REG - Centamin PLC - Final Results
16/03/2022 07:15
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RNS Number : 8978E Centamin PLC 16 March 2022
16 March 2022
Centamin plc
("Centamin" or "the Company")
(LSE:CEY, TSX:CEE)
Full year 2021 results
full year results for the twelve months ended 31 December 2021
MARTIN HORGAN, CEO, commented: "Delivery towards our strategic objectives was
the standout achievement in 2021, placing Centamin in a much stronger position
going forward and laying the foundations for long-term success. We safely
delivered annual production and cost guidance and made excellent progress on
our key capital projects. The completion of our Sukari Life of Asset review
delivered a significant mineral reserve uplift, identified further growth and
cost savings opportunities, and underpinned a robust 12 year life of mine plan
with a clear roadmap to achieving a consistent +500,000 ounce production
profile. We completed a value assessment and ranking of our organic growth
pipeline, resulting in progressing the Doropo Project to PFS stage and secured
3,000km(2) of exploration ground in the highly prospective Egyptian Eastern
Desert. Balancing our growth plans with shareholder returns, today we
announced a 5 US cent final dividend for 2021 and expressed our intention to
pay a minimum 5 US cent 2022. I would like to thank our team at Centamin and
more broadly our stakeholders, including our government partners, whose
support and hard work has enabled us to deliver what has been a
transformational year for Centamin."
FINANCIAL HIGHLIGHTS
· New safety record at Sukari Gold Mine ("Sukari") achieving 5.2
million hours LTI free
· Revenue of US$733 million, generated from gold sales of 407,252
oz at an average realised gold price of US$1,797/oz sold
· Adjusted EBITDA of US$329 million, at a 45% margin
· Profit before tax of US$154 million, including accelerated
amortisation for the period
· Basic earnings per share ("EPS") of 8.8 US cents per share
· US$27 million of gross cost-savings in 2021, for a cumulative
US$71 million delivered of the US$150 million cost-saving target by 2024
· Strong balance sheet with no debt or hedging, and cash and liquid
assets of US$257 million, as at 31 December 2021
· The Board has proposed a final dividend of 5 US cents per share,
equating to US$58 million to be distributed to shareholders, subject to
shareholder approval at the annual general meeting on 10 May 2022, bringing
total distribution to shareholders for full year 2021 to US$105 million.
2022 OUTLOOK UNCHANGED
· Gold production: 430,000 to 460,000 oz
o Split 45:55 across H1:H2 driven by lower scheduled tonnes from the
underground in H1 as the mine transitions to owner-operator
· Cash costs: US$900-1,000/oz produced
· Capital expenditure: US$225.5 million
o Split 65:35 across H1:H2 driven by solar, paste fill and underground
contractor equipment purchase in Q1
· All-in sustaining costs: US$1,275-1,425/oz sold
· Exploration expenditure: US$25 million
2022 EVENTS
· Doropo Project (Côte d'Ivoire) pre-feasibility study
· Sukari (Egypt) underground expansion study
· Group capital structure review
· Sukari 36MW Solar farm commissioning
· Sukari Mineral Reserve and Resource update Group exploration
update
GROUP FINANCIAL SUMMARY
Units FY21 FY20 % H2 21 H1 21
Gold produced Oz 415,370 452,320 (8%) 211,095 204,275
Gold sold Oz 407,252 468,681 (13%) 203,450 203,802
Cash cost US$'000 359,868 325,188 11% 195,094 164,774
Unit cash cost US$/oz produced 866 719 21% 924 807
AISC US$'000 502,366 485,478 3% 260,661 241,705
Unit AISC US$/oz sold 1,234 1,036 19% 1,281 1,186
Avg realised gold price US$/oz 1,797 1,766 2% 1,797 1,799
Revenue US$'000 733,306 828,737 (12%) 365,902 367,404
Adjusted EBITDA US$'000 328,600 437,555 (25%) 138,173 190,427
Profit before tax US$'000 153,647 314,999 (51%) 36,853 116,794
Profit after tax attrib to the parent US$'000 101,527 155,979 (35%) 42,043 59,484
Basic EPS US cents 8.81 13.53 (35%) 3.65 5.16
Capital expenditure US$'000 240,872 138,396 74% 162,560 78,312
Operating cash flow US$'000 309,878 453,305 (32%) 168,114 141,764
Adjusted free cash flow US$'000 (5,998) 141,768 (104%) (22,193) 16,195
WEBCAST PRESENTATION and CONFERENCE CALL
The Company will host a conference call and webcast presentation today,
Wednesday 16 March, at 09.30 GMT, to discuss the results with investors and
analysts, followed by an opportunity to ask questions. Please find below the
required participation details. A replay will be made available on the Company
website.
To join the
webcast: https://www.investis-live.com/centamin/620a40fb03c5201200352b6a/twrh
(https://www.investis-live.com/centamin/620a40fb03c5201200352b6a/twrh)
Please allow a few minutes to register.
Dial-in telephone numbers:
United Kingdom
+44 (0) 203 936
2999
United States
+1 646 664
1960
South Africa +27
(0)87 550 8441
All other locations +44 (0) 203
936 2999
Participation access code:
949534
About Centamin
Centamin is an established gold producer, with premium listings on both the
London Stock Exchange and Toronto Stock Exchange. The Company's flagship asset
is the Sukari Gold Mine ("Sukari"), Egypt's largest and first modern gold
mine, as well as one of the world's largest producing mines. Since production
began in 2009 Sukari has produced circa 5 million ounces of gold, and today
has a projected mine life of 12 years.
Through its large portfolio of exploration assets in Egypt and West Africa,
Centamin is advancing an active pipeline of future growth prospects, including
the Doropo Project in Côte d'Ivoire, and over 3,000km(2) of highly
prospective exploration ground in Egypt's Arabian Nubian Shield.
Centamin practices responsible mining activities, recognising its
responsibility to not only deliver operational and financial performance but
to create lasting mutual benefit for all stakeholders through good corporate
citizenship.
FOR MORE INFORMATION
Please visit the website www.centamin.com (http://www.centamin.com) or
contact:
Centamin plc Buchanan
Alexandra Barter-Carse, Corporate Communications Bobby Morse/ Ariadna Peretz/ James Husband
Michael Stoner, Group Corporate Manager + 44 (0) 20 7466 5000
investor@centaminplc.com (mailto:investor@centaminplc.com) centamin@buchanan.uk.com (mailto:centamin@buchanan.uk.com)
ENDNOTES
Guidance
The Company actively monitors the developments of the COVID-19 pandemic,
global geopolitical uncertainties and macroeconomics, such as global
inflation, and guidance may be impacted if the supply chain, workforce or
operation are disrupted.
Financials
Full year financial data points included within this report are audited.
Non-GAAP measures
This statement includes certain financial performance measures which are not
GAAP measures as defined under International Financial Reporting Standards
(IFRS). These include EBITDA and adjusted EBITDA, Cash costs of production,
AISC, Cash and liquid assets, Free cash flow and adjusted Free cash flow.
Management believes these measures provide valuable additional information for
users of the financial statements to understand the underlying trading
performance. An explanation of the measures used along with reconciliation to
the nearest IFRS measures is provided in the Financial Review.
Profit after tax attributable to the parent
Centamin profit after the profit share split with the Arab Republic of Egypt.
Royalties
Royalties are accrued and paid six months in arrears.
Cash and liquid assets
Cash and liquid assets include cash, bullion on hand, gold sales receivables
and financial assets at fair value through profit or loss.
Movements in inventory
Movement in inventory on ounces produced is the movement in mining stockpiles
and ore in circuit while the movement in inventory on ounces sold is the net
movement in mining stockpiles, ore in circuit and gold in safe inventory.
Gold produced
Gold produced is gold poured and does not include gold-in-circuit at period
end.
Dividend
All dividends are subject to final Board approval and final dividends are
subject to shareholder approval at the Company's annual general meeting.
Forward-looking Statements
This announcement (including information incorporated by reference) contains
"forward-looking statements" and "forward-looking information" under
applicable securities laws (collectively, "forward-looking statements"),
including statements with respect to future financial or operating
performance. Such statements include "future-oriented financial information"
or "financial outlook" with respect to prospective financial performance,
financial position, EBITDA, cash flows and other financial metrics that are
based on assumptions about future economic conditions and courses of action.
Generally, these forward-looking statements can be identified by the use of
forward-looking terminology such as "believes", "expects", "expected",
"budgeted", "forecasts" and "anticipates"." and include production outlook,
operating schedules, production profiles, expansion and expansion plans,
efficiency gains, production and cost guidance, capital expenditure outlook,
exploration spend and other mine plans. Although Centamin believes that the
expectations reflected in such forward-looking statements are reasonable,
Centamin can give no assurance that such expectations will prove to be
correct. Forward-looking statements are prospective in nature and are not
based on historical facts, but rather on current expectations and projections
of the management of Centamin about future events and are therefore subject to
known and unknown risks and uncertainties which could cause actual results to
differ materially from the future results expressed or implied by the
forward-looking statements. In addition, there are a number of factors that
could cause actual results, performance, achievements or developments to
differ materially from those expressed or implied by such forward-looking
statements; the risks and uncertainties associated with the ongoing impacts of
COVID-19 or other pandemic, general business, economic, competitive, political
and social uncertainties; the results of exploration activities and
feasibility studies; assumptions in economic evaluations which prove to be
inaccurate; currency fluctuations; changes in project parameters; future
prices of gold and other metals; possible variations of ore grade or recovery
rates; accidents, labour disputes and other risks of the mining industry;
climatic conditions; political instability; decisions and regulatory changes
enacted by governmental authorities; delays in obtaining approvals or
financing or completing development or construction activities; and discovery
of archaeological ruins. Financial outlook and future-ordinated financial
information contained in this news release is based on assumptions about
future events, including economic conditions and proposed courses of action,
based on management's assessment of the relevant information currently
available. Readers are cautioned that any such financial outlook or
future-ordinated financial information contained or referenced herein may not
be appropriate and should not be used for purposes other than those for which
it is disclosed herein. The Company and its management believe that the
prospective financial information has been prepared on a reasonable basis,
reflecting management's best estimates and judgments at the date hereof, and
represent, to the best of management's knowledge and opinion, the Company's
expected course of action. However, because this information is highly
subjective, it should not be relied on as necessarily indicative of future
results. There can be no assurance that forward-looking statements will prove
to be accurate, as actual results and future events could differ materially
from those anticipated in such information or statements, particularly in
light of the current economic climate and the significant volatility,
uncertainty and disruption caused by the outbreak of COVID-19. Forward-looking
statements contained herein are made as of the date of this announcement and
the Company disclaims any obligation to update any forward-looking statement,
whether as a result of new information, future events or results or otherwise.
Accordingly, readers should not place undue reliance on forward-looking
statements.
LEI: 213800PDI9G7OUKLPV84
Company No: 109180
CEO STATEMENT
It is a pleasure to be writing to you as we reflect on the achievements of
2021, laying the foundations which underpin our plans to deliver a multi-asset
gold producer whose purpose is to create opportunities for people through
responsible mining.
Since becoming your CEO in April 2020, we have undertaken thorough reviews of
our strategy, processes and procedures, organisational structure, capital
allocation framework and most notably our portfolio in order to better
understand the optimal route to unlocking its full potential. These reviews
have not only confirmed our belief in the quality of the assets but have also
identified numerous organic growth opportunities across the portfolio
including taking Sukari to a +500koz producer and advancing Doropo to
pre-feasibility study ("PFS") stage to be a second mine. We have also grown
our portfolio in 2021, adding 3,000km(2) of highly-prospective greenfield
exploration ground within the Egyptian Eastern Desert, further expanding our
integrated pipeline of projects, as we look to leverage our position as
Egypt's only significant gold producer. As announced in December, we
commenced a capital structure review of the Group - we believe it is
strategically appropriate to consider introducing a right level of debt onto
the balance sheet, in line with our growth objectives.
Integral to our growth plans is our commitment to sustainability. Centamin
recognises its societal responsibility as a modern mining company. In 2021 we
continued to reinforce our sustainability performance framework on matters
including gender diversity and inclusion, tailings management and the impact
of climate change.
Climate-related risk is one of the key issues facing society today, and our
sector must play its part in achieving the targets required to deliver to keep
global warming within acceptable levels. We continue to assess and implement
opportunities for the Company to manage and reduce our carbon footprint.
You'll be aware of our 36MW Sukari solar farm and the fleet-wide installation
of high-performance truck trays that will have a significant impact on
reducing our carbon footprint, but there are numerous other projects under
review that have the potential to build on this great start and we look
forward to updating you later in 2022 on these developments. Through the
course of the year we will study in more detail the climate-related risks and
opportunities associated with the updated life of mine plan for Sukari and the
impact of climate on our business model, strategy and financial statement more
broadly. We will develop a climate change strategy that will set ambitious
targets for carbon reduction by 2030 and one that strives to align with a
trajectory of emission reduction to net-zero by 2050.
HEALTH & SAFETY FIRST
The persistence of the COVID-19 pandemic presented challenges globally. The
safeguarding of our people, communities and operations remains a priority. Our
COVID-19 protocols combined with the resilience of our business resulted in no
material impacts to gold sales and supply chain. We continue to keep full
COVID-19 protocols in place at our operations, including vaccination
programmes and today greater than 90% of our Group workforce, including
contractors, have been vaccinated.
Our people come first and through a proactive approach to safety management,
2021 saw a further annual improvement in our headline safety performance by a
45% year-on-year reduction in lost time injury frequency rate ("LTIFR").
Importantly, we achieved in excess of five million hours worked at Sukari
without a lost time injury ("LTI"), which was a new record for the Company.
2021 PERFORMING WHILST TRANSFORMING
2021 was a year of continued delivery for Centamin including meeting our
production and cost guidance and excellent progress on our key capital
projects. In December 2020, we announced our three-year reset plans and
outlook, which framed 2021 as our peak reset year, meaning lower production
and higher capital expenditure. Therefore, understandably, our financial
results last year were not as strong as previous years but, importantly, our
business is in a much stronger position as we invest in our long-term success.
Gold sales of 407,252 ounces, and consequently revenue of US$733 million, were
down 13% and 12% respectively, but ahead of our expectations resulting from
higher average gold price of US$1,797/oz. Capital expenditure of US$241
million was up 74%, including the outperformance from the critical Sukari open
pit waste-stripping programme, commissioning of the second Sukari tailings
storage facility, construction commencement of the Sukari solar farm and
extensive geological reinterpretation programme. Cash generated from
operations was US$310 million, whilst adjusted EBITDA was US$329 million with
a margin of 45%. We continue to maintain a strong and flexible balance sheet
and finished the year with US$257 million in cash and liquid assets as of
31 December 2021, after distributing US$81 million to shareholders during the
year.
Geology is the foundation upon which our business is built - a comprehensive
understanding of our orebodies both underpins our ability to ensure consistent
and reliable performance while simultaneously identifying growth
opportunities. During 2021 we placed significant effort into refocussing our
approach to orebody stewardship by establishing new exploration and mineral
resource management teams. This change in approach has already seen
significant benefits with resource and reserve growth at Sukari, a roadmap to
value realisation in West Africa and the clear identification of further
growth potential across our newly enlarged portfolio of assets that includes
the exploration permits in Egypt.
Demonstrating our belief in the quality of our people and portfolio, we have
set and communicated bold and ambitious multi-year operational targets and we
have already begun to make notable progress against them:
· Safety (2020 to 2023): Targeted 25% reduction year-on-year in
lagging safety indicators LTIFR and TRIFR.
· Production (2021 to 2024): Targeted 25% growth to 500,000 ounces
per annum. Last year was the baseline year with 415,370 ounces produced, in
line with annual guidance.
· Costs (2020 to 2023): Targeted US$150 million in cost-savings. A
total US$72 million of cost-savings realised to date
· Reserves (2021 to 2024): Targeted Group Mineral Reserve growth of
three million ounces. In 2021, 1.1 million ounces of Mineral Reserves were
added at Sukari, before depletion, representing the largest annual increase
since production commenced.
· Life of mine (2021 to 2024): Targeted increase in Sukari
underground life of mine to ten years. In 2021, a 200% increase in underground
Mineral Reserves extended the life of mine to eight years.
· Environmental (2021 to 2023): Define science-based GHG emission
reduction targets by 2030. The 36MW Sukari solar farm is the key
decarbonisation initiative currently under construction ahead of commissioning
in H2 2022. There are several further initiatives under review including
expansion of our existing commitment to renewables, grid connection, fuel
switching to liquified natural gas and energy efficiency projects.
DELIVERY AGAINST STRATEGY
We have maintained a clear and consistent strategy at Centamin, and delivery
into our strategic objectives was the standout achievement in 2021:
Sukari Value Maximisation
Centamin remains the only commercial scale Egyptian gold producer, having
operated the Sukari Gold Mine for more than twelve years, and, based on
current gold reserves, has at least a further twelve years of production
ahead. This high-quality, long-life asset is the robust foundation of
Centamin. Following a period of underperformance, our strategic priority was
to put a world-class mine around this world-class orebody. The completion of
the Life of Asset Review resulted in a robust life of mine plan that achieves
a consistency of production and importantly, informs our roadmap to a
consistent production level of 500,000 ounces of gold per annum into the next
decade at targeted long-term AISC below US$1,000/oz.
Growth & Diversification
Outside of Sukari, 2021 saw a strategic review of our West African exploration
portfolio with the aim of defining a roadmap for the creation and delivery of
value for Centamin. The review highlighted the significant opportunity for
further value creation at the Doropo project in Cote d'Ivoire which
demonstrated the metrics consistent with Centamin's investment hurdles around
scale, annual production targets and forecast capital and operating costs.
Based on this analysis we commenced the PFS, with supporting drilling and
associated environmental and social assessments, which is planned to be
completed in H2 2022. Also in Cote d'Ivoire, the ABC exploration project
demonstrated the potential to build on the currently identified two million
ounce mineral inventory and establish a project with the scale to support
development in due course. In respect of the Batie West project in Burkina
Faso, the strategic review concluded that while there is a viable project that
could be developed it does not meet our investment hurdle criteria. A review
of corporate options in respect of Batie West has been on-going since
mid-2021, albeit this has been somewhat frustrated by the recent changes in
Burkina Faso's political environment.
In 2021 we secured approximately 3,000km(2) of new exploration licences within
the Nubian Shield of the Egyptian Eastern Desert. We have commenced desktop
exploration as permitting is finalised and we hope to have geologists on the
ground commencing a fieldwork programme next quarter. The minimum license
spend in the first two years is US$10 million. We expect to spend
approximately US$3 million in 2022 and US$6-7 million in 2023. This will form
the platform for the Company to take the next steps in identifying further
potential gold targets and developing deposits in this underexplored and
highly prospective gold belt.
Commitment to stakeholder returns
In 2021, the Arab Republic of Egypt, our partners at Sukari, earned US$97
million in profit share payments and royalties. Meanwhile, recognising 2021 as
the peak reset year, the Board honoured their commitment to sustain the 2020
dividend distribution in 2021.
As Egypt's largest gold producer, Centamin is a significant investor and
employer in Egypt and more specifically in the Eastern Desert city of Marsa
Alam. At the interims, we announced the implementation of our Centamin
Capability Framework focussed on workforce development with a particular
commitment to the training and promotion of local talent that ensures Sukari
provides a broad-based benefit to Egypt's nascent mining sector.
STAKEHOLDER ENGAGEMENT
I personally recognise how crucial clear and transparent stakeholder
engagement is to the continued successful operation of our business. In an
everchanging world, we are continually exploring and trying new ways to expand
our reach and communication with our stakeholders. The pandemic has played a
significant part in how we share and store information internally,
accelerating our digital transformation towards a more centralised platform.
Whereas this is not a replacement for face-to-face interaction, video
communication has become an efficient and effective tool. Externally, we have
hosted three virtual capital markets events, introduced bi-annual retail
investor events and launched our social media platform providing a great
opportunity to further convey our corporate personality, as defined by our
purpose and values.
Despite COVID-19, throughout 2021, we enjoyed being able to routinely visit
our assets and our teams, meet with our government partners and local
communities once again.
OUTLOOK
Although the global outlook remains uncertain with regards to geopolitical
tensions, potential new COVID-19 variants, and the impact of inflation on the
economy, our business has never been so resilient and well placed to navigate
future challenges.
For 2022, we have guided higher production volumes of 430,000-460,000 ounces
driven by improving open pit grades and increased productivity from the
underground operation at AISC of US$1,275-1,425/oz sold reflecting the
emerging inflationary pressures and US$226 million comprehensive asset reset
and growth investment programme.
As we look to build on the successes of 2021, we can look forward to several
key workstreams being completed in 2022. At Sukari this includes resource
and reserve updates, the completion of an underground expansion study, the
delivery of our key capital projects at the mine and the on-going assessment
of further cost saving initiatives such as the ability to connect to grid
power. Staying in Egypt, we will commence the exploration work across the
Eastern Desert permits and start to demonstrate the significant potential we
see in the region. In West Africa we will deliver the Pre-feasibility Study
for Doropo and complete the next round of exploration work at ABC in Cote
d'Ivoire. Another busy, but exciting year lies ahead.
THANK YOU
After a remarkable 28 years of dedicated service to Centamin, Youssef El-Raghy
will be retiring from 1 April 2022. From greenfield exploration to being
recognised as a world class mine, the Company owes him a debt of gratitude for
his commitment and contribution in making possible what is Sukari today -
Egypt's first modern gold mine. Thank you, Youssef, enjoy your well-deserved
retirement.
As part of an internal succession programme, Amr Hassouna has been appointed
as the Egypt Country Manager. Amr has worked at Centamin for over ten years.
His career has progressed through various operating and financial roles at
Sukari and in 2021 he was the Sukari Gold Mine General Manager, playing an
instrumental role in the delivery of guidance, optimisation studies,
cost-savings and our ESG initiatives.
Finally, thank you to all our stakeholders for your continued support, we
never take that for granted. We have commenced 2022 with confidence and
excitement and look forward to delivering and communicating on our clear
roadmap to growing and unlocking further value from Sukari and our exploration
portfolio.
Martin Horgan
Chief Executive Officer
CFO STATEMENT
We are fully focussed on managing the bottom line of the business in which to
maximise the value at Sukari, deliver growth and diversification combined with
sustainable stakeholder returns. Centamin is a financially robust business,
committed to responsible mining. In 2020 we set out bold capital investment
plans required to sustain and grow our business for the long term and 2021 was
about delivery into those plans.
iNVESTING IN THE FUTURE
Capital allocation continues to be disciplined and closely qualified against
value creation. The Company continues to exercise a balanced approach to
responsibly maximising operating cash flow generation, reinvesting for future
growth and prioritising sustainable shareholder returns. The Company's
liquidity and strength of the balance sheet is fundamental to the longevity of
the business and is seriously considered when assessing capital allocation.
Centamin has an active growth pipeline through results-driven exploration.
These self-funded projects are ranked based on results against our development
criteria and prospective returns before capital is allocated.
In December 2020 we announced our three-year capital outlook to put Sukari
back on the front foot by improving the long-term sustainability of the
operations through increased stripping and underground development to increase
mining flexibility. Investment in technology, people and training are
additional critical areas as the Company continues to invest to further
improve operational performance. In 2021, a key focus was on improving
operational efficiencies to achieve consistent operational performance with
US$106 million spent on sustaining capital expenditure and US$135 million in
non-sustaining, or 'growth' capital expenditure. Growth projects include the
ongoing construction of the hybrid solar plant, reducing the reliance on
fossil fuels and improving operating costs, and the construction of the
underground paste-fill plant.
Capitalisation of open pit waste-stripping
The largest spend category in 2021 was on the deferred stripping which added
US$59 million to our balance sheet, US$51 million was included in
non-sustaining capital expenditure and related specifically to the work done
by the waste-mining contractor, with the balance of US$8 million allocated to
sustaining capital expenditure. Some deferred stripping has already been
amortised in the year based on ore extracted from these areas.
As more fully described in note 2.9 to the Financial Statements and as
required by the Accounting Standards, from 2021, capitalised deferred
stripping costs are included in "Mine Development Properties" and amortised
using the unit of production method based on total ounces produced for the
'component' of the orebody, which is defined as the respective "stage" of the
open pit mine plan. Capitalisation occurs when the strip ratio exceeds the
life of mine strip ratio for that stage. Only the costs related to the excess
stripping are capitalised. In line with the accelerated stripping programme
(2022-2024) we expect to be above the life of mine strip ratio, resulting in a
larger quantum to be capitalised to the balance sheet.
STRONG BALANCE SHEET
Centamin continues to maintain a robust financial strategy, with cash and
liquid assets(3) of US$257 million as at 31 December 2021. Unique amongst our
peers, Centamin has never had debt, hedging nor streaming in place, which was
strategically appropriate as we focussed on generating and distributing
shareholder returns.
With our renewed longer-term focus and strong emerging growth opportunities,
we announced in December that we have launched a capital structure review
process. As the business transforms, it is the right time to assess
introducing some debt onto our balance sheet thereby increasing our financial
flexibility and liquidity as we grow the business. The capital structure
review is scheduled to be completed in mid-2022.
FINANCIAL PERFORMANCE
Centamin delivered a resilient performance that was in line with our
expectations and guidance for the year.
Revenues decreased year-on-year by 12% to US$733 million, from annual gold
sales of 407,252 ounces, down 13%, at an average realised price of US$1,797
per ounce, up 2%. A total of 11,156 ounces of unsold gold bullion was held on
site at year end, due to timing of gold shipments across the year end.
As a Group, underlying EBITDA decreased by 33% to US$293 million, at a 40%
margin 1 , principally driven by;
· an 8% reduction in gold production, as scheduled
· a 38% increase in the combined open pit and underground material
mined, some of which has been capitalised to mining properties as a waste
stripping asset,
· higher fuel costs to the value of US$23 million,
· US$10 million additional spend on consumables due to increases in
reagent prices,
· offset slightly by a higher average realised gold sales price,
· EBITDA has been adjusted by an impairment charge of US$35 million
to US$329 million Adjusted EBITDA, during the year an impairment trigger was
identified for the Burkina Faso exploration and evaluation asset and it was
fully impaired, refer to note 1.3.3 in the financial statements for further
information.
Profit before tax decreased by 51% to US$154 million, due to the factors
below, with basic earnings per share ("EPS") decreasing by 35% to 8.8 US
cents.
· a 12% decrease in revenue, in line with reduced gold sales as
planned
· a 18% decrease in other income; offset by
· a 13% decrease in other operating costs, mainly due to a 13%
decrease in royalties
· US$35.2 million impairment of exploration and evaluation related
to our assets in Burkina Faso
· a 20% decrease in greenfield exploration and evaluation
expenditure, and
· an 8% increase in cost of sales.
As expected, and in line with our three year reset plans announced in December
2020, Centamin's cash flows and earnings declined in 2021 due to lower gold
production and sales, higher costs and increased capital expenditure spend.
Operational cash flow decreased by 32% to US$310 million, cash flows from
investing activities was impacted mainly by gross capital expenditure of
US$241 million (predominantly invested in the long-term sustainability of the
business). Adjusted Group free cash flow 2 declined by 104% to negative US$6
million, after profit share distribution of US$75 million to our partner, the
Arab Republic of Egypt.
STRINGENT COST MANAGEMENT
Despite significant inflationary pressures experienced towards the end of 2021
and above budgeted material mined, our focus on stringent cost management
meant that costs were delivered at the midpoint of our annual guidance.
Average realised gold price on sales improved 2% year-on-year, our AISC margin
declined 23% to US$564 per ounce sold. Cash costs of production 3 were US$866
per ounce produced, up 21%, reflecting a 38% increase in open pit mined tonnes
and a 6% increase in underground mined tonnes, processed tonnes remained flat
year on year and an 8% decrease in gold ounces produced. AISC(3) was US$1,234
per ounce sold, up 19%, mainly due to a 9% increase in mine production costs,
49% increase in sustaining corporate costs and a 10% increase in sustaining
capital costs. This was compounded by a 13% decrease in gold ounces sold
(which was as scheduled and in line with guidance).
A critical element of our strategy is maximising margins. Our cost savings
programme was initially launched to extract a minimum of US$100 million of
sustainable costs from the business over 4 years, from 2020 to 2023. This
focus on identifying continuous improvements has been adopted across the Group
with excellent results. Since 2020 we have delivered US$71 million of
cost-savings and combined with the recent outcomes of the Sukari Life of Asset
work identifying more cost initiatives, we had the confidence to increase the
target from US$100 million to US$150 million.
SHAREHOLDER RETURNS
Stakeholder, and specifically shareholder returns, are central to our company
strategy. We have an eight-year track record of returning cash to
shareholders, based on our policy linked to free cash flow generation. Our
dividend policy makes firm commitments on capital allocation, meaning
shareholder interests are always at the centre of what we do.
2021 Dividend
Consistent with the Company's commitment to returning cash to shareholders,
and recognising 2021 as the peak reset year, the Board propose a 2021 final
dividend, for the year ended 31 December 2021, of 5 US cents per share
(c.US$58 million), bringing the proposed total dividend for 2021 to 9 US cents
per share (c.US$105 million):
· Interim 2021 dividend paid: 4 US cents per share
· Final 2021 dividend proposed: 5 US cents per share
The final 2021 dividend is subject to shareholder approval at the 2022 AGM on
10 May 2022 and following approval would be paid on 10 June 2022.
2022 Dividend
In consideration of Centamin's growth plans, and against a backdrop of global
uncertainty and persisting inflationary pressures, the Board wanted to provide
shareholders with some clarity on the 2022 dividend. Today we have announced
our intention to pay a minimum of 5 US cents for 2022, with upside opportunity
aligned with free cash flow generation after growth capital investment.
Outlook
We remain focused on the generation of free cash flow as this is ultimately
the metric that matters. We have budgeted for rising costs in 2022, driven by
higher consumer price inflation within our operating countries, supply chain
pressures on fuel, consumables and shipping costs and tighter labour markets.
We have prudently decided not to budget any offsetting impacts of our ongoing
cost-savings and improving operating efficiencies and productivity gains until
we have a better sense of the longer-term inflationary environment.
But, as Martin said in his statement, "Sukari can consistently deliver 500,000
ounces of gold per annum into the next decade at targeted long-term AISC below
US$1,000/oz."
Ross Jerrard
Chief Financial Officer
FINANCIAL REVIEW
Consolidated statement of comprehensive income
Year ended Year ended
31 December 2021
31 December 2020
US$'000
US$'000
Revenue 733,306 828,737
Revenue from gold and silver sales for the year decreased by 12% year-on-year
to US$733 million (2020: US$829 million), with a 2% increase in the average
realised gold sales price to US$1,797 per ounce (2020: US$1,766 per ounce) and
a 13% decrease in gold sold to 407,252 ounces (2020: 468,681 ounces).
Year ended Year ended
31 December 2021
31 December 2020
US$'000
US$'000
Cost of sales (487,376) (449,441)
Cost of sales represents the cost of mining, processing, refining, transport,
site administration, depreciation, amortisation and movement in production
inventories. Cost of sales is up 8% year-on-year to US$487 million, mainly as
a result of:
· 9% increase in total mine production costs from US$339 million to
US$368 million (+ve), due to:
o a 12% increase in open pit mining costs (+ve);
o a 2% increase in underground mining costs (+ve);
o a 3% increase in processing costs (+ve); offset by
o a 3% decrease in refinery and transport costs (-ve).
· 12% increase in depreciation and amortisation charges
year-on-year from US$125 million to US$139 million (+ve) due to:
o US$226 million in capital expenditure additions to property, plant and
equipment (excl. capital work in progress) which increased the associated
depreciation and amortisation charges;
o slightly offset by lower production in the year.
Year ended Year ended
31 December 2021
31 December 2020
US$'000
US$'000
Exploration and evaluation expenditure (13,879) (17,391)
Exploration and evaluation expenditure comprises expenditure incurred for
exploration activities in Côte d'Ivoire and Burkina Faso. Exploration and
evaluation costs decreased by US$4 million or 20% as more exploration and
evaluation work specifically drilling and assaying at the two Côte d'Ivoire
sites was done in 2020 as compared to 2021. The exploration and evaluation
asset related to Burkina Faso has been fully impaired in the year, for further
information refer to note 1.3.3 in the financial statements.
Year ended Year ended
31 December 2021
31 December 2020
US$'000
US$'000
Other operating costs (49,100) (56,392)
Other operating costs comprise expenditure incurred for communications,
consultants, directors' fees, stock exchange listing fees, share registry
fees, employee entitlements, general office administration expenses and the
3% royalty payable to the Arab Republic of Egypt ("ARE"). Other operating
costs decreased by US$7 million or 13%, mainly as a result of:
· US$3 million decrease in royalty paid to the ARE government (in
line with the decrease in gold sales revenue) (-ve);
· In 2020, US$10 million was provided for the possible settlement
of EMRA cost recovery items. Subsequent to the 2020 year end an agreement was
reached with EMRA and this was reallocated to accruals, as the full amount was
provided for in 2020 and no additional provision was required in the 2021 year
(-ve); offset by
· US$2 million increase in the provision for obsolete stock (+ve).
Adjusted EBITDA was US$329 million, a decrease of 25% year-on-year, mostly
driven by the 12% decrease in revenue and a 17% increase in cash costs per
ounce sold in the year. The adjusted EBITDA margin decreased by 8 percentage
points to 45%. Profit after tax was US$154 million, down 51% year-on-year,
which was impacted by the impairment of the Burkina Faso exploration and
evaluation asset of US$35 million. Basic earnings per share was 8.8 US cents,
a decrease of 35% year-on-year.
Year ended Year ended
31 December 2021
31 December 2020
US$'000
US$'000
Dividend paid - non-controlling interest in Sukari Gold Mining Company (SGM) (75,200) (174,275)
(being EMRA)
The profit share payments during the year are reconciled against SGM's audited
financial statements. Any variation between payments made during the year
(which are based on the Company's estimates) and the audited financial
statements, may result in a balance due and payable to EMRA or advances to be
offset against future distributions. SGM's 30 June 2021 financial statements
have been audited and signed off.
Refer to note 1.3.1.2 for details of the treatment and disclosure of the EMRA
profit share.
Year ended Year ended
31 December 2021
31 December 2020
US cents per share
US cents per share
Earnings per share attributable to owners of the parent:
Basic (US cents per share) 8.81 13.53
Consolidated statement of financial position
31 December 2021 31 December 2020
US$'000
US$'000
Current assets
Inventories - mining stockpiles and consumables 128,721 118,705
Trade and other receivables 32,579 18,424
Prepayments 7,964 8,908
Cash and cash equivalents 207,821 291,281
Total current assets 377,085 437,318
Current assets have decreased by US$60 million or 14% mainly as a result of:
· US$83 million decrease in net cash (net of foreign exchange
movements) (-ve) driven by reduced profit for the year less payment of the
2020 final dividend of US$34 million, the payment of the 2021 interim dividend
of US$46 million and a US$75 million payment to EMRA as distributions to the
NCI
The Group has a strong and flexible balance sheet with no debt, no hedging and
cash and liquid assets of US$257 million (2020: US$310 million). Refer to note
3 under Non-GAAP Financial Measures below for details of this non-GAAP
measure.
31 December 2021 31 December 2020
US$'000
US$'000
Non-current assets
Property, plant and equipment 956,217 829,884
Exploration and evaluation asset 25,261 63,701
Inventories - mining stockpiles 64,756 64,870
Other receivables 101 103
Total non-current assets 1,046,335 958,558
Non-current assets have increased by US$88 million or 9% mainly as a result
of:
· US$104 million net increase in property, plant and equipment
(excluding rehabilitation asset increase). This included waste stripping costs
that have been capitalised, further lifts to the TSF 2, camp upgrades, the
continued construction of the solar plant and continuous process plant
optimisation (total property, plant and equipment cost of US$266 million)
(+ve);
· US$22 million restoration and rehabilitation asset increase
(notes 1.3.9 and 2.13); offset by
· US$35 million impairment of the Burkina Faso exploration and
evaluation asset (notes 1.3.2 and 2.10)
31 December 2021 31 December 2020
US$'000
US$'000
Current liabilities
Trade and other payables 75,759 64,488
Tax liabilities 253 267
Provisions 4,617 7,480
Total current liabilities 80,629 72,235
Current liabilities have increased by US$8 million or 12% primarily as a
result of:
· Increased spend on capital projects in the current year compared
to the previous year.
31 December 2021 31 December 2020
US$'000
US$'000
Non-current liabilities
Provisions 42,647 32,752
Other payables 10,386 1,437
Total non-current liabilities 53,033 34,189
Non-current liabilities have increased by US$19 million or 55% primarily as a
result of:
· US$22 million increase in the rehabilitation provision (included
in the net provisions balance). The movement was driven by an increase in the
various input unit costs of expected rehabilitation work and changes in other
variables such as the discount rate as well as the expansion of the area with
mining related activities and infrastructure over the year. One of the big
contributors was the construction of and lifts of TSF2. This resulted in a
larger area that will require rehabilitation, (notes 1.3.9 note 2.13).
· The US$10 million increase in other payables relates to the EMRA
settlement amount, this was recognised as a provision in the previous year and
reclassified to accruals in the current year following the signing of the
settlement agreement with EMRA.
Consolidated statement of cash flows
31 December 2021 31 December 2020
US$'000
US$'000
Cash flows from operating activities
Cash generated from operating activities 309,873 453,315
Income tax received/(paid) 5 (10)
Net cash generated from operating activities 309,878 453,305
Group cash costs of production were US$866 per ounce produced, up 21%
year-on-year, predominantly due to a 8% decrease in gold ounces produced and a
9% increase in mine production costs.
A stronger gold price combined with cost and capital allocation management,
offset by increased mining and processing costs in the year, resulted in a 32%
year-on-year decrease in the net cash generated by operating activities to
US$310 million.
31 December 2021 31 December 2020
US$'000
US$'000
Cash flows from investing activities
Disposal of financial assets at fair value through profit or loss - 7,414
Acquisition of property, plant and equipment (224,929) (127,099)
Brownfield exploration and evaluation expenditure (15,943) (11,717)
Finance income 196 1,554
Net cash used in investing activities (240,676) (129,848)
The current year's capital expenditure was within budget and a number of
significant projects were completed and others were started in the year. The
capital expenditure in the year included the spend on various capital
projects, the largest being on waste stripping activities capitalised of US$59
million, the solar plant of US$33 million, further lifts to the new tailings
dam of US$9 million, process plant optimization of US$7 million and camp
upgrades US$4 million (refer to notes 2.9 and note 2.10).
31 December 2021 31 December 2020
US$'000
US$'000
Cash flows from financing activities
Own shares acquired (1,391) (3,298)
Dividend paid - non-controlling interest in SGM (75,200) (174,275)
Dividend paid - owners of the parent (80,517) (138,725)
Net cash used in financing activities (157,108) (316,298)
After distribution of profit share payments to the Company's partner, EMRA(1),
the Group generated negative adjusted free cash flow of US$6 million, down
104% year-on-year. Profit share payments of US$75 million and royalties of
US$22 million were earned in the year. Under the terms of the Concession
Agreement with EMRA, on 1 July 2020, the profit share mechanism changed to
50:50, from 55:45 in favour of Centamin, and will remain at this level for the
remainder of the tenure.
(1) All profit share payments are made to Egyptian Mineral Resources
Authority ("EMRA"), a department of the Ministry of Petroleum and Mineral
Resources
Capital expenditure
The following table provides a breakdown of the total capital expenditure of
the Group:
Year ended Year ended
31 December 2021
31 December 2020
US$'000
US$'000
Underground exploration 13,741 11,599
Underground mine development 34,900 39,197
Other sustaining capital expenditure 57,513 52,433
Total sustaining capital expenditure 106,154 103,229
Non-sustaining exploration expenditure 2,202 118
Other non-sustaining capital expenditure((1)) 132,516 35,049
Total gross capital expenditure 240,872 138,396
(1) Non-sustaining capital expenditure included the construction of
TSF 2, camp upgrades, the Capital waste stripping contract and the
construction of the solar plant. Non-sustaining costs are primarily those
costs incurred at 'new operations' and costs related to 'major projects at
existing operations' that will materially benefit the operation.
Exploration expenditure
The following table provides a breakdown of the total exploration expenditure
of the Group:
Year ended Year ended
31 December 2021
31 December 2020
US$'000
US$'000
Greenfield exploration
Burkina Faso 2,380 2,803
Côte d'Ivoire 11,499 14,588
Total greenfield exploration expenditure 13,879 17,391
Brownfield exploration
Sukari Tenement 15,943 11,709
Cleopatra((1)) - 8
Total brownfield exploration expenditure 15,943 11,717
Total exploration expenditure 29,822 29,108
(1) Cleopatra expenditure before the offset of net pre-production gold sales.
Exploration and evaluation assets - impairment considerations
In consideration of the requirements of the International Financial Reporting
Standards ("IFRS") 6 an impairment trigger assessment has been performed.
On review, an impairment trigger was identified for the Burkina Faso
exploration and evaluation asset and as a result, an impairment charge for the
full carrying amount of US$35 million was recognised in the statement of
comprehensive income in the year, refer to note 1.3.3 for further information.
Subsequent events
As referred to in note 5.2, subsequent to the year end, the Board proposed a
final dividend for 2021 of 5 US cents per share. Subject to shareholder
approval at the annual general meeting on 10 May 2022, the final dividend will
be paid on 10 June 2022 to shareholders on record date of 20 May 2022.
There were no other significant events occurring after the reporting date
requiring disclosure in the financial statements.
Non‑GAAP financial measures
1) EBITDA and adjusted EBITDA
EBITDA is a non‑GAAP financial measure, which excludes the following from
profit before tax:
· Finance costs
· Finance income
· Depreciation and amortisation
Management considers EBITDA a valuable indicator of the Group's ability to
generate liquidity by producing operating cash flow to fund working capital
needs and capital expenditures. EBITDA is also frequently used by investors
and analysts for valuation purposes whereby EBITDA is multiplied by a factor
or "EBITDA multiple" that is based on an observed or inferred relationship
between EBITDA and market values to determine a company's approximate total
enterprise value. EBITDA is intended to provide additional information to
investors and analysts and does not have any standardised definition under
IFRS and should not be considered in isolation or as a substitute for measures
of performance prepared in accordance with IFRS.
EBITDA excludes the impact of cash cost of production and income of financing
activities and taxes, and therefore is not necessarily indicative of operating
profit or cash flow from operations as determined under IFRS. Other companies
may also calculate EBITDA differently. The following table provides a
reconciliation of EBITDA to profit for the year before tax.
Adjusted EBITDA removes the effect of transactions that are not core to the
Group's main operations, like adjustments made to normalise earnings, for
example profit on financial assets at fair value through profit or loss,
impairments of property, plant and equipment, non-current mining stockpiles
and exploration and evaluation assets.
Reconciliation of profit before tax to EBITDA and adjusted EBITDA:
31 December 2021 31 December 2020
US$'000
US$'000
Profit for the year before tax 153,647 314,999
Finance income (196) (1,554)
Interest expense 486 558
Depreciation and amortisation 139,455 124,512
EBITDA 293,392 438,515
Add back/less:((1))
Profit on financial assets at fair value through profit or loss - (960)
Impairments of non-current assets 35,208 -
Adjusted EBITDA 328,600 437,555
(1) Adjustments made to normalise earnings for example profit on financial
assets at fair value through profit or loss, impairments of property, plant
and
equipment, non-current mining stockpiles and exploration and evaluation
assets.
2) Cash cost of production per ounce produced and sold and all-in sustaining
costs ("AISC") per ounce sold calculation
Cash cost of production and AISC are non-GAAP financial measures. Cash cost of
production per ounce is a measure of the average cost of producing an ounce of
gold, calculated by dividing the operating costs in a period by the total gold
production over the same period. Operating costs represent total operating
costs less sustaining administrative expenses, royalties, depreciation and
amortisation. Management uses this measure internally to better assess
performance trends for the Company as a whole. Management considers that, in
addition to conventional measures prepared in accordance with GAAP, certain
investors use such non-GAAP information to evaluate the Company's performance
and ability to generate cash flow. Management considers that these measures
provide an alternative reflection of the Group's performance for the current
year and are an alternative indication of its expected performance in future
periods. Cash cost of production is intended to provide additional
information, does not have any standardised meaning prescribed by GAAP and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP. This measure is not necessarily
indicative of operating profit or cash flow from operations as determined
under GAAP. Other companies may calculate these measures differently.
During June 2013 the World Gold Council ("WGC"), an industry body, published a
Guidance Note on the 'all in sustaining costs' metric, which gold mining
companies can use to supplement their overall non-GAAP disclosure. AISC is an
extension of the existing 'cash cost' metric and incorporates all costs
related to sustaining production and in particular recognising the sustaining
capital expenditure associated with developing and maintaining gold mines. In
addition, this metric includes the cost associated with developing and
maintaining gold mines. This metric also includes the cost associated with
corporate office structures that support these operations, the community and
rehabilitation costs attendant with responsible mining and any exploration and
evaluation costs associated with sustaining current operations. AISC US$/oz is
arrived at by dividing the dollar value of the sum of these cost metrics, by
the ounces of gold sold (as compared to using ounces produced which is used in
the cash cost of production calculation).
On 14 November 2018 the World Gold Council published an updated Guidance Note
on 'all-in sustaining costs' and 'all-in costs' metrics. Per their press
release it was expected that companies have chosen to use the updated guidance
from 1 January 2019 or on commencement of their financial year if later. The
Group have applied the updated guidance from 1 January 2019 with no impact on
our results or comparatives.
Reconciliation of cash cost of production per ounce produced:
31 December 2021 31 December 2020
Mine production costs (note 2.3) US$'000 368,327 339,012
Less: Refinery and transport US$'000 (2,264) (2,322)
Movement of inventory((1)) US$'000 (6,195) (11,502)
Cash cost of production - gold produced US$'000 359,868 325,188
Gold produced - total (oz.) oz 415,370 452,320
Cash cost of production per ounce produced US$/oz 866 719
(1) The movement in inventory on ounces produced is only the net movement in
mining stockpiles and ore in circuit while the movement in ounces sold is the
net movement in mining stockpiles, ore in circuit and gold in safe inventory.
A reconciliation has been included below to show the cash cost of production
metric should gold sold ounces be used as a denominator.
Reconciliation of cash cost of production per ounce sold:
31 December 2021 31 December 2020
Mine production costs (note 2.3) US$'000 368,327 339,012
Royalties US$'000 21,672 24,792
Movement of inventory((1)) US$'000 (15,081) 4,181
Cash cost of production - gold sold US$'000 374,918 367,985
Gold sold - total (oz.) oz 407,252 468,681
Cash cost of production per ounce sold US$/oz 921 785
1) The movement in inventory on ounces produced is only net the movement in
mining stockpiles and ore in circuit while the movement in ounces sold is the
net movement in mining stockpiles, ore in circuit and gold in safe inventory.
31 December 2021((1)) 31 December 2020((1))
Movement in inventory
Movement in inventory - cash (above) US$'000 (15,081) 4,181
Effect of depreciation and amortisation - non-cash US$'000 35,049 9,523
Movement in inventory - cash & non-cash (note 2.3) US$'000 19,968 13,704
Reconciliation of AISC per ounce sold:
31 December 2021 31 December 2020
Mine production costs (note 2.3) US$'000 368,327 339,012
Movement in inventory US$'000 (15,081) 4,181
Royalties US$'000 21,672 24,792
Sustaining corporate administration costs US$'000 22,379 15,029
Rehabilitation costs US$'000 276 350
Sustaining underground development and exploration US$'000 48,641 50,796
Other sustaining capital expenditure US$'000 57,513 52,433
By‑product credit US$'000 (1,361) (1,115)
All‑in sustaining costs((1)) US$'000 502,366 485,478
Gold sold - total (oz.) oz 407,252 468,681
AISC per ounce sold US$/oz 1,234 1,036
(1) Includes refinery and transport.
31 December 2021 31 December 2020
US$'000
US$'000
Corporate costs
Sustaining corporate costs 22,379 15,029
Non-sustaining corporate costs((1)) - 2,550
Corporate costs (sub-total) (note 2.3) 22,379 17,579
(1) Non-sustaining corporate costs relate to expenses and/or accruals
recognised for work performed by the Group's advisors on the successful
defence of the third-party all-share acquisition attempt of Centamin plc. This
is not a normal cost incurred in the day-to-day operations of running the
Group and as such has been excluded from our Non-GAAP reporting measures.
3) Cash and cash equivalents, bullion on hand and gold and silver sales debtor
Cash and cash equivalents, bullion on hand, gold and silver sales debtor and
financial assets at fair value through profit or loss is a non-GAAP financial
measure and is a measure of the available cash and liquid assets at a point in
time. Management uses this measure internally to better assess performance
trends for the Company as a whole. Management considers that, in addition to
conventional measures prepared in accordance with GAAP, certain investors use
such non-GAAP information to evaluate the Company's performance and ability to
generate cash flow and the measure is intended to provide additional
information. This non-GAAP measure does not have any standardised meaning
prescribed by GAAP and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with GAAP. This
measure is not necessarily indicative of cash and cash equivalents as
determined under GAAP and other companies may calculate this measure
differently.
Reconciliation to cash and cash equivalents, bullion on hand, gold and silver
sales debtor:
31 December 2021 31 December 2020
US$'000
US$'000
Cash and cash equivalents (note 2.16(a)) 207,821 291,281
Bullion on hand (valued at the year-end spot price) 20,304 5,747
Gold and silver sales debtor (note 2.7) 29,147 12,492
Cash and cash equivalents, bullion on hand, gold and silver sales debtor 257,272 309,520
The majority of funds have been invested in international rolling short-term
interest money market deposits.
4) Free cash flow and adjusted free cash flow
Free cash flow is a non-GAAP financial measure. Free cash flow is a measure of
the available cash after distributions to the Non-Controlling Interest ("NCI")
in SGM, being EMRA, that the Group has at its disposal to use for capital
reinvestment and to distribute to shareholders of the parent. Free cash flow
is intended to provide additional information, does not have any standardised
meaning prescribed by GAAP and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with GAAP. This
measure is not necessarily indicative of operating profit or cash flow from
operations as determined under GAAP and other companies may calculate this
measure differently.
31 December 2021 31 December 2020
US$'000
US$'000
Net cash generated from operating activities 309,878 453,305
Less:
Net cash used in investing activities (240,676) (129,848)
Dividend paid - non-controlling interest in SGM (75,200) (174,275)
Free cash flow (5,998) 149,182
Add back:
Net disposals of financial assets at fair value through profit or loss((1)) - (7,414)
Adjusted free cash flow (5,998) 141,768
(1) Adjustments made to free cash flow, for example acquisitions and disposals
of financial assets at fair value through profit or loss, which are completed
through specific allocated available cash reserves
PRINCIPAL RISKS AND UNCERTAINTIES
RISK AND OPPORTUNITY IN A TRANSITIONAL YEAR
Centamin recognises that nothing is without risk. A successful and sustainable
business needs a robust and proactive risk management framework as its
foundation, which outlines the Company's approach and process for management
of risk. The framework should be supported by a strong culture of risk
awareness, that encourages openness and integrity, alongside a clearly defined
appetite for risk. This enables the Board to consider risks and opportunities
to improve our decision-making process, deliver on our objectives and improve
our performance as a responsible mining company.
Ultimate accountability for risk management lies with the Board, supported by
the Audit and Risk Committee. We continuously monitor and refine our risk
management and wider internal controls to meet the changing requirements of
the business. The risk management framework and the system of internal
controls are designed to operate effectively together and report through to
the Audit and Risk Committee on a regular basis.
Centamin takes a number of measures to mitigate risk and maximise opportunity,
including those associated with its underlying operational and exploration
activity, with these being monitored and evaluated regularly. Due to the
nature of these inherent risks, it is not possible to give absolute assurance
that mitigating actions will be wholly effective.
During 2021 there have been updates to the principal risks driven by the
revised strategy for the business and external factors such as greater
understanding of the potential impact of climate change. A 'new' principal
risk, Decarbonisation, has been elevated from the climate change emerging risk
disclosed in the 2020 Annual Report. The existing principal and emerging risks
have also been refreshed to reflect the broader considerations of the business
moving forward to align with the robust foundation for growth & yield
which has been set as we invest for the future.
Of particular note through 2021 was the ongoing global impact of the COVID-19
pandemic, the Infectious Disease Management risk reflects this as we continued
with our proactive approach to managing the potential impacts and a refresh of
the stakeholder expectations risk to focus on the environmental and social
considerations. In addition, we recognise the importance of climate change as
a growing global risk and in particular due to the nature of our business the
need to address decarbonisation as reflected in the 'new' principal risk.
Through 2021 we have established reinforced our culture of continuous
improvement which has identified several opportunities such as the transition
of the underground to an owner operator model and the Solar Project.
The Directors confirm they have completed a robust assessment of the principal
and emerging risks facing the Company, including those which would negatively
impact its business model, future performance, operations, solvency or
liquidity.
PRINCIPAL RISKS
Due in part to the nature of the business as an operating mining company, the
headline principal risks, whilst fundamental to the ongoing operation, have
remained fairly constant since the updates for the 2020 Annual Report, with
the exception of Decarbonisation. The principal risks are listed below:
Principal Risk Nature of Risk Mitigation Measures Ongoing Strategy Risk Appetite
External Risks
Political Future political, social or economic changes in the countries in which we Government policies have developed over the past years in host countries to To maintain a detailed and up to date understanding of the investment Level: Balanced
operate may impact on the Group. incentivise foreign direct investment and the development of local mining framework and climate in which we operate as well as a constructive
industries. Centamin deploys a proactive approach to government and relationship with our host governments and local partners, such as EMRA. We will not take any unnecessary risk within our control. However, we
The future investment framework and business conditions in our operating stakeholder liaison and actively monitors - on an ongoing basis - legal,
understand that inherently we have limited control over a number of external
locations could change with governments adopting different laws, regulations fiscal, regulatory and political developments in its host countries. The Company undertakes to abide by the spirit and letter of the Concession risk factors.
and policies that may impact on the ownership, development and operation of
Agreement as well as local laws/Regulations in Egypt and furthermore where our
our mineral resources projects. Over the last year the Company recognises the The terms of the Sukari Concession Agreement, (including the applicable tax exploration activities are taking place in CDI.
changing landscape for our license holdings in CDI and BF, which we are regime and rights of tenure), were issued and ratified under special Law No.
monitoring closely. Outside of our host countries we are monitoring the 222 of 1994 and can, therefore, only be amended by the passing of a further
ongoing conflict in the Ukraine. law.
Legal and Regulatory Compliance The Groups structure includes operational and exploration licences in Egypt, Centamin deploys a proactive approach to government and stakeholder liaison The Company will ensure that it complies with all relevant regulation and Level: Balanced
CDI and BF, held through companies in Australia, Jersey and the United and actively monitors - on an ongoing basis - legal, fiscal, regulatory and legislation including its environmental and operational commitments set out in
Kingdom. This means we are subject to various legal and regulatory political developments in its host countries. the relevant permits/authorisations and local laws/regulations. We will not take any unnecessary risk within our control. However, we
requirements across all jurisdictions, relating to issues such as cross
understand that inherently we have limited control over a number of external
jurisdictional taxation, related party transactions, anti-bribery and In Egypt we have the Sukari Concession Agreement which can only be changed by risk factors.
corruption. means of another law, so we have the right to export gold, repatriation of
funds, existing tax exemption and further considerations.
Ongoing legal, fiscal and regulatory changes may impact project permitting,
tenure, taxation, exchange rates, environmental protection, labour relations, In addition, the Group engages with the relevant regulatory authorities and
and the ability to repatriate income and capital. These measures may also seeks appropriate advice to ensure compliance with all relevant regulation and
impact the ability to import key supplies, export gold production and legislation. An example would be the global tax strategy in place which
repatriate revenues. ensures all taxes are paid at an operational level and further tax
requirements are met through the holding structure. Appropriate monitoring
procedures are in place and we ensure that we manage legal and regulatory
compliance.
Litigation Centamin's ability to operate and conduct business in host countries, may be In order to mitigate this risk Centamin has (a) taken appropriate legal advice To minimise exposure to litigation and reduce the impact of actions by Level: Balanced
adversely affected by current and any future dispute resolution and/or from reputable legal advisers and continues actively to pursue its legal complying with all relevant laws and regulations and to defend and/or bring
litigation proceedings. The Group is currently party to a single legal action rights with respect to its existing case; and (b) maintains regular contact any actions necessary to protect the Company's assets, rights and reputation. We will not take any unnecessary risk within our control. However, we
in Egypt. The details of this litigation, which relates to the Concession with its Egyptian legal advisers who actively monitor developments in both
understand that inherently we have limited control over a number of external
Agreement, is given in note 5.1 of the financial statements. The challenge to court and local media for signs of any legislative or similar developments risk factors.
the concession agreement could affect its ability to operate the mine at that relate to its ongoing litigation or which may otherwise threaten its
Sukari in the manner in which it is currently operated and the former could operations, finances or prospects.
adversely affect its profitability.
The potential for serious impact can be further mitigated by: Centamin's
strict adherence to local laws and agreements; the Egyptian government's
continued support on the constitutionality of Law no. 32 of 2014, which
restricts the ability of third parties to challenge contractual agreements
between the Egyptian government and investors such as Centamin; the investment
protections and dispute resolution provisions set out in the Sukari Concession
Agreement and the bilateral investment treaty between Australia (PGM's place
of incorporation) and the Arab Republic of Egypt.
Infectious Disease Management In 2020, COVID-19 significantly impacted the world, presenting an Safely managing the health and wellbeing of our workforce, in line with We recognise the potential risks of the global pandemic as a threat bringing Level: Balanced
unprecedented medical, economic and social challenge and the ongoing effects government and public health advice led to us introducing covid-secure working potential risks to our people and business. Following the initial assessment
of this were felt through 2021 and will be beyond. Centamin has been proactive conditions which have assisted in the mitigation of the risk. Ensuring a local of the potential risks, their impacts to our people and business we developed We will not take any unnecessary risk within our control. However, we
in how it manages and mitigates the impacts within its control. We have and global proactive approach to our response during the pandemic has been a dynamic action plan at a corporate and site level supported by resources understand that inherently we have limited control over a number of external
experienced no material disruption to operations, supply chain or gold key. focusing on our response day to day. This has continued to adapt and evolve in risk factors.
shipments.
response to the changes both realised and projected to ensure we are in the
Whilst the impact and potential duration remains uncertain, the Company best place to manage and respond as required.
Furthermore, we recognise the macro-economic uncertainty this has created regularly reviews our scenario risk analysis on the Group and believes it is
including volatility in the markets, increasing commodity costs, supply chain well positioned to continue to manage through these difficult times. As the
disruption and the impacts to our people. The scale and duration remain pandemic progressed we continued to monitor the global situation, adapting our
uncertain but we continue to monitor and are prepared to manage accordingly. policies, procedures and controls to minimise the impacts within our control
and we have maintained this through 2021.
Gold Price The extent of the Company's financial performance is due in part to the price The Group is 100% exposed to the gold price; however, the cash costs of the The Company does not currently hedge against the price of gold or exposure to Level: Balanced
of gold, over which the Company has no influence. Revenues from gold sales are Sukari Gold Mine remain within our budget which is conservatively based on the currencies.
in US dollars and Centamin has exposure to costs in other currencies including long term gold price as modelled by external advisors. This often means we can
We will not take any unnecessary risk within our control. However, we
Egyptian pounds, Australian dollars and sterling. take advantage of any changes in the gold price which have been positive over We will continue to allow for financial flexibility when budgeting and understand that inherently we have limited control over a number of external
the course of 2021 with a realised average price of US$1797. forecasting using a measured approach to the potential fluctuations in gold risk factors.
Centamin manages its exposure to gold price by keeping operating costs as low price.
as possible and continues to consider other options where these would be
viewed as beneficial for our commitment to stakeholder returns.
Strategic Risks
Single Project Dependency Sukari currently constitutes Centamin's main mineral resource and sole mineral The project at Sukari has two distinct ore sources (open pit and underground), At Sukari, the process plant has been designed with sufficient resilience and Level: Informed
reserve, near term production and revenue. Whilst the resource base in CDI is the processing plant has two separate flotation circuits and two separate redundancies within the operating cycle.
growing, we are undertaking brownfield surface exploration within the existing power stations.
We will have an approach that could deliver reasonable rewards, economic or
concession and have secured highly prospective ground within Egypt's Nubian
The exploration projects across the business provide a well-balanced project otherwise, by managing risk in an informed way.
Shield, we recognise until further production growth beyond Sukari is Whilst one project, the nature of the design of the plant provides adequate pipeline, with potential to add incremental shareholder value by increasing
identified, the potential impact remains high and safeguarding the project is mitigation and reduces the relative likelihood of dependence compared to a production across the Group as highlighted in the Strategy in Action. The
paramount to the Company. The ongoing COVID-19 pandemic has continued to single layer plant design. The second circuit of the process plant has been recent bid round in Egypt has resulted in the Company being awarded additional
ensure focus on this risk but through 2021 we have continued our approach to fully operational for over seven years, which shows the resilience of the exploration areas, which we are currently discussing further with the
"Co-Existing with COVID-19". project. In addition, the plant is fed by both the open pit and underground government.
operation, providing higher and lower-grade ore to the processing plant.
Operational activity and production is expected to continue at above nameplate
capacity. Other mitigating factors, outside the single project at Sukari,
include the continued focus on longer term growth and expansion through
exploration and acquisition targets both inside and outside of Egypt.
Concession Governance and Management SGM, is 50:50 jointly owned by PGM (the Company's wholly owned subsidiary) and It is of key importance for Centamin to maintain a solid and transparent A key objective of the Company is to maintain its licence to operate in its Level: Balanced
EMRA, with equal board representation from both parties. The board of SGM working relationship with its 50% partner, EMRA, through a strict adherence to host countries. In Egypt, this is achieved through active and ongoing
operates by way of simple majority. the Sukari Concession Agreement. With the onset of profit sharing in 2019, the co-operation, regular meetings and correspondence with EMRA, as well as making We will not take any unnecessary risk within our control. However, we
proper application of the cost recovery and net profit share payment sure that the terms and conditions of the Concession Agreement and applicable understand that inherently we have limited control over a number of external
Should a dispute arise, or decision-making become deadlocked and cannot provisions under the Concession Agreement, has become a key priority. laws are fully complied with. Ongoing monitoring and review of this is key and risk factors.
otherwise be amicably resolved by way of commercial negotiations or mediation
is an activity which we will continue to give the required focus to.
then time-consuming and costly arbitration or other dispute resolution To ensure successful operation of the Sukari Gold Mine maintaining a good
proceedings may need to be initiated. working relationship with EMRA, other relevant ministries and wider government
is a key focus. The Group has regular meetings with officials from EMRA and
invests time in liaising with relevant ministry and other governmental
representatives.
Licence to Operate Centamin are committed to building and operating our mines in a safe and Ensure that we are clear on the standards that are expected locally and Acting in an ethical, responsible and transparent manner is fundamental to Level: Balanced
responsible manner. To do this, we seek to build trust-based partnerships with regionally within our areas of operation. realising the significant business benefits gained from building trusted and
host governments and local communities to protect our license to operate and
constructive relationships with all our stakeholders, and to maintaining our We will not take any unnecessary risk within our control. However, we
ability to grow. Develop and implement investment plans that sustain broad stakeholder support socio-political license to operate. Strengthen our sustainability governance understand that inherently we have limited control over a number of external
and compliance with local and regional standards. and management framework at all levels of the organisation, including risk factors.
We should only advance our business interests where this protects people,
reinforcement of our performance standards to support growth, supported by
fosters socio-economic development and safeguards the environment, and leaves Maintain an up-to-date compliance register for each asset and routinely review resources allocated to ensure the long-term physical, chemical and biological
a positive legacy for our host communities. our performance against these commitments and obligations. stability of the site - or social benefits to our host communities.
Future of our Workforce Our accomplishments and success as a Company are made possible by our ability Initiatives which have been introduced include: the employee development To deliver on the principles and commitments as stated in our People policy. Level: Balanced
to attract and retain human capital and through the commitment of our people. pathway, to ensure all positions are undertaken to a proficient level; Visible leadership in the development of our people, diversity and inclusion.
supervisory and leadership training to equip employees for increased levels of Sustained resourcing of the professional development and training initiatives. We will not take any unnecessary risk within our control. However, we
We need to support our people to develop a shared understanding of the technical and management responsibility; and succession planning. understand that inherently we have limited control over a number of external
critical behaviours and skills required for successful performance and provide
risk factors.
them the opportunity to progress to a top-level if they possess the ability to Continue to reinforce awareness of our organizational values and the critical
do so. Failure to do so will result in elevated rates of turnover and behaviours required for successful performance.
knowledge loss.
Through visible leadership, strengthen diversity and inclusion in workplace
Valuing diversity and promoting inclusion is an ethical imperative for a culture and practice, and set targets to increase the representation of women.
sustainable business.
Stakeholder Environmental and Social Expectations Elevated societal expectations on corporate environmental responsibility, Through our Sustainability Performance Framework, we continue to strengthen Reinforce the implementation of our Sustainability Performance Framework and Level: Controlled
including increased levels of stakeholder scrutiny, disclosure, regulatory our governance and management controls and assurance processes to meet its integration into asset-level management systems and practice.
requirements and industry standards. stakeholder expectations, existing and new regulatory and industry standards,
Controlled considers potential breaches in our policies and controls to
for example the RGMPs, GSITM and TCFD. Build the awareness and capacity of senior management teams to integrate meeting our environmental expectations. The Board invests heavily in a
Recent high-profile incidents have put a spotlight on the need for increased
environmental and social risks and opportunities into investment programme of continuous improvement in relevant practices and has an
levels of corporate accountability on matters of environmental and social Define environmental and social criteria and triggers to support key decision-making expectation to meet the highest standards.
governance, including tailings management, heritage protection, responsible investment decisions.
supply chain, diversity and inclusion.
At asset-level, focused on building the capacity of our HSES specialist teams
The COVID-19 pandemic has also focussed attention on the wellbeing our people, and the continual improvement of our environmental and social management
social inequalities and the role which we must play in the wider communities. system. We are improving our LOM management plans, measurement and target
setting and third-party verification.
Decarbonisation The transition to a net zero carbon economy is expected to profoundly affect A number of carbon abatement initiatives are underway. Construction has Understanding the effects of climate-related risk on our business is important Level: Balanced
our business model over the medium and/or long-term due to factors including: commenced on a solar PV project that will reduce our GHG emissions by 60,000 as we study in more detail and specificity the updated life of mine plan for
New Principal Risk the pricing of carbon emissions; availability and costing of commodities and tCO2-e per annum at Sukari; and the installation of the high production trays Sukari including opportunities for decarbonisation. We will undertake a We will not take any unnecessary risk within our control. However, we
consumables; changing market and investor sentiment. to our haul fleet indicates a 15 to 20% reduction in fuel consumption per trade-off analysis for decarbonisation options. understand that inherently we have limited control over a number of external
tonne hauled.
risk factors.
The most significant opportunity for decarbonisation is the ability to reduce
Elaborate a climate change strategy that will set an ambitious science-based
and potentially remove fossil fuel-generated electricity from gold mining's Other initiatives under investigation include expansion of our existing target for carbon reduction by 2030 and an accompanying roadmap to achieve
sources of power. This is likely to require increased levels of capital commitment to renewables, connection to the national grid in Egypt and fuel this target.
investment in the short-medium term and the uptake of new technology. switching to natural gas for both power generation and hybridization of our
mobile fleet.
Operational Risks
Safety, Health and Wellbeing It is an inherent risk in our industry that incidents due to unsafe acts or Protecting the safety, health and wellbeing of employees, contractors, local Ensuring the safety, health and wellbeing of our workforce is directly aligned Level: Controlled
conditions, or the failure of our equipment or infrastructure could lead to communities and other stakeholders is a fundamental responsibility for with our first Value, to Protect, and is amoral imperative. This requires a
injuries or fatalities. Centamin. We seek continuous improvement of our safety and health management focus on zero harm whilst constituting a direct investment in the Controlled considers potential breaches in our policies and controls to
system and practices including assurance processes, with particular focus on
safety, health and wellbeing. The Board invests heavily in a programme of
Remote and rostered work also has potential to impact the mental health and the early identification of risks and the prevention of incidents. productivity of the business and the physical integrity of our operations. continuous improvement in relevant practices and has an expectation to meet
wellbeing of our workers - an aspect that has been heightened by the ongoing
the highest standards.
COVID-19 pandemic. We continue to reinforce our critical risk and control standards, review and A safe and healthy workforce translates into an engaged, motivated and
test our crisis management plan, maintain Covid-19 management protocols, productive workforce that mitigates operational stoppages, and reduces
Our workforce face potential risks from hazards such as fire, explosion and continue to enhance employee medical benefits and our new Tailings Storage potential incidents or harm.
electrocution, as well as risks specific to the mine site and development Facility ("TSF2") starting operation.
project. These include potential slope failures or collapse in the
underground, heavy or light equipment collisions involving machinery/transport Reinforce the implementation of our Sustainability Performance Framework and
or personnel or environmental incidents such as cyanide contamination. its integration into asset-level management systems and practice.
Continuing focus on the risks associated with mining companies' tailings Build the awareness and capacity of senior management teams to operationalise
facilities also means we continue to monitor this risk, completing regular our critical risks standards and seek conformance to ISO 45001.
internal and external technical reviews.
Exploration Exploration activities by their very nature are highly speculative with an Before undertaking any exploration activities a risk-based approach is Ensuring we have an effective and efficient exploration programme to meet our Level: Opportunistic
inherent degree of risk. Centamin strives to make new discoveries, growth and undertaken to filter projects considering a number of factors. strategic targets, long-term production and reserves goals.
value-creation opportunities through our exploration programme.
We will consider opportunities with higher levels of risk in exchange for
This approach has been further enhanced in 2021, and beyond, by an overhaul of Further information will be provided through 2022 in updates on the potentially greater reward, as long as they do not conflict with our core
Whilst Egypt continues to represent a significant opportunity through the exploration and geological leadership team and a restructured approach. exploration activities. values.
brownfield exploration around the concession and highly prospective ground in This will be supported by independent advice and an investment in technology.
Egypt's Nubian Shield, we also recognise our potential growth projects in
Côte d'Ivoire. 2021 also delivered a positive PEA for Doropo and we commenced the PFS which
is due in 2022, we secured highly prospective ground in Egypt and doubled ABC
resources.
During 2021 we invested a total of US$14M in exploration activities, with an
initial US$25m budgeted for exploration expenditure in 2022.
Geological Understanding Geological uncertainty is an inherent risk which any mining company faces. The overhaul of the geological leadership team through 2021 and a restructured To achieve an accurate estimation based on geology, that informs improved mine Level: Informed
approach has led to a number of changes to the stewardship of the orebody and planning and operations to deliver results. This will be supported by the
Understanding of the orebody can be influenced by a number of factors which a new Sukari Orebody Stewardship Model. near-term roadmap to +500koz pa and the robust life of mine schedule as We will have an approach that could deliver reasonable rewards, economic or
can impact on the ability to estimate the location of the ore and the
presented in December 2021. otherwise, by managing risk in an informed way.
potential grade expected by the mining operations. Upgrades to the resource management processes and the development of more
robust resource models have driven a review of the existing data alongside
As these estimations are used to inform the approach to our operations and the future analysis and the ability to set Geology targets.
wider business strategy we need to ensure that we can make this process as
accurate as possible. These changes will contribute to an integrated approach to the mining methods
which are applied and inform the mine-to-mill planning.
Operational Performance and Planning By their nature, mineral resources and reserves are estimates based on a range 2021 has been a transformational year for Centamin with a focus on improving To achieve reliable and consistent production, whilst optimising the potential Level: Informed
of assumptions, including geological, metallurgical, technical and economic mining flexibility and delivering growth. At the end of 2020 we completed the of the operation. The Company provides timely and accurate information to the
factors. Other variables include expected costs, inflation rates, gold price, Life of Asset Phase 1, issued 3 year guidance and commenced accelerated market on production levels and forecasts. The mining sector continues to face We will have an approach that could deliver reasonable rewards, economic or
grade downgrades and production outputs. waste-stripping. Through 2021 we commissioned TSF 2, completed the new Sukari operating cost inflation, including labour costs, energy costs and the natural otherwise, by managing risk in an informed way.
Orebody Stewardship Model and launched the Centamin Capability Framework, impact of ore-grade deterioration over time. In order to deliver our
Unplanned operational stoppages can impact our production. An inability to
disciplined growth strategy and to maintain and improve our competitive
shift the volumes of waste required, drops in our operational capacity in The plan should provide clarity as to the strategic direction of the mine and position, the Group must deliver its financial improvement targets and
mining, contractor management, supply chain disruption or ground stability are the desired production levels for the,short, medium and long-term to give minimise the number of unplanned operational stoppages.
examples of potential risks. focus to the operational elements of the mine. Alongside the overhauled
geological leadership team and restructured approach to geology and orebody
Accurate and complete planning is pivotal to informing production estimates, stewardship we have developed a comprehensive mining engineering model,
grade quality and provide greater clarity to corporate/operational enhanced our geotechnical engineering programme, increased our mining
decision-making. We then need to deliver against our targets by analysis of flexibility and have identified multiple initiatives to improve operating
our data to inform the right decisions. efficiency and productivity.
Further through 2021 we have managed the impact of COVID-19 and continue to An example being a dedicated contract-mining solution on the East of the open
monitor these. At the time of publishing there were no additional concerns. pit and the owner-operator fleet utilised for ore and waste mining on the
North and West.
EMERGING RISKS
The Audit & Risk Committee and Board regularly review the principal risks
as well as the wider operational, corporate and general business risks
including a discussion on emerging risks.
Emerging risks are defined as circumstances or trends that could significantly
impact the Company's financial strength, competitive position, or reputation
within the next three years or over a longer term. Emerging risks may prove
difficult to quantify as they are often influenced by external factors and
difficult to predict. Emerging risks are considered as part of the Company's
strategic discussions through all levels of the Group and one of these risks
from the 2020 Annual Report has now been elevated to a principal risk
highlighting the importance of this process.
We have outlined a non-exhaustive list of emerging risks assessed during the
year, these are risks which are inherent to the nature of our business and
where we operate. We monitor these as part of the risk management framework.
Financial Ensuring that we effectively manage our exposure to risks such as
jurisdictional taxation exposure, currency fluctuations, interest rate and
liquidity is an ongoing process. The Company has developed the necessary
procedures and programmes, including in response to inflationary pressures, to
minimise the potential impact of these risks as outlined in the Financial
Review and going concern in Note 1.3.7 of the financial statements.
Cyber security The Company recognises the importance of risks associated with cyber security
and data governance but has assessed they do not represent a principal risk
given the current position of the Company's operations. Increasing investment
in this area is, however, a priority for the Company to ensure we can maintain
our resilience alongside planned enhancements to our technology started in
2021 through a Digital Transformation programme.
Corporate development The Company continue to acknowledge the risks and opportunities associated
with our ability to realise value by successfully executing merger,
acquisitions and divestments. Management must be ready to evaluate approaches
and opportunities to ensure value for shareholders is maintained and enhanced.
Security - CDI Increased militant activity and political instability in Northern CDI and BF
continues to raise potential concerns for our personnel safety in-country. We
continue to closely monitor the situation through our own security, local
government, national security and external advisors. These resources have
received investment in 2021 to ensure we have the required support to mitigate
the risk as we increase operations in CDI.
Capital allocation and project execution Ensuring balanced capital is allocated effectively and projects are well
executed is a risk and opportunity which the Company recognises as
highlighted in the Financial Review. Examples of key capital projects
delivered in 2021 include upgrades to the new tailings storage facility,
infrastructure improvements to the camp and progressing the solar plant and
paste fill plant at Sukari, further detail is shown in the Financial Review
under Capital Projects .
Directors' responsibilities
For the year ended 31 December 2021
Directors' responsibilities in respect of the Annual Report and financial
statements
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Companies (Jersey) Law 1991, as amended (the "Company Law") requires the
Directors to prepare financial statements for each financial year. Under that
law the Directors have prepared the Group financial statements in accordance
with IFRS as adopted by the European Union. Under Company Law the Directors
must not approve the Group financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Group and of the
profit or loss of the Group for that period. In preparing the financial
statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently
· state whether applicable IFRS as adopted by the European Union
have been followed, subject to any material departures disclosed and explained
in the financial statements
· make judgments and accounting estimates that are reasonable and
prudent, and
· prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group will continue in
business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's transactions and disclose with
reasonable accuracy at any time the financial position of the Group and enable
them to ensure that the financial statements and the Directors' Remuneration
Report comply with the Company Law.
The Directors are also responsible for safeguarding the assets of the Group
and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
Company's website. Legislation in the United Kingdom and Jersey governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
The Directors consider that the Annual Report and financial statements, taken
as a whole, are fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group's position and performance,
business model and strategy.
The Directors have undertaken a robust assessment of the principal risks
impacting the Company. The assessment identified strategic and operational
risks at a corporate level and principal risks impacting our operations in
Egypt and West Africa. Details of the risk assessment can be found in the
Audit and Risk Committee Report and the risk management and principal risks
section of the Strategic Report.
The Board receives written assurances from the CEO and CFO that to the best of
their knowledge and belief, the Group's financial position presents a true and
fair view and that the financial statements are founded on a sound system of
risk management, internal compliance and control. Further, they confirm that
the Group's risk management and internal compliance is operating efficiently
and effectively. The Board recognises that internal control assurances from
the CEO and CFO can only be reasonable rather than absolute, and therefore
they are not and cannot be designed to detect all weaknesses in control
procedures.
The financial statements have been audited by PricewaterhouseCoopers LLP,
independent auditor, who was given unrestricted access to all financial
records and related information, including minutes of all shareholder, Board
and committee meetings.
The financial statements were authorised by the Board of Directors for issue
and signed on their behalf by Martin Horgan (CEO) and Ross Jerrard (CFO) on 16
March 2022.
Each of the Directors, whose names and functions are listed in the Governance
Report, confirm that, to the best of their knowledge:
· the Group financial statements, which have been prepared in
accordance with IFRS as adopted by the European Union, give a true and fair
view of the assets, liabilities, financial position and profit of the Group
· the Strategic and Governance Report includes a fair review of the
development and performance of the business and the position of the Group,
together with a description of the principal risks and uncertainties that it
faces
· In the case of each Director in office at the date the Governance
Report is approved
· so far as the Director is aware, there is no relevant audit
information of which the Group's auditor is unaware
· they have taken all the steps that they ought to have taken as a
Director in order to make themselves aware of any relevant audit information
and to establish that the Group's auditor is aware of that information.
On behalf of the Board:
Martin Horgan
Ross Jerrard
Chief Executive Officer Chief Financial
Officer
Director Director
16 March 2022 16
March 2022
audited full year consolidated financial statements
Consolidated statement of comprehensive income
for the year ended 31 December 2021
Note 31 December 31 December
2021 2020
US$'000 US$'000
Revenue 2.2 733,306 828,737
Cost of sales 2.3 (487,376) (449,441)
Gross profit 245,930 379,296
Exploration and evaluation expenditure 2.1 (13,879) (17,391)
Other operating costs 2.3 (49,100) (56,392)
Other income 2.3 5,708 6,972
Profit on financial assets at fair value through profit or loss 2.6 - 960
Finance income 2.3 196 1,554
Impairment of exploration and evaluation asset 2.10 (35,208) -
Profit for the year before tax 153,647 314,999
Tax 2.5 20 (50)
Profit for the year after tax 153,667 314,949
Profit for the year after tax attributable to:
- the owners of the parent 101,527 155,979
- non-controlling interest in SGM 2.4 52,140 158,970
Total comprehensive income for the year 153,667 314,949
Total comprehensive income for the year attributable to:
- the owners of the parent 101,527 155,979
- non-controlling interest in SGM 2.4 52,140 158,970
Earnings per share attributable to owners of the parent:
Basic (US cents per share) 6.4 8.811 13.531
Diluted (US cents per share) 6.4 8.738 13.453
The above audited consolidated statement of comprehensive income should be
read in conjunction with the accompanying notes.
Consolidated statement of financial position
as at 31 December 2021
Note 31 December 31 December
2021 2020
US$'000 US$'000
Non-current assets
Property, plant, and equipment 2.9 956,217 829,884
Exploration and evaluation asset 2.10 25,261 63,701
Inventories - mining stockpiles 2.11 64,756 64,870
Other receivables 2.7 101 103
Total non-current assets 1,046,335 958,558
Current assets
Inventories - mining stockpiles and consumables 2.11 128,721 118,705
Trade and other receivables 2.7 32,579 18,424
Prepayments 2.8 7,964 8,908
Cash and cash equivalents 2.16(a) 207,821 291,281
Total current assets 377,085 437,318
Total assets 1,423,420 1,395,876
Non-current liabilities
Provisions 2.13 42,647 32,752
Other payables 2.12 10,386 1,437
Total non-current liabilities 53,033 34,189
Current liabilities
Trade and other payables 2.12 75,759 64,488
Tax liabilities 2.5 253 267
Provisions 2.13 4,617 7,480
Total current liabilities 80,629 72,235
Total liabilities 133,662 106,424
Net assets 1,289,758 1,289,452
Equity
Issued capital 2.14 669,531 668,807
Share option reserve 2.15 4,975 3,343
Accumulated profits 655,508 634,498
Total equity attributable to:
- owners of the parent 1,330,014 1,306,648
- non-controlling interest in SGM 2.4 (40,256) (17,196)
Total equity 1,289,758 1,289,452
The above audited consolidated statement of financial position should be read
in conjunction with the accompanying notes.
The audited consolidated financial statements were authorised by the Board of
Directors for issue on 16 March 2022 and signed on its behalf by:
Martin Horgan
Chief Executive Officer
Director
16 March 2022
Ross Jerrard
Chief Financial Officer, Director
Director
16 March 2022
Consolidated statement of changes in equity
for the year ended 31 December 2021
Note Issued Share option Accumulated Total Non-controlling Total
capital reserve profits US$'000 interests equity
US$'000 US$'000 US$'000 US$'000 US$'000
Balance as at 1 January 2021 668,807 3,343 634,498 1,306,648 (17,196) 1,289,452
Profit for the year after tax - - 101,527 101,527 52,140 153,667
Total comprehensive income for the year - - 101,527 101,527 52,140 153,667
Own shares acquired (1,391) - - (1,391) - (1,391)
Net recognition of share-based payments - 3,747 - 3,747 - 3,747
Transfer of share-based payments 2,115 (2,115) - - - -
Dividend paid - non-controlling interest in SGM 2.4 - - - - (75,200) (75,200)
Dividend paid - owners of the parent - - (80,517) (80,517) - (80,517)
Balance as at 31 December 2021 669,531 4,975 655,508 1,330,014 (40,256) 1,289,758
Note Issued Share option Accumulated Total Non-controlling Total
capital reserve profits US$'000 interests equity
US$'000 US$'000 US$'000 US$'000 US$'000
Balance as at 1 January 2020 672,105 4,179 617,244 1,293,528 (1,891) 1,291,637
Profit for the year after tax - - 155,979 155,979 158,970 314,949
Total comprehensive income for the year - - 155,979 155,979 158,970 314,949
Own shares acquired (3,298) - - (3,298) - (3,298)
Net reversal of share-based payments - (836) - (836) - (836)
Dividend paid - non-controlling interest in SGM 2.4 - - - - (174,275) (174,275)
Dividend paid - owners of the parent - - (138,725) (138,725) - (138,725)
Balance as at 31 December 2020 668,807 3,343 634,498 1,306,648 (17,196) 1,289,452
The above audited consolidated statement of changes in equity should be read
in conjunction with the accompanying notes.
Consolidated statement of cash flows
for the year ended 31 December 2021
Note 31 December 31 December
2021 2020
US$'000 US$'000
Cash flows from operating activities
Cash generated from operating activities 2.16(b) 309,873 453,315
Income tax received/(paid) 5 (10)
Net cash generated from operating activities 309,878 453,305
Cash flows from investing activities
Disposal of financial assets at fair value through profit or loss - 7,414
Acquisition of property, plant, and equipment (224,929) (127,099)
Brownfield exploration and evaluation expenditure (15,943) (11,717)
Finance income 2.3 196 1,554
Net cash used in investing activities (240,676) (129,848)
Cash flows from financing activities
Own shares acquired (1,391) (3,298)
Dividend paid - non-controlling interest in SGM 2.4 (75,200) (174,275)
Dividend paid - owners of the parent (80,517) (138,725)
Net cash used in financing activities (157,108) (316,298)
Net (decrease)/increase in cash and cash equivalents (87,906) 7,159
Cash and cash equivalents at the beginning of the year 291,281 278,229
Effect of foreign exchange rate changes 4,446 5,893
Cash and cash equivalents at the end of the year 2.16(a) 207,821 291,281
The above audited consolidated statement of cash flows should be read in
conjunction with the accompanying notes.
Notes to the consolidated financial statements
for the year ended 31 December 2021
Basis of preparation
These financial statements are denominated in US dollars ("US$"), which is the
presentation currency of Centamin plc. All companies in the Group use the US$
as their functional currency. All financial statements presented in US$ have
been rounded to the nearest thousand dollars, unless otherwise stated.
These financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted for use by the European
Union ("EU") and interpretations issued from time to time by the IFRS
Interpretations Committee ("IFRS IC") both as adopted by the EU and which are
mandatory for EU reporting as at 31 December 2021 and the Companies (Jersey)
Law 1991. The Group has not early adopted any other amendments, standards or
interpretations that have been issued but are not yet mandatory.
The consolidated financial statements have been prepared on a going concern
basis and under the historical cost convention, as modified by financial
assets and financial liabilities (including derivative) instruments which are
measured at fair value.
The consolidated financial statements for the year ended 31 December 2021 were
authorised by the Board of Directors of the Company for issue on 16 March
2022.
Accounting policies
Accounting policies are selected and applied in a manner which ensures that
the resulting financial statements satisfy the concepts of relevance and
reliability, thereby ensuring that the substance of the underlying
transactions or other events is reported. These policies have been
consistently applied to all the years presented, unless otherwise stated.
1. Current reporting period amendments
1.1 Changes in critical judgements and estimates
There were no material updates and/or changes to critical accounting
judgements and estimates that management have made in the year in applying the
Group's accounting policies that have a significant effect on the amounts
recognised and the related disclosures in the financial statements.
1.2 Changes in policies and estimates
Certain new accounting standards, amendments to accounting standards and
interpretations have been published that are not mandatory for 31 December
2021 reporting periods and have not been early adopted by the Group. These
standards, amendments or interpretations are not expected to have a material
impact on the entity in the current or future reporting periods and on
foreseeable future transactions.
For a detailed discussion about the Group's performance and financial
position, please refer to the financial review.
1.3 Critical judgements and estimates in applying the entity's accounting
policies
The following are the critical judgements and estimates that management have
made in the process of applying the Group's accounting policies and that have
the most significant effect on the amounts recognised in the financial
statements.
Management has discussed its critical accounting judgements and estimates and
associated disclosures with the Company's Audit and Risk Committee.
The critical accounting judgements are as follows:
1.3.1 Judgement: Control
Principles of consolidation
The consolidated financial statements are prepared by combining the financial
statements of all the entities that comprise the consolidated entity, being
the Company (the parent entity) and its subsidiaries. Subsidiaries are all
entities (including structured entities) over which the Group has control, as
defined in IFRS 10 'Consolidated financial statements'. Consistent accounting
policies are employed in the preparation and presentation of the consolidated
financial statements.
The consolidated financial statements include the information and results of
each subsidiary and controlled entity from the date on which the Company
obtains control and until such time as the Company ceases to control such
entities. The Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
In preparing the consolidated financial statements, all intercompany balances
and transactions, and unrealised profits arising within the consolidated
entity, are eliminated in full.
1.3.1.1 Judgement: Accounting treatment of the Sukari Gold Mining Company
("SGM")
Pharaoh Gold Mines NL (the holder of an Egyptian branch) ("PGM") and EMRA are
50:50 partners in SGM. However, SGM is fully consolidated within the Group as
if it were a subsidiary due to it being a controlled entity, reflecting the
substance and economic reality of the Concession Agreement ("CA") (see note
4.1 and note 4.2 to the financial statements).
IFRS 10 'Consolidated financial statements' defines control as encompassing
three distinct principles, which, if present, identify the existence of
control by an investor over an investee, hence forming a parent-subsidiary
relationship. The principles are:
1. power over the investee;
2. exposure, or rights, to variable returns from its involvement with the
investee; and
3. the ability to use its power over the investee to affect the amount of
the investor's returns.
An investor has power over an investee when the investor has existing rights
that give it the current ability to direct the relevant activities (i.e., the
activities that significantly affect the investee's returns).
The Company's control of SGM, through PGM
PGM is a 100% owned subsidiary of the Company. The Company, through PGM, has
the right to appoint or remove the managing director of SGM under the terms of
the CA and in doing so controls the activities in relation to the operation of
SGM that most significantly affect the returns of SGM. These are all
illustrated in the sections that follow:
a) The duties of PGM
• PGM controls the appointment of the General Manager ("GM") at the
Sukari Gold Mine;
• By controlling the appointment of the GM and directing their
activities, the GM will make all day-to-day decisions to allow the mine to
operate in a manner that aligns with the Company's objectives which involve:
• preparing SGM's work programmes through determination of the
daily and longer-term mine plans, the budgets covering the operations to be
carried out throughout the life of the mine ("LOM") and approval of the same;
• managing capital expenditure, procurement, cost control and
treasury;
• conducting exploration, development, production, and marketing
operations;
• co-ordinating SGM operations and activities, including its
dealings with all contractors and subcontractors;
• bearing ultimate responsibility for all costs and expenses
required in carrying out any and all operations under the CA;
• funding the operations of SGM and recovering costs and
expenses throughout the LOM (i.e., exploration, development, and production
phases);
• funding additional exploration and expansion programmes within
the mine during the production phase;
• taking custody of SGM's stock and management of its funds;
• selling and shipping of all gold and associated metals
produced; and
• entering into and managing gold sales or hedging contracts and
forward sale agreements.
b) The duties of EMRA
• EMRA must, under the terms of the CA, provide the required approvals
to allow the mine to operate.
c) The duties, role, and function of the board of SGM:
• The board of SGM has six board members:
• three of which are appointed by the Company, through PGM; and
• three of which are appointed by EMRA:
• the executive chairman, as one of the three EMRA appointed board
members, is a representative of EMRA and is appointed by the Egyptian Ministry
of Finance.
• The board of SGM convenes twice a year to:
• facilitate a forum for sharing information between the owners of
SGM;
• provide a mechanism to scrutinise the timing and amounts of
expenses; rather than as a decision-making body over SGM's most significant
relevant activities;
• consider, review, and approve all the following in relation to SGM:
• the budget;
• the annual financial statements;
• the cost recovery position; and
• other compliance matters.
• The board of SGM is not allowed to unreasonably withhold
approval of any of the above.
• If there is a disputed matter or deadlock position at an SGM board
level, it is resolved as follows:
• through open discussion at board level;
• the executive chairman does not have a veto or casting vote;
• where matters cannot be agreed upon, an ad-hoc committee is
appointed with each party having equal representation. This committee will
then recommend an appropriate course of action to the board with the best
interest of all shareholders in mind; and
• should the board still not agree on a course of action, there is a
provision for arbitration and ultimately matters can be presented to the
International Court of Arbitration at The Hague;
• the board of SGM cannot appoint or remove the GM, this right belongs
solely to the Company, through PGM, under the terms of the CA;
EMRA and/or the Egyptian government have no downside risk in their share of
SGM. If SGM were to become loss making or insolvent, these costs are absorbed
in its entirety by the Company, through PGM, in accordance with the CA.
The Company, through PGM, is therefore exposed to the variable returns of SGM,
has the ability to affect the amount of those returns, has power over SGM
through its ability to direct its relevant activities and therefore meets all
the criteria of control to consolidate SGM's results within the Group to
reflect the substance and economic reality of the CA.
As the Company, through PGM, is determined to be the controlling party,
it should consolidate SGM, and should apply consolidation procedures,
combining balance sheet and profit and loss items line by line as well
as applying the rest of the consolidation procedures set out in IFRS 10 App B
para B86. The Group therefore prepares consolidated financial statements on
this basis.
1.3.1.2 Judgement: Treatment and disclosure of EMRA profit share
EMRA holds 50% of the shares in the Group controlled entity, SGM, which are
not attributable to the Company, and it is entitled to receive net proceeds
from the operations of SGM on a residual basis in accordance with their
specified shareholding per the CA (this distribution is in accordance with the
profit share mechanism and not as a consequence of accumulated profits as
defined by accounting standards). Therefore, the Group recognises a
Non-Controlling Interest("NCI") in SGM to represent EMRA's participation.
In terms of the CA, the NCI's rights to any profit share payments (dividend
distributions) is only triggered after the cost recovery of all amounts
invested (or spent during operations) during the exploration, construction and
development stages have been repaid to PGM. The profit share mechanism was
only triggered in November 2016 (after all amounts due to be cost recovered
were complete). Until that time the NCI had no rights to claim any
distribution of accumulated profits or profit share.
It is important to note that the availability of cash in SGM for distribution
to its shareholders as profit share is under the control of the Company,
through PGM, by the decisions made on SGM's strategic direction and day-to-day
operational requirements of running the mine. This is regarded as
discretionary and exposes the Company to variable returns.
Distributions to shareholders in SGM:
• once all expenditure requirements, including current cost recovery
payments due, have been met, excess cash reserves, if any, are distributed to
both SGM shareholders:
• distributions are always made simultaneously to both shareholders;
• the split of the distribution is in accordance with the ratchet
mechanism (i.e. the standard profit share ratios of 60/40 (first two years
from 1 July 2016), 55/45 (second two years from 1 July 2018) and 50/50 (from 1
July 2020) to PGM and EMRA respectively through time) as governed by the CA;
but:
• distributions are not mandatory, entirely discretionary and there
are only distributions if there are excess funds;
• distributions are paid in advance on a weekly or fortnightly basis
by mutual agreement between shareholders;
• at the end of the SGM reporting period, final profits are
determined, externally audited, and then approved by the board of SGM:
• final profit distributions become payable within 60 days of the
financial year end, SGM is unable to avoid payment at this point and the
amount payable is recorded as equity attributable to the NCI until paid;
• the CA is merely a shareholder agreement specifying how and when
profits from SGM will be distributed to shareholders and is typical of a
minority shareholder protection mechanism.
The Group should attribute the profit or loss for the year after tax and each
component of other comprehensive income for the year to the owners of the
parent and to the NCI in SGM. The entity shall also attribute total
comprehensive income for the year to the owners of the parent and to NCI even
if this results in the NCI having a deficit balance (IFRS 10 App B para B94).
The CA only contemplates the distribution of profit to shareholders.
The NCI would only have a deficit balance where advance distributions paid
during the year have exceeded final distributions payable after year-end
financial statements have been prepared and audited. This deficit would be
entirely funded by the Company, through PGM, and would first be redeemed from
future excess cash before regular distributions to both parties resume. SGM
has no claw back provision for advance profits paid to the NCI. We note that
annual dividend payments, after approval of audited financial statements, is a
standard feature of transactions with an NCI and that such payments are not
normally treated as non‑discretionary payments triggering a liability in
the consolidated statement of financial position of the parent.
Any losses generated by SGM will be entirely funded by the Company, through
PGM, but attributed to both shareholders. These losses will first be recovered
before further profit share distributions commence.
In the Group statement of financial position, all the accumulated profits of
SGM are attributable to the Company as EMRA have already received their share
through the advance profit distribution payments made, therefore NCI is
usually disclosed in the financial statements as nil unless there is an
outstanding distribution payable to or deficit from EMRA due to timing
differences of the cash sweep. Please refer to note 2.4 for further
information.
1.3.2 Judgement: Impairment trigger assessment - Burkina Faso exploration and
evaluation assets
IFRS requires management to test for impairment if events or changes in
circumstances indicate that the carrying amount of a finite life asset may not
be recoverable. Considering the requirements of IFRS 6 an impairment trigger
assessment has been performed.
In making its assessment as to the possibility of whether any impairment
losses had arisen, management considered the following as part of its
assessment of the recoverable amount:
• internal sources of information; and
• external sources of information.
The Group's accounting policy for exploration and evaluation (E&E)
expenditure results in brownfield E&E expenditure being capitalised for
those projects where such expenditure is considered likely to be recoverable
through future extraction activity or sale or where the E&E activities
have not reached a stage which permits a reasonable assessment of the
existence of reserves.
This policy requires management to make certain judgements and assumptions as
to future events and circumstances, in particular whether the Group will
proceed with development based on the existence of reserves or whether an
economically viable extraction operation can be established.
Such judgements and assumptions may change from period to period as new
information becomes available. If, subsequent to the brownfield E&E
expenditure being capitalised, a judgement is made that recovery of the
expenditure is unlikely or the project is to be abandoned, this would
constitute an impairment trigger which requires an impairment assessment to be
performed. The result of that impairment assessment could be that the relevant
capitalised amount will be written off to the income statement.
On review, an impairment trigger was identified on the recoverability of the
E&E asset related to Burkina Faso valued at US$35 million, the sequence of
events and subsequent impairment trigger occurred as follows during the
financial year:
• At 30 June 2021, the asset was accounted for as an asset
classified as held for sale on the statement of financial position. This was
due to an announcement made by the company on 27 May 2021 to the market
regarding the active sale process for the Burkina Faso exploration licence. At
30 June 2021, following an impairment assessment review of the asset held for
sale; no impairment was required based on an active third-party preliminary
offer.
• In December 2021 the company received a letter from the
Burkinabe government, stating that as no development of a mine had commenced
the licence had reached the end of its renewable period. The company disputes
the date from which this is applicable, believing it to be from March 2022 and
has formally written a letter to the Burkinabe government expressing its
views.
• On 23 January 2022 a military coup occurred in Burkina Faso
and currently no formal government exists. As a result, discussions with
government officials with regards to the licence are not possible.
1.3.3 Estimate: Impairment assessment of Burkina Faso exploration
and evaluation assets
Management have carefully considered all the possible scenarios and outcomes
with respect to this matter and concluded that it is highly unlikely that the
licence will be renewed and management no longer expects that it will be able
to sell the asset within 12 months of the balance sheet date. Accordingly, the
asset is no longer classified as an asset held for sale and it has been
transferred back to E&E assets on the consolidated statement of financial
position. Based on the fact pattern outlined, management has determined that
there is an impairment trigger under IFRS 6, and subsequently has assessed
that the asset has been fully impaired as at 31 December 2021. The value of
the asset has been written off in full to the statement of comprehensive
income.
1.3.4 Judgement: Impairment trigger assessment - Sukari
IFRS requires management to test for impairment if events or changes in
circumstances indicate that the carrying amount of a finite life asset may not
be recoverable. Considering the requirements of IAS36 an impairment trigger
assessment has been performed.
Group operating assets
As part of the impairment trigger assessment, management have also considered
movements in the key assumptions which have historically been used in
impairment assessments and are satisfied that there have not been any changes
that would constitute an impairment trigger.
These include changes to:
• forecast gold prices;
• discount rates;
• production volumes;
• reserves and resources report;
• costs, taking into consideration the impact of the solar plant on
those costs and emissions targets; and
• recovery rates.
On review, no impairment triggers were identified.
Consideration of climate change risks
In making the impairment trigger assessment for both the group operating
assets and the remaining exploration and evaluation assets, the Group also
considered elements of climate change risks that may have an impact on the
carrying value of assets, through its effects on future cash flow projections
applied for the determination of the recoverable amount. We have considered
the relevant legislation currently in place and actions to manage
environmental change which may affect the existing usage of the Group's
assets. The Group has also considered the opportunities from the sustainable
capital investments it is making e.g., the investment in the solar plant at
Sukari aimed at switching part of the energy requirements of the operations to
renewable clean energy, displacing fossil fuel consumption with lower carbon
alternatives, and improving the way in which the mine operates.
The Group is committed to continuously improve its operations to operate in an
environmentally sustainable way, in line with industry standards and continue
to monitor the future uncertainty around climate change risks.
Due to economic developments, inherent uncertainties over the pace of
transition to low mission technologies particularly in the extractive industry
in the territories the Group operates, political and environmental actions
that will be taken to meet the carbon reduction goals, regulatory changes and
emissions activity arising from climate-related matters, the Directors have
made judgements and assumptions using the available internal and external
information to assess the impact of climate change on the future cash flows
and operations of the business. These include considering the impact of
increases in temperatures and rising sea levels at our operating site, the
impact of increased operating costs because of carbon pricing and the impact
on gold prices of the aforementioned carbon pricing. Based on the
considerations made in the review, there are currently no significant climate
change risk factors that are expected to have a material impact on the net
cash flows of the Group and therefore the recoverable amounts of the Group's
assets.
In preparing the financial statements we have considered the potential impact
of climate-related physical and transition risks, in the context of the
disclosures included in the Strategic Report. Based on this assessment,
climate-related risk is not assessed to have a material financial impact on
the viability of the business at the current time.
We have assessed the physical risks to our operations under future emissions
scenarios based on General Circulation Models and scenarios aligned with the
latest phase of the Climate Model Intercomparison Project ("CMIP6"). Our
business was assessed to be resilient to physical risks for the near-term
predictions indicating that adaptation specifically to mitigate the effects of
climate are not required for the operational life of Sukari. We have not
impaired any assets this year as a result of this physical risk assessment.
We have conducted a preliminary qualitative assessment of climate-related
transition risks on our forecast revenue and growth. In the short-term, we do
not believe these risks present a material financial impact to the viability
of the business, while noting the potential materiality of the following
factors over the medium and long-term: Pricing of carbon emissions;
Availability and costing of commodities and consumables; Changing market and
investor sentiment. In 2022 we will conduct a more detailed assessment of the
medium and long-term risks and opportunities through application of
climate-related scenarios aligned to the Intergovernmental Panel on Climate
Change ("IPCC"). In 2022 we will also develop a pathway to decarbonise Sukari
for the life of asset, including associated capital investment.
1.3.5 Judgement: Litigation
The Group exercises judgement in measuring and recognising provisions and the
exposures to contingent liabilities related to pending litigation, (see note
5.1 to the financial statements). Judgement is necessary in assessing the
likelihood that a pending claim will succeed, or a liability will arise, and
to quantify the possible range of any financial settlement.
The Group is currently a party to a significant legal action in Egypt, which
could adversely affect its profitability and, may affect its ability to
operate the mine at Sukari in the manner in which it is currently operated.
The details of this litigation, which relate to the Concession Agreement under
which Sukari operates, is given in note 5.1 to the financial statements. It is
not currently possible to quantify with sufficient precision the impact of any
restrictions placed on the terms of the Group's operations under the
Concession Agreement.
With respect to the Administrative Court ruling in the Concession Agreement
case (discussed in note 5.1 below), on 20 March 2013 the Supreme
Administrative Court upheld the Company's application to suspend this decision
until the merits of the Company's appeal are considered and ruled on, thus
providing assurance that normal operations will be able to continue during
this process. In 2016, the Company's appeal was indefinitely stayed by the
Supreme Administrative Court, pending judgement in a case currently before the
Supreme Constitutional Court, the outcome of which may affect the Concession
Agreement case. Further details are provided in note 5.1 below.
In the unlikely event that the Group is unsuccessful in either or both of its
legal actions, and that the operating activities are restricted to a reduced
area, it is management's belief that the Group will be able to continue as
going concern. The Group is in regular contact with its Egyptian lawyers, who
are monitoring developments in the litigation cases on a day-to-day basis and
is therefore able to react swiftly if action is required.
The changes to critical accounting estimates and assumptions are disclosed in
notes 1.2 and 1.3 above. The other critical estimates and assumptions are as
follows:
1.3.6 Estimate: Mineral Reserve and Resource statement impact on ore
reserves
The Group Mineral Reserve and Resource statement for SGM with an effective
date of 30 June 2021 is contained in the supplementary section of the annual
report. The information on the Mineral Resources and Reserves statement was
prepared by Qualified Persons as defined by the National Instrument 43-101 of
the Canadian Securities Administrators.
There are numerous uncertainties inherent in estimating Mineral Resources and
Mineral Reserves. Assumptions that are valid at the time of estimation may
change significantly when new information becomes available. Estimates of
recoverable quantities of reserves include assumptions on commodity prices,
exchange rates, discount rates and production costs for future cash flows. It
also involves assessment and judgement of complex geological models. The
economic, geological, and technical factors used to estimate ore reserves may
change from period to period. Changes in ore reserves affect the carrying
values of mine properties, deferred stripping asset, property, plant and
equipment, provision for rehabilitation assets and deferred taxes. Ore
reserves are integral to the amount of depreciation and amortisation charged
to the consolidated statement of comprehensive income and in the valuation of
inventory because of the unit of production amortisation method.
Production forecasts from the underground mine at Sukari are partly based on
estimates regarding future resource and reserve growth. It should be
specifically noted that the potential quantity and grade from the Sukari
underground mine is conceptual in nature and that it is uncertain if
exploration will result in further targets being delineated as a mineral
resource. Please refer to the Mineral Reserve and Resource statement impact on
ore reserves sensitivity, note 3.1.1(h).
1.3.7 Estimate: Going concern
Under guidelines set out by the FRC, the directors of UK listed companies are
required to consider whether the going concern basis is the appropriate basis
of preparation of consolidated financial statements, under the historical cost
convention, as modified by financial assets and financial liabilities
(including derivative) instruments which are measured at fair value.
COVID-19
The FRC has released updated guidelines regarding disclosure of "material
uncertainties" related to going concern in current circumstances. Material
uncertainties refers to uncertainties related to events or conditions that may
cast significant doubt upon the entity's ability to continue as a going
concern. In other words, if boards identify possible events or scenarios
(other than those with a remote possibility of occurring) that could lead to
corporate failure, then these should be disclosed. When assessing whether
material uncertainties exist, boards should consider both the uncertainty and
the likely success of any realistically possible response to mitigate this
uncertainty.
The economic impact of the COVID-19 pandemic has and will continue to have its
effect, but currently there are no material financial implications to our
operations, Sukari continues to operate with confirmed cases on site, gold
sales are still commencing on a weekly basis. Weekly cash flow forecasts
continue to be performed and distributions to EMRA and PGM are continuing,
however these can be halted should cash be required locally. To date there has
been no significant impact to critical stock on site and additional stock has
been purchased where required, this is continuously being assessed and further
backup plans are in place.
To secure the health and safety of our employees and the production
capabilities of Sukari, the Group established a COVID-19 Executive Committee
and support team which meets and provides daily updates on COVID-19 globally
to site, production, supply chain and HSE activities. The Group is
continuously evaluating further potential actions to mitigate risk due to the
COVID-19 crisis. As a result, and even though globally everyone is confronted
with a high level of uncertainty, it is not expected that COVID-19 will have a
material negative impact on the ability of the Group to operate as going
concern.
Management have performed detailed analyses and forecasts to assess the
economic impact of various downside scenarios from a going concern and
viability perspective. The Group continues to benefit from a strong balance
sheet with large cash balances and no debt. At 31 December 2021 the Group had
cash and cash equivalents of US$208 million. As part of assessing the Group's
ability to continue as a going concern, management performed various downside
stress testing scenarios to assess the impact on liquidity headroom. The
scenarios were considered without applying any mitigating actions over a
period of 12 months.
Key assumptions underpinning this forecast include:
• available cash balances;
• favourable litigation outcomes, for current litigation refer to note
5.1 to the financial statements;
• gold price of US$1,795/oz. for 2022, US$1,763/oz. for 2023,
US$1,724/oz. for 2024, US$1,650/oz. for 2025 onwards; and
• production volumes in line with 2022 guidance.
The scenarios and impact on liquidity is as follows:
• Base case: No change to parameters, expected closing cash balance of
US$103 million
• Average gold price reduction to US$1,575 per ounce, resulted in a
closing cash balance of US$23 million.
• Processing plant recovery rate reduction by 3%, resulted in a
closing cash balance of US$81 million.
• Operating expenses increased by 10%, resulted in a closing cash
balance of US$76 million.
• Underground ore tonnage decreased by 10%, resulted in a closing cash
balance of US$90 million.
• Underground ore grade reduction of 2.0 g/t resulted in a closing
cash balance of US$39 million.
• Processing plant head grade reduction of 10%, resulted in a closing
cash balance of US$29 million and
• A combination of the above scenarios
o Average gold price reduction to US$1,650 per ounce.
o Processing plant recovery rate reduction by 1%.
o Operating expenses increased by 5%.
o Underground ore tonnage decreased by 5%.
o Underground ore grade reduction of 0.5 g/t; and
o Processing plant head grade reduction of 5%.
Resulted in a closing cash balance of US$26 million.
The sensitivities applied were informed by internal and external data sources,
including a review of the Group's most recent production levels with
reductions or increases of various levels to various stages of slowdown, or
metal content. Consultations were also made with our critical suppliers and
refiners. The Group doesn't engage in any hedging activities and as such all
gold sales are exposed to movements in market prices. In each scenario,
sufficient liquidity was maintained.
Based on a detailed cash flow forecast prepared by management, and the various
downside scenarios, the Directors have a reasonable expectation that the Group
will have adequate resources to continue in operational existence for twelve
months from 16 March 2022 and that at this point in time there are no material
uncertainties regarding going concern.
These financial statements for the year ended 31 December 2021 have therefore
been prepared on a going concern basis, which contemplate the realisation of
assets and liquidation of liabilities during the normal course of operations,
in preparing these financial statements.
1.3.8 Estimate: Long-term gold price used in the non-current stockpiles net
realisable value (NRV) assessment
All inventories are stated at the lower of cost and net realisable value.
Management and Directors believe that the estimates used regarding long-term
gold prices in the non-current stockpiles NRV assessment are critical
estimates and are realistic based on current information. Please refer to
inventories, note 2.11.
1.3.9 Estimate: Restoration and rehabilitation provision unit rates
Estimates include the unit costs used in calculating the nominal provision
including ripping and grading, hauling and application, regrading slopes,
construction of bunds and demolition of buildings as well as certain fixed
costs, including labour and dismantling of equipment.
For rehabilitation activities measured in tonnes, the unit costs range between
$0.36/t to US$0.90/t and those measured in cubic metres and for surface areas
measured in metres, the unit cost used are as follows:
· Load and Haul waste rock by mass (average haul distance of 2km)
$0.36/t
· Load and Haul waste rock by mass (average haul distance of 6km)
$0.90/t
· Load and Haul waste rock by volume (average haul distance of 2km)
$0.77/m(3)
· Spread waste rock to create cover
$1.25/m(3)
· Load and haul demolition waste for onsite landfill
$2.30/m(3)
· Demolish concrete foundations (medium reinforced)
$53.00/m(3)
· Regrade slopes and batters
$0.40/m(2)
· Rip and grade compacted surfaces
$0.95/m(2)
· Demolish buildings (mix of prefabricated, steel and blockwork)
$8.00/m(2)
The range of the unit costs as outlined above is primarily driven by the level
of the work required for each work area requiring restoration and
rehabilitation activity, the extent of the mine areas and/or infrastructure or
equipment requiring such work as well as the expected mix of the resources to
execute the activities i.e., either internally sourced, contracted third
party, other specialist resource or a combination of the three.
The provision for restoration and rehabilitation has been discounted by 1.38%
(2020: 1.35%) using a US$ applicable rate and inflation applied at 2.5% (2020:
1.23%).
Sensitivities to changes in costs and discount rates were as follows:
• A 10% change in these unit and fixed costs would have a US$3 million
increase on the provision and corresponding asset amounts.
• a 0.5% decrease in the discount rate would have a US$3 million
increase on the provision and corresponding asset amounts.
Both had a highly insignificant effect on the consolidated statement of
comprehensive income. Please refer to note 2.13 for the result of the
restoration and rehabilitation provision reassessment for the current year.
The US$21.9 million increase in the provision for the 2021 financial year was
primarily due to a US$18 million increase in the cost base, before
discounting, mainly due to the following significant changes:
• TSF1 - A US$9 million increase in the cost of loading and hauling
waste rock to create a 2-meter cover over the tailings surface.
• TSF2 - the TSF is significantly bigger in 2021 compared to 2020 as
construction work continues towards completion in accordance with engineered
plans including a US$5 million increase in the cost of loading and hauling
waste rock to create a 2-meter cover over the tailings surface.
• North and west dump leach area - A US$2.6 million increase in the
cost including the cost of supplying and installing an impermeable liner over
the dump leach areas at a cost of US$1.5 million.
• US$1.6 million increase in the cost of engineering work related to
the planning and design for closure of the mine.
In the financial statements for the year ended 31 December 2020 it stated that
in 2021, in line with the Life of Asset Review, Centamin will commence a full
review of the restoration and rehabilitation plan for Sukari which could
result in a change in the provision recognised to date. The life of asset
review was completed in Q4 of 2021 and announced to the market on 8 December
2021. After completion of the life of asset review, work has commenced on the
full review of the restoration and rehabilitation plan for Sukari which will
determine the company's obligation. It is estimated that this work will be
completed before 31 December 2022 and will involve an external third party to
verify the assumptions and methodology used.
2. How numbers are calculated
2.1 Segment reporting
The Group is engaged in the business of exploration for and mining of precious
metals, which represents three operating segments, two in the business of
exploration and one in mining of precious metals. The Board is the Group's
chief operating decision-maker within the meaning of IFRS 8 'Operating
segments. Management has determined the operating segments based on the
information reviewed by the Board for the purposes of allocating resources and
assessing performance.
The Board considers the business from a geographic perspective and a mining of
precious metals versus exploration for precious metals perspective.
Geographically, management considers separately the performance in Egypt,
Burkina Faso, Côte d'Ivoire and Corporate (which includes Jersey, United
Kingdom, and Australia). From a mining of precious metals versus exploration
for precious metals perspective, management separately considers the Egyptian
mining of precious metals from the Egyptian and West African exploration for
precious metals in these geographies. The Egyptian mining operations derive
its revenue from the sale of gold while the West African and the recently
incorporated Egyptian entities are currently only engaged in precious metal
exploration and do not produce any revenue.
The Board assesses the performance of the operating segments based on profits
and expenditure incurred as well as exploration expenditure in each region.
Egypt is the only operating segment with one of its entities, SGM, mining
precious metals and therefore has revenue and cost of sales whilst the
remaining operating segments do not. All operating segments are reviewed by
the Board as presented and are key to the monitoring of ongoing performance
and assessing plans of the Company.
Non-current assets other than financial instruments by country:
31 December 31 December
2021 2020
US$'000 US$'000
Egypt 1,044,543 921,427
Burkina Faso 526 35,766
Côte d'Ivoire 596 467
Corporate 670 898
Total non-current assets 1,046,335 958,558
Additions to non-current assets mainly relate to Egypt and are disclosed in
note 2.9.
Statement of financial position by operating segment:
31 December 2021 Total Egypt Mining Egypt Exploration Burkina Faso Côte d'Ivoire Corporate
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Statement of financial position
Total assets 1,423,420 1,228,758 935 1,724 1,650 190,353
Total liabilities (133,662) (129,762) - (368) (829) (2,703)
Net assets/total equity 1,289,758 1,098,996 935 1,356 821 187,650
31 December 2020 Total Egypt Egypt Exploration Burkina Faso Côte d'Ivoire Corporate
US$'000 Mining US$'000 US$'000 US$'000 US$'000
US$'000
Statement of financial position
Total assets 1,395,876 1,077,949 - 37,001 1,087 279,839
Total liabilities (106,424) (101,096) - (635) (390) (4,303)
Net assets/total equity 1,289,452 976,853 - 36,366 697 275,536
Statement of comprehensive income by operating segment:
For the year ended 31 December 2021 Total Egypt Burkina Côte Corporate
US$'000 Mining Faso d'Ivoire US$'000
US$'000 US$'000 US$'000
Statement of comprehensive income
Revenue 733,306 733,306 - - -
Cost of sales (487,376) (487,376) - - -
Gross profit 245,930 245,930 - - -
Exploration and evaluation costs (13,879) - (2,380) (11,499) -
Other operating costs (49,100) (15,756) (21) (247) (33,076)
Other income 5,708 6,922 (105) (238) (871)
Finance income 196 (1) - - 197
Impairment of exploration and evaluation asset (35,208) - (35,208) - -
Profit/(loss) for the year before tax 153,647 237,095 (37,714) (11,984) (33,750)
Tax 20 20 - - -
Profit/(loss) for the year after tax 153,667 237,115 (37,714) (11,984) (33,750)
Profit/(loss) for the year after tax attributable to:
- the owners of the parent(1) 101,527 184,975 (37,714) (11,984) (33,750)
- non-controlling interest in SGM(1) 52,140 52,140 - - -
(1) Please note that the cost recovery model on which profit share is based
under the Concession Agreement is different to the accounting results
presented above due to various adjustments and as such the share of profit
disclosed above is not reflective of the 55%:45% split that was in place from
1 July 2018 to 30 June 2020 and 50%:50% split from 1 July 2020 onwards that
occurs in practice, refer to the statement of cash flows by operating segment
below for further information.
For the year ended 31 December 2020 Total Egypt Burkina Côte Corporate
US$'000 Mining Faso d'Ivoire US$'000
US$'000 US$'000 US$'000
Statement of comprehensive income
Revenue 828,737 828,737 - - -
Cost of sales (449,441) (449,441) - - -
Gross profit 379,296 379,296 - - -
Exploration and evaluation costs (17,391) - (2,803) (14,588) -
Other operating costs (56,392) (30,760) 307 (197) (25,742)
Other income 6,972 4,820 54 35 2,063
Profit on financial assets at fair value through profit or loss 960 - - - 960
Finance income 1,554 77 - - 1,477
Profit/(loss) for the year before tax 314,999 353,433 (2,442) (14,750) (21,242)
Tax (50) (50) - - -
Profit/(loss) for the year after tax 314,949 353,383 (2,442) (14,750) (21,242)
Profit/(loss) for the year after tax attributable to:
- the owners of the parent (1) 155,979 194,413 (2,442) (14,750) (21,242)
- non-controlling interest in SGM (1) 158,970 158,970 - - -
(1) Please note that the cost recovery model on which profit share is
based under the Concession Agreement is different to the accounting results
presented above due to various adjustments and as such the share of profit
disclosed above is not reflective of the 55%:45% split that was in place from
1 July 2018 to 30 June 2020 and 50%:50% split from the 1 July 2020 onwards
that occurs in practice, refer to the statement of cash flows by operating
segment below for further information.
Statement of cash flows by operating segment:
For the year ended 31 December 2021 Total Egypt Mining Egypt Exploration Burkina Faso Côte d'Ivoire Corporate
US$'000 US$'000 US$'000 US$'000 US$'000
US$'000
Statement of cash flows
Net cash generated from/(used in) operating activities (1) 309,878 372,972 887 200 901 (65,082)
Net cash (used in)/generated from investing activities (240,676) (241,250) - (1) (308) 883
Net cash used in financing activities (157,108) (150,400) - - - (6,708)
Own shares acquired (1,391) - - - - (1,391)
Dividend paid - non-controlling interest in SGM (75,200) (75,200) - - - -
Dividend (paid)/received - controlling interest in SGM - (75,200) - - - 75,200
Dividend paid - owners of the parent (80,517) - - - - (80,517)
Net (decrease)/increase in cash and cash equivalents (87,906) (18,678) 887 199 593 (70,907)
Cash and cash equivalents at the beginning of the year 291,281 9,892 - 5 456 280,928
Effect of foreign exchange rate changes 4,446 15,139 48 (199) (190) (10,352)
Cash and cash equivalents at the end of the year 207,821 6,353 935 5 859 199,669
(1) Please note that the cash generated by operating activities for
Burkina Faso and Côte d'Ivoire are affected by the movements in working
capital, specifically intercompany loans, with its direct parent entity
Centamin West Africa Holdings Limited which is included within the corporate
segment.
For the year ended 31 December 2020 Total Egypt Mining Egypt Exploration Burkina Faso Côte d'Ivoire Corporate
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Statement of cash flows
Net cash generated from/(used in) operating activities(1) 453,305 517,341 - 343 (41) (64,338)
Net cash (used in)/generated from investing activities (129,848) (138,722) - (3) (65) 8,942
Net cash used in financing activities (3,298) - - - - (3,298)
Dividend paid - non-controlling interest in SGM (174,275) (174,275) - - - -
Dividend (paid)/received - controlling interest in SGM - (196,725) - - - 196,725
Dividend paid - owners of the parent (138,725) - - - - (138,725)
Net increase/(decrease) in cash and cash equivalents 7,159 7,619 - 340 (106) (694)
Cash and cash equivalents at the beginning of the year 278,229 5,881 - 16 562 271,770
Effect of foreign exchange rate changes 5,893 (3,608) - (351) - 9,852
Cash and cash equivalents at the end of the year 291,281 9,892 - 5 456 280,928
(1) Please note that the cash generated by operating activities for
Burkina Faso and Côte d'Ivoire are affected by the movements in working
capital, specifically intercompany loans, with its direct parent entity
Centamin West Africa Holdings Limited which is included within the corporate
segment.
Exploration expenditure by operating segment:
The following table provides a breakdown of the total exploration expenditure
of the Group by operating segment:
For the year ended For the year ended
31 December 31 December
2021 2020
US$'000 US$'000
Côte d'Ivoire 11,499 14,588
Burkina Faso 2,380 2,803
Exploration expenditure - greenfield 13,879 17,391
Egypt (Sukari tenement) 15,943 11,717
Exploration expenditure - brownfield 15,943 11,717
Total exploration expenditure 29,822 29,108
ACCOUNTING POLICY: SEGMENT REPORTING
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board of
Directors.
2.2 Revenue
An analysis of the Group's revenue for the year, is as follows:
For the year ended For the year ended
31 December 31 December
2021 2020
US$'000 US$'000
Gold sales 731,945 827,622
Silver sales 1,361 1,115
733,306 828,737
All gold and silver sales during the year were made to a single customer in
North America, Asahi Refining Canada Ltd.
ACCOUNTING POLICY: REVENUE
Revenue is measured at the fair value of the consideration received or
receivable for goods in the normal course of business.
Sale of goods
Under IFRS 15, revenue from the sale of mineral production is recognised when
the Group has passed control of the mineral production to the buyer, it is
probable that economic benefits associated with the transaction will flow to
the Group, the sales price can be measured reliably, and the Group has no
significant continuing involvement and the costs incurred or to be incurred in
respect of the transaction can be measured reliably. This is when insurance
risk has passed to the buyer and the goods have been collected at the agreed
location.
The performance obligation is satisfied when the doré bars are packaged and
collected by the approved carrier with the appropriate required documentation
at the gold room and the approved carrier accepts control of the shipment by
signature. 98% of the payable gold and silver content of the refined gold bars
will be priced and paid within one working day after receipt of the shipment
at the refinery with the balance being priced and paid five working days after
receipt. There are no significant judgements applied to the determination of
revenue.
Where the terms of the executed sales agreement allow for an adjustment to the
sales price based on a survey of the mineral production by the buyer (for
instance an assay for gold content), recognition of the revenue from the sale
of mineral production is based on the most recently determined estimate of
product specifications.
Royalty
The Arab Republic of Egypt ("ARE") is entitled to a royalty of 3% of net sales
revenue (revenue net of freight and refining costs) as defined from the sale
of gold and associated minerals from SGM. This royalty is calculated and
recognised on receipt of the final certificate of analysis document received
from the refinery. Due to its nature, this royalty is not recognised in cost
of sales but rather in other operating costs.
2.3 Profit before tax
Profit for the year before tax has been arrived at after crediting/(charging)
the following gains/(losses) and income/(expenses):
For the year ended For the year ended
31 December 2021 31 December 2020
US$'000 US$'000
Other income
Net foreign exchange gains 5,158 6,922
Other income 550 50
5,708 6,972
Finance income
Interest received 196 1,554
Expenses
Cost of sales
Mine production costs (368,327) (339,012)
Movement in inventory 19,968 13,704
Depreciation and amortisation (139,017) (124,133)
(487,376) (449,441)
Other operating costs
Corporate compliance (2,698) (3,049)
Fees payable to the external auditors (856) (924)
Corporate consultants (1,914) (4,033)
Salaries and wages (10,094) (7,262)
Other administration expenses (3,070) (3,147)
Employee equity settled share-based payments (3,747) 836
Corporate costs (sub-total) (22,379) (17,579)
Other provisions (731) (10,309)
Net movement on provision for stock obsolescence (3,135) (958)
Other non-corporate operating expenses (511) (2,017)
Royalty - attributable to the ARE government (21,672) (24,792)
Bank charges (186) (179)
Finance charges (486) (558)
Other operating costs (total) (49,100) (56,392)
ACCOUNTING POLICY: FINANCE INCOME, OTHER INCOME AND FOREIGN CURRENCIES
Finance income
Finance income is recognised when it is probable that the economic benefits
will flow to the Group and the amount of income can be measured reliably.
Finance income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that discounts estimated future cash receipts through the expected life of the
financial asset to that asset's net carrying amount.
Foreign currencies
The individual financial statements of each Group entity are presented in its
functional currency being the currency of the primary economic environment in
which the entity operates. For the purpose of the consolidated financial
statements, the results and financial position of each entity are expressed in
US dollars, which is the functional currency of all companies in the Group and
the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual entities, transactions
in currencies other than the entity's functional currency are recorded at the
rates of exchange prevailing on the dates of the transactions. At each
reporting date, monetary items denominated in foreign currencies are
retranslated at the rates prevailing at the reporting date. Non-monetary items
carried at fair value that are denominated in foreign currencies are
retranslated at the rates prevailing on the date when the fair value was
determined.
Non-monetary items that are measured in terms of historical cost in a foreign
currency are not retranslated. Exchange differences are recognised in profit
or loss in the period in which they arise.
2.4 Non-controlling interest in SGM
EMRA is a 50% shareholder in SGM and is entitled to a share of 50% of SGM's
net production surplus which can be defined as 'revenue less payment of the
fixed royalty to the ARE and recoverable costs'.
Earnings attributable to the non-controlling interest in SGM (i.e., EMRA) are
pursuant to the provisions of the CA and are recognised as profit attributable
to the non-controlling interest in SGM in the attribution of profit section of
the statement of comprehensive income of the Group. The profit share payments
during the year will be reconciled against SGM's audited financial statements.
The SGM financial statements for the year ended 30 June 2021 have been audited
and signed off at the date of this report.
Certain terms of the CA and amounts in the cost recovery model may also vary
depending on interpretation and management and the Board making various
judgements and estimates that can affect the amounts recognised in the
financial statements.
(a) Statement of comprehensive income and statement of financial position
impact
For the year ended For the year ended
31 December 31 December
2021 2020
US$'000 US$'000
Statement of comprehensive income
Profit for the year after tax attributable to the non-controlling interest in 52,140 158,970
SGM (1)
Statement of financial position
Total equity attributable to non-controlling interest in SGM (1) (opening) (17,196) (1,891)
Profit for the year after tax attributable to the non-controlling interest in 52,140 158,970
SGM(1)
Dividend paid - non-controlling interest in SGM (75,200) (174,275)
Total equity attributable to non-controlling interest in SGM (1) (closing) (40,256) (17,196)
(1) Profit share commenced during the third quarter of 2016. The first two
years was a 60:40 split of net production surplus to PGM and EMRA
respectively. From 1 July 2018 this changed to a 55:45 split for the next
two-year period until 30 June 2020, after which all net production surpluses
have been split 50:50.
Any variation between payments made during the year (which are based on the
Company's estimates) and the SGM audited financial statements, may result in a
balance due and payable to EMRA or advances to be offset against future
distributions. This will be reflected as an amount attributable to the
non-controlling interest in SGM on the statement of financial position and
statement of changes in equity.
(b) Statement of cash flows impact
For the year ended For the year ended
31 December 31 December
2021 2020
US$'000 US$'000
Statement of cash flows
Dividend paid - non-controlling interest in SGM (1) (75,200) (174,275)
(1) Profit share commenced during the third quarter of 2016. The first two
years was a 60:40 split of net production surplus to PGM and EMRA
respectively. From 1 July 2018 this changed to a 55:45 split for the next
two-year period until 30 June 2020, after which all net production surpluses
will be split 50:50.
EMRA and PGM benefit from advance distributions of profit share which are made
on a weekly or fortnightly basis and proportionately in accordance with the
terms of the CA. Future distributions will consider ongoing cash flows,
historical costs that are still to be recovered and any future capital
expenditure. All profit share payments will be reconciled against SGM's
audited June financial statements for current and future periods.
2.5 Tax
The Group operates in several countries and, accordingly, it is subject to the
various tax regimes in the countries in which it operates. From time to time
the Group is subject to a review of its related tax filings and in connection
with such reviews, disputes can arise with the taxing authorities over the
interpretation or application of certain rules to the Group's business
conducted within the country involved. If the Group is unable to resolve any
of these matters favourably, there may be an adverse impact on the Group's
financial performance, cash flows or results of operations. If management's
estimate of the future resolution of these matters' changes, the Group will
recognise the effects of the changes in its consolidated financial statements
in the period that such changes occur.
In Egypt, Pharaoh Gold Mines NL ("PGM") has entered into a Concession
Agreement ("CA") that provides that the income generated by SGM's activities
is granted a long-term tax exemption from all taxes imposed in Egypt, other
than the fixed royalty attributable to the Egyptian government, rental income
on property and interest income on cash and cash equivalents.
The CA grants certain tax exemptions, including the following:
• from 1 April 2010, being the date of commercial production, SGM is
entitled to a 15-year exemption from any taxes imposed by the Egyptian
government on the revenues generated from SGM. PGM and EMRA intend that SGM
will in due course file an application to extend the tax-free period for a
further 15 years. The extension of the tax-free period requires that there
have been no tax problems or disputes in the initial period and that certain
activities in new remote areas have been planned and agreed by all parties;
• PGM and SGM are exempt from custom taxes and duties with respect to
the importation of machinery, equipment and consumable items required for the
purpose of exploration and mining activities at SGM. The exemption shall only
apply if there is no local substitution with the same or similar quality to
the imported machinery, equipment, or consumables. Such exemption will also be
granted if the local substitution is more than 10% more expensive than the
imported machinery, equipment, or consumables after the addition of the
insurance and transportation costs;
• PGM, EMRA and SGM and their respective buyers will be exempt from
any duties or taxes on the export of gold and associated minerals produced
from SGM;
• PGM at all times is free to transfer in US$ or other freely
convertible foreign currency any cash of PGM representing its share of net
proceeds and recovery of costs, without any Egyptian government limitation,
tax or duty;
• PGM's contractors and subcontractors are entitled to import
machinery, equipment, and consumable items under the "Temporary Release
System" which provided exemption from Egyptian customs duty; and
• legal title of all operating assets of PGM will pass to EMRA when
cost recovery is completed. The right of use of all fixed and movable assets
remains with PGM and SGM.
Relevance of tax consolidation to the consolidated entity
In Australia, Centamin Egypt Limited and Pharaoh Gold Mines NL, both wholly
owned Australian resident entities within the Group, have elected to form a
tax-consolidated group from 1 July 2003 and therefore are treated as a single
entity for Australian income tax purposes. The head entity within the
tax-consolidated group is Centamin Egypt Limited. Pharaoh Gold Mines NL, which
has a registered Egyptian branch, benefits from the 'branch profits exemption'
whereby foreign branch income will generally not be subject to Australian
income tax. Ampella Mining Limited is a single entity for Australian income
tax purposes.
Nature of tax funding arrangements and tax-sharing agreements
Entities within the Australian tax-consolidated group have entered into a tax
funding arrangement and a tax-sharing agreement with the head entity. Under
the terms of the tax-funding agreement, Centamin Egypt Limited and each of the
entities in the tax-consolidated group have agreed to pay a tax-equivalent
payment to or from the head entity, based on the current tax liability or
current tax asset of the entity. Such amounts are reflected in amounts
receivable from or payable to other entities in the tax-consolidated group.
The tax-sharing agreement entered between members of the tax-consolidated
group provides for the determination of the allocation of income tax
liabilities between the entities should the head entity default on its tax
payment obligations. No amounts have been recognised in the financial
statements in respect of this agreement as payment of any amounts under the
tax-sharing agreement is considered remote.
Tax recognised in profit is summarised as follows
Tax credit/(expense)
For the year ended For the year ended
31 December 31 December
2021 2020
US$'000 US$'000
Current tax
Current tax credit/(expense) in respect of the current year 20 (50)
Deferred tax - -
Total tax credit/(expense) 20 (50)
The tax credit /(expense) for the year can be reconciled to the profit per the
consolidated statement of comprehensive income as follows:
For the year ended For the year ended
31 December 31 December
2021 2020
US$'000 US$'000
Profit for the year before tax 153,647 314,999
Tax expense calculated at 0%(1) (2020: 0%)(1) of profit for the year before - -
tax
Tax effect of amounts which are not deductible/taxable in calculating taxable
income:
Effect of different tax rates of subsidiaries operating in other jurisdictions 20 (50)
Tax 20 (50)
(1) The tax rate used in the above reconciliation is the corporate tax
rate of 0% payable by Jersey corporate entities under the Jersey tax law
(2020: 0%). There has been no change in the underlying corporate tax rates
when compared with the previous financial period.
Tax recognised in the balance sheet is summarised as follows:
For the year ended For the year ended
31 December 31 December
2021 2020
US$'000 US$'000
Current tax liabilities 253 267
ACCOUNTING POLICY: TAXATION
Income tax expense comprises current and deferred tax. It is recognised in
profit or loss except to the extent that it relates to a business combination,
or items recognised directly in equity or in OCI.
Current tax
The tax currently payable is based on taxable profit for the period. Taxable
profit differs from profit as reported in the consolidated statement of
comprehensive income because of items of income or expense that are taxable or
deductible in other periods and items that are never taxable or deductible.
The Group's liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying
amounts of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profit. Deferred
tax liabilities are generally recognised for all taxable temporary
differences. Deferred tax assets are generally recognised for all deductible
temporary differences to the extent that it is probable that taxable profits
will be available against which those deductible temporary differences can be
utilised. Such deferred tax assets and liabilities are not recognised if the
temporary difference arises from goodwill or from the initial recognition
(other than in a business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit.
2.6 Financial assets at fair value through profit or loss
For the year ended For the year ended
31 December 31 December
2021 2020
US$'000 US$'000
Balance at the beginning of the year - 6,454
Disposals at market value - (7,414)
Unrealised gain on fair value of investment - profit or loss - 960
Balance at the end of the year - -
The financial assets at fair value through profit or loss in 2020 related to
an equity interest in a listed public company which the Group disposed of in
full in that year ended.
ACCOUNTING POLICY: FINANCIAL INSTRUMENTS
Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or
as equity in accordance with the substance of the contractual arrangement as
defined below. Financial liabilities are recognised in the Group's balance
sheet when the Group becomes a party to the contractual provisions of the
instrument.
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at
fair value, net of transaction costs. Other financial liabilities are
subsequently measured at amortised cost using the effective interest method,
with interest expense recognised on an effective yield basis.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group's
obligations are discharged, cancelled or they expire.
Financial assets
Classification
The Group classifies its financial assets in the following measurement
categories:
• those to be measured subsequently at fair value (either through OCI
or through profit or loss), and
• those to be measured at amortised cost.
The classification depends on the entity's business model for managing the
financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in
profit or loss or OCI. For investments in equity instruments that are not held
for trading, this will depend on whether the Group has made an irrevocable
election at the time of initial recognition to account for the equity
investment at Fair Value through other Comprehensive Income ("FVOCI").
Recognition and derecognition
Purchases and sales of financial assets are recognised on trade date, being
the date on which the Group commits to purchase or sell the asset.
Financial assets are derecognised when the rights to receive cash flows from
the financial assets have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership. If the Group
neither transfers nor retains substantially all the risks and rewards of
ownership and continues to control the transferred asset, the Group recognises
its retained interest in the asset and an associated liability for amounts it
may have to pay. If the Group retains substantially all the risks and rewards
of ownership of a transferred financial asset, it continues to recognise the
financial asset and also recognises a collateralised borrowing for the
proceeds received.
Measurement
At initial recognition, the Group measures a financial asset at its fair value
plus, in the case of a financial asset not at Fair Value through Profit or
Loss ("FVPL"), transaction costs that are directly attributable to the
acquisition of the financial asset. Transaction costs of financial assets
carried at FVPL are expensed in profit or loss. Financial assets with embedded
derivatives are considered in their entirety when determining whether their
cash flows are solely payment of principal and interest.
Subsequent to initial recognition, investments in subsidiaries are measured at
cost in the Company's financial statements. The classification depends on the
nature and purpose of the financial assets and is determined at the time of
initial recognition.
Effective interest method
The effective interest method is a method of calculating the amortised cost of
a financial asset and of allocating interest income over the relevant period.
The effective interest rate is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset, or,
where appropriate, a shorter period, to the net carrying amount on initial
recognition.
Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable
payments that are not quoted in an active market are classified as loans and
receivables. Loans and receivables are measured at amortised cost using the
effective interest rate method less impairment. Interest is recognised by
applying the effective interest rate except for short term receivables when
the recognition of interest would be immaterial.
Impairment of financial assets
Financial assets, other than those at fair value through profit or loss, are
assessed for indicators of impairment at each reporting date. Financial assets
are impaired where there is objective evidence that as a result of one or more
events that occurred after the initial recognition of the financial asset the
estimated future cash flows of the investment have been impacted. For
financial assets carried at amortised cost, the amount of the impairment is
the difference between the asset's carrying amount and the present value of
estimated future cash flows, discounted at the original effective interest
rate.
The carrying amount of the financial asset is reduced by the impairment loss
directly for all financial assets with the exception of trade receivables
where the carrying amount is reduced through the use of an allowance account.
When a trade receivable is uncollectible, it is written off against the
allowance account. Subsequent recoveries of amounts previously written off are
credited against the allowance account. Changes in the carrying amount of the
allowance account are recognised in profit or loss.
With the exception of financial assets at fair value through other
comprehensive income equity instruments, if, in a subsequent period, the
amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognised, the
previously recognised impairment loss is reversed through profit or loss to
the extent the carrying amount of the investment at the date the impairment is
reversed does not exceed what the amortised cost would have been had the
impairment not been recognised.
In respect of FVOCI equity instruments, any subsequent increase in fair value
after an impairment loss is recognised in other comprehensive income.
2.7 Trade and other receivables
For the year ended For the year ended
31 December 31 December
2021 2020
US$'000 US$'000
Non-current
Other receivables - deposits 101 103
Current
Gold and silver sales debtors 29,147 12,492
Other receivables 3,432 5,932
32,579 18,424
Trade and other receivables are classified as financial assets subsequently
measured at amortised cost.
All gold and silver sales during the year were made to a single customer in
North America, Asahi Refining Canada Ltd, and are neither past due nor
impaired.
The average age of the receivables is 16 days (2020: 8 days) and expected
credit losses are considered immaterial. No interest is charged on the
receivables. There are no trade receivables past due and impaired at the
reporting date, and thus no allowance for doubtful debts has been recognised.
Of the trade receivables balance, the gold and silver sales debtor is all a
receivable from Asahi Refining Canada Ltd. The amount due has been received in
full subsequent to year end. Other receivables represent GST and VAT owing
from various jurisdictions that the Group operates in.
The Directors consider that the carrying amount of trade and other receivables
is approximately equal to their fair value, therefore no expected credit loss
is recognised within this note, see note 3.1.1 for the risk assessment related
to trade receivables.
2.8 Prepayments
For the year ended For the year ended
31 December 31 December
2021 2020
US$'000 US$'000
Current
Prepayments 7,964 8,908
7,964 8,908
Refer to note 5.1 regarding the outcome of the Diesel Fuel Oil ("DFO")
dispute.
2.9 Property, plant, and equipment
Office Buildings Plant and Mining Mine Capital Total
equipment US$'000 equipment equipment development work in US$'000
US$'000 US$'000 US$'000 properties progress
US$'000 US$'000
Year ended 31 December 2021 Cost
Balance at 1 January 2021 8,792 5,690 617,465 359,009 662,496 44,554 1,698,006
Additions 11 - 54 231 - 224,633 224,929
Increase in rehabilitation asset - - - - 21,875 - 21,875
Transfers from capital work in progress 1,127 8,489 7,848 54,042 112,678 (184,184) -
Transfers from exploration and evaluation asset - - - - 19,175 - 19,175
Disposals (687) (5) (290) (53,673) - - (54,655)
Disposals: IFRS16 right of use assets - (351) - (142) - - (493)
Balance at 31 December 2021 9,243 13,823 625,077 359,467 816,224 85,003 1,908,837
Accumulated depreciation and amortisation
Balance at 1 January 2021 (7,542) (1,641) (242,853) (298,572) (317,514) - (868,122)
Depreciation and amortisation (688) (1,597) (33,077) (43,518) (60,574) - (139,454)
Disposals 687 212 290 53,769 - - 54,958
Balance at 31 December 2021 (7,543) (3,026) (275,640) (288,323) (378,088) - (952,620)
Year ended 31 December 2020 Cost
Balance at 1 January 2020 7,789 3,533 613,792 334,119 561,780 28,584 1,549,597
Additions 73 203 141 153 - 126,529 127,099
Additions: IFRS16 right of use assets - 1,604 - 47 - - 1,651
Increase in rehabilitation asset - - - - 5,574 - 5,574
Transfers from capital work in progress 930 480 3,784 25,787 78,988 (109,969) -
Transfers from exploration and evaluation asset - - - - 16,154 - 16,154
Disposals - - (110) (1,097) - (590) (1,797)
Disposals: IFRS16 right of use assets - (130) (142) - - - (272)
Balance at 31 December 2020 8,792 5,690 617,465 359,009 662,496 44,554 1,698,006
Accumulated depreciation and amortisation
Balance at 1 January 2020 (6,974) (1,097) (213,681) (250,519) (272,609) - (744,880)
Depreciation and amortisation (568) (609) (29,303) (49,127) (44,905) - (124,512)
Disposals - 65 131 1,074 - - 1,270
Balance at 31 December 2020 (7,542) (1,641) (242,853) (298,572) (317,514) - (868,122)
Net book value
As at 31 December 2021 1,700 10,797 349,437 71,144 438,136 85,003 956,217
As at 31 December 2020 1,250 4,049 374,612 60,437 344,982 44,554 829,884
Included within the depreciation charge is US$0.7 million within the buildings
asset class and US$0.1 million related to plant and equipment in relation to
depreciation of ROU assets (2020: US$0.5 million buildings and US$0.1 million
plant and equipment).
An impairment trigger assessment was performed in 2021 on all Cash Generating
Units ("CGUs") including the Sukari Mine, refer to note 1.3.4 above, however
no impairment triggers on property, plant and equipment were identified in the
assessment.
Deferred stripping assets of US$59 million were recognised in the year ended
31 December 2021, which have been included within mine development properties,
US$10m of amortisation has been recognised in the year related to these
assets.
Assets that have been cost recovered in Egypt under Concession Agreement
("CA") terms are included on the statement of financial position under
property, plant, and equipment due to the Company having the right of use of
these assets. These rights will expire together with the CA.
ACCOUNTING POLICY: PROPERTY, PLANT AND EQUIPMENT ("PPE")
PPE is stated at cost less accumulated depreciation and impairment. PPE will
include capitalised development expenditure. Cost includes expenditure that
is directly attributable to the acquisition of the item and the estimated cost
of abandonment. In the event that settlement of all or part of the purchase
consideration is deferred, cost is determined by discounting the amounts
payable in the future to their present value as at the date of acquisition.
Subsequent costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. The carrying amount of the replaced part
is derecognised. All other repairs and maintenance are charged to the income
statement during the financial year in which they are incurred. The cost of
PPE includes the estimated restoration costs associated with the asset.
Depreciation is charged on PPE, except for capital work in progress.
Depreciation is calculated on a straight-line basis so as to write off the net
cost or other revalued amount of each asset over its expected useful life to
its estimated residual value. Depreciation on capital work in progress
commences on commissioning of the asset and transfer to the relevant PPE
category.
The estimated useful lives, residual values and depreciation method are
reviewed at the end of each annual financial year, with the effect of any
changes recognised on a prospective basis. The following estimated useful
lives are used in the calculation of straight-line basis depreciation:
Plant and equipment: 2 - 20
years
Office equipment: 3-7 years
Mining equipment: 2-13
years
Buildings 4-20 years
Where the assets relate to an active mine site, the shorter of the above
periods or remaining life of mine are used.
Freehold land is not depreciated, and all other depreciable assets are
depreciated over their useful life or the life of mine whichever is shorter.
The gain or loss arising on the disposal or scrappage of an asset is
determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in other income or operating expenses.
Mine development properties
Where mining of a mineral reserve has commenced, the accumulated costs are
transferred from exploration and evaluation assets to mine development
properties.
Amortisation is first charged to new mine development ventures from the date
of first commercial production. Amortisation of mine properties is on a unit
of production basis resulting in an amortisation charge proportional to the
depletion of the proven and probable ore reserves. The unit of production is
on an ore tonne depleted basis for open pit mining property assets and an
ounce depleted basis for underground mining property assets.
Capitalised underground development costs incurred to enable access to
specific ore blocks or areas of the underground mine, and which only provide
an economic benefit over the period of mining that ore block or area, are
depreciated on a unit of production basis, whereby the denominator is
estimated ounces of gold in proven and probable reserves within that ore block
or area where it is considered probable that those reserves will be extracted
economically.
IFRIC 20 'Stripping costs in the production phase of a surface mine'
The Group adopted its accounting policy on stripping costs in the production
phase of a surface mine effective 1 January 2012. IFRIC20 provides clarity on
how to account for and measure the removal of mine waste materials which
provide access to mineral ore deposits. Within Sukari's Open Pit operations,
removal of mine overburden or waste material is routinely necessary to gain
access to mineral ore deposits and this waste removal activity is known as
'stripping'. There can be two benefits accruing to the entity from the
stripping activity:
· usable ore that can be used to produce inventory; and
· improved access to further quantities of material that will be
mined in future periods.
The costs of stripping activity to be accounted for in accordance with the
principles of IAS2 'Inventories' to the extent that the benefit from the
stripping activity is realised in the form of inventory produced. The costs of
stripping activity which provides a benefit in the form of improved access to
ore is recognised as a non-current 'stripping activity asset' where the
following criteria are met:
1. it is probable that the future economic benefit (improved access to
the ore body) associated with the stripping activity will flow to the entity;
2. the entity can identify the component of the ore body for which
access has been improved; and
3. the costs relating to the stripping activity associated with that
component can be measured reliably.
When the costs of the stripping activity asset and the inventory produced are
not separately identifiable, production stripping costs are allocated between
the inventory produced and the stripping asset by using an allocation basis
that is based on a relevant production measure. A stripping activity asset is
accounted for as an addition to, or as an enhancement of, an existing asset
and classified as tangible or intangible according to the nature of the
existing asset of which it forms part.
A deferred stripping asset is initially measured at cost and subsequently
carried at cost or its revalued amount less depreciation or amortisation and
impairment losses. A stripping asset is depreciated or amortised on a
systematic basis, over the expected useful life of the identified component of
the ore body that becomes more accessible as a result of the stripping
activity. The stripping activity asset is depreciated using a unit of
production method based on the total ounces to be produced for the component
over the life of the component of the ore body.
Capitalised deferred stripping costs are included in 'Mine Development
Properties', within Property, plant, and equipment. These form part of the
total investment in the relevant cash-generating unit, which is reviewed for
impairment if events or a change in circumstances indicate that the carrying
value may not be recoverable. Amortisation of deferred stripping costs is
included in cost of sales.
The stripping costs associated with the current period operations are expensed
during that period and any stripping activity cost associated with producing
future benefit is deferred on the balance sheet and amortized over the period
that the benefit is received i.e., is classified as capital expenditure,
creating a Deferred Stripping asset.
The SGM components are the separate stages of the open pit mine. For each
component, the stripping ratio is determined, and costs are capitalised if the
stripping ratio in the year for that component is greater than the overall LOM
stripping ratio for that component.
The change in mine plan has necessitated an increase in stripping activity
during the year (more than has been experienced in the past) and includes
activity from both internal and external parties. As a result, there has been
a significant increase in the stripping activity. Based on the calculations
performed the amount capitalized to the balance sheet for 2021 is US$59m.
Impairment of assets (other than exploration and evaluation and financial
assets)
At each reporting date, the Group reviews the carrying amounts of its tangible
and intangible assets to determine whether there is any indication that those
assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated to determine the extent of the
impairment loss (if any). For the purposes of assessing impairment, assets are
grouped at the lowest levels for which they potentially generate largely
independent cash inflows (cash generating units).
Recoverable amount is the higher of fair value loss costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessment of the time value of money and the risks specific to the
asset for which the estimates of future flows have not been adjusted.
If the recoverable amount of a cash generating unit ("CGU") is estimated to be
less than its carrying amount, the carrying amount of the CGU is reduced to
its recoverable amount. Where an impairment loss subsequently reverses, the
carrying amount of the cash generating unit is increased to the revised
estimate of its recoverable amount, but only to the extent that the increased
carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the cash generating unit
in prior years.
A reversal of an impairment loss is recognised immediately in profit or loss,
unless the relevant asset is carried at a revalued amount, in which case the
reversal of an impairment loss is treated as a revaluation increase.
2.10 Exploration and evaluation asset
For the year ended For the year ended
31 December 2021 31 December 2020
US$'000 US$'000
Balance at the beginning of the year 63,701 68,138
Expenditure for the year 15,943 11,717
Transfer to property, plant, and equipment (19,175) (16,154)
Impairment charge on exploration and evaluation asset (35,208) -
Balance at the end of the year 25,261 63,701
The exploration and evaluation asset relates to the drilling, geological
exploration and sampling of potential ore reserves and can all be attributed
to Egypt (US$25.3 million).
In accordance with the requirements of IAS 36 'Impairment of assets' and IFRS
6 'Exploration for and evaluation of mineral resources' exploration and
evaluation assets are assessed for impairment when facts and circumstances (as
defined in IFRS 6 'Exploration for and evaluation of mineral resources')
suggest that the carrying amount of exploration and evaluation assets may
exceed its recoverable amount.
An impairment trigger assessment was performed in 2021 on the exploration and
evaluation assets, and the asset in Burkina Faso of US$35.2 million relating
to the acquisition of Ampella Mining Limited was impaired in full in the
current year, refer to note 1.3.2 and 1.3.3.
ACCOUNTING POLICY: EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE
Exploration and evaluation expenditures in relation to each separate area of
interest are differentiated between greenfield and brownfield exploration
activities in the year in which they are incurred.
The greenfield and brownfield terms are generally used in the minerals sector
and have been adopted to differentiate high risk remote exploration activity
from near-mine exploration activity:
(a) greenfield exploration refers to territory, where mineral deposits are not
already developed and has the goal of establishing a new mine requiring new
infrastructure, regardless of it being in an established mining field or in a
remote location. Greenfield exploration projects can be subdivided into
grassroots and advanced projects embracing prospecting, geoscientific surveys,
drilling, sample collection and testing, but excludes work of brownfields
nature, pit and shaft sinking and bulk sampling; and
(b) brownfield exploration, also known as near-mine exploration, refers to
areas where mineral deposits were previously developed. In brownfield
exploration, geologists look for deposits near or adjacent to an already
operating mine with the objective of extending its operating life and taking
advantage of the established infrastructure.
Greenfield exploration costs will be expensed as incurred and will not be
capitalised to the balance sheet until a decision is made to pursue a
commercially viable project. Brownfield exploration costs will continue to be
capitalised to the statement of financial position. Brownfield exploration
and evaluation expenditures in relation to each separate area of interest are
recognised as an exploration and evaluation asset in the year in which they
are incurred where the following conditions are satisfied:
• the rights to tenure of the area of interest are current; and
• vat least one of the following conditions is also met:
• the exploration and evaluation expenditures are expected to be
recouped through successful development and exploration of the area of
interest, or alternatively, by its sale; or
• exploration and evaluation activities in the area of interest have
not at the reporting date reached a stage which permits a reasonable
assessment of the existence or otherwise of economically recoverable reserves,
and active and significant operations in, or in relation to, the area of
interest are continuing.
Exploration and evaluation assets are initially measured at cost and include
acquisition of rights to explore, studies, exploration drilling, trenching,
and sampling and associated activities. General and administrative costs are
only included in the measurement of exploration and evaluation costs where
they are related directly to operational activities in a particular area of
interest.
Exploration and evaluation assets are assessed for impairment when facts and
circumstances (as defined in IFRS 6 'Exploration for and evaluation of mineral
resources') suggest that the carrying amount of exploration and evaluation
assets may exceed its recoverable amount. The recoverable amount of the
exploration and evaluation assets (or the cash generating unit(s) to which it
has been allocated, being no larger than the relevant area of interest) is
estimated to determine the extent of the impairment loss (if any). Where an
impairment loss subsequently reverses, the carrying amount of the asset is
increased to the revised estimate of its recoverable amount, but only to the
extent that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognised for
the asset in previous years.
Where a decision is made to proceed with development in respect of a
particular area of interest based on the commercial and technical feasibility,
the relevant exploration and evaluation asset is tested for impairment,
reclassified to mine development properties, and then amortised over the life
of the reserves associated with the area of interest once mining operations
have commenced.
Mine development expenditure is recognised at cost less accumulated
amortisation and any impairment losses. When commercial production has
commenced, the associated costs are amortised over the estimated economic life
of the mine on a units of production basis. Changes in factors such as
estimates of proved and probable reserves that affect the unit of production
calculations are dealt with on a prospective basis.
Income derived by the entity prior to the date of commercial production is
offset against the expenditure capitalised and carried in the consolidated
statement of financial position. All revenues recognised after commencement of
commercial production are recognised in accordance with the Revenue Policy
stated in note 2.2.
The commencement date of commercial production is determined when stable and
sustained production capacity has been achieved.
2.11 Inventories
The treatment and classification of mining stockpiles within inventory is
split between current and non-current assets. Priority is placed on the
higher-grade ore, accordingly, stockpiles which will not be consumed within
the next twelve months based on mining and processing forecasts have been
classified to non-current assets. The volume of ore extracted from the open
pit in the year exceeded the volume that could be processed, which has caused
a large increase in the volume and value of the mining stockpiles.
The carrying value of the non-current asset portion is assessed at the lower
of cost or net realisable value. The long-term gold price would have to reduce
to approximately US$1,460 per ounce for the net realisable value to fall below
carrying value.
For the year ended For the year ended
31 December 2021 31 December
US$'000 2020
US$'000
Non-current
Mining stockpiles 64,756 64,870
Current
Mining stockpiles, ore in circuit, doré supplies 60,194 40,112
Stores inventory 74,452 81,383
Provision for obsolete stores inventory (5,925) (2,790)
128,721 118,705
The calculation of weighted average costs of mining stockpiles is applied at a
detailed level. The open pit ore on the Mine ROM is split into seven different
grade categories and the underground ore is treated as a single high-grade
category. Each grade category is costed individually on a weighted average
basis applying costs specifically related to that extracting and moving that
grade of ore to and from the Mine ROM pad. The grade categories range from
high grade underground and open pit ore to low grade open pit ore. Costs per
contained ounce differ between the various cost categories.
Currently at Sukari, low grade low (0.4 to 0.5g/t) open pit stockpile material
above the cut-off grade of 0.4g/t has been classified as follows on the
statement of financial position:
· 1.7Mt at 0.47g/t to current assets as these ore tonnes are
scheduled to be processed within the next twelve months; and
· 11.8Mt at 0.44g/t to non-current assets as these ore tonnes are
not scheduled to be processed within the next twelve months.
ACCOUNTING POLICY: INVENTORIES
Inventories include mining stockpiles, gold in circuit, doré supplies and
stores and materials. All inventories are stated at the lower of cost and net
realisable value (NRV). The cost of mining stockpiles and gold produced is
determined principally by the weighted average cost method using related
production costs.
Cost of mining stockpiles include costs incurred up to the point of
stockpiling, such as mining and grade control costs, but exclude future costs
of production. Ore extracted is allocated to stockpiles based on estimated
grade, with grades below defined cut-off levels treated as waste and expensed.
Material piled on the ROM pad is accounted for in their separate grade
categories. While held in physically separate stockpiles, the Group blends the
ore from selected stockpiles when feeding the processing plant to achieve the
resultant gold content. In such circumstances, lower and higher-grade ore
stockpiles each represent a raw material, used in conjunction with each other,
to deliver overall gold production, as supported by the relevant feed plan.
The processing of ore in stockpiles occurs in accordance with the LOM
processing plan and is currently being optimised based on the known Mineral
Reserves, current plant capacity and mine design. Ore tonnes contained in the
stockpiles which exceed the annual tonnes to be milled as per the mine plan in
the following year, are classified as non-current in the statement of
financial position.
Costs of gold inventories include all costs incurred up until production of an
ounce of gold such as milling costs, mining costs and directly attributable
mine general and administration costs but exclude transport costs, refining
costs and royalties. NRV is determined with reference to estimated contained
gold and market gold prices.
Stores and materials consist of consumable stores and are valued at weighted
average cost after appropriate impairment of redundant and slow-moving items.
Consumable stock for which the Group has substantially all the risks and
rewards of ownership are brought onto the statement of financial position as
current assets.
2.12 Trade and other payables
For the year ended For the year ended
31 December 2021 31 December
US$'000 2020
US$'000
Non-current
Other creditors ((1)) 10,386 1,437
Current
Trade payables 36,050 31,483
Other creditors and accruals ((1)) 39,709 33,005
75,759 64,488
(1) The increase in the other creditors is mainly due to the reclassification
from provisions to accruals of the US$9.8m relating to the non-current portion
of the remaining EMRA settlement amount balance totalling US$12m as at 31
December 2021 as the timing and amount of the settlement amount was
established in the year following the signing of the settlement agreement.
US$2m of the balance remains in the current category as it will be settled
within the next 12 months from the reporting date. Also included within
non-current other creditors are lease liabilities of US$634k.
Trade payables principally comprise the amounts outstanding for trade
purchases and ongoing costs. The average credit period taken for trade
purchases is 29 days (2020: 26 days). Trade payables are interest free for
periods ranging from 30 to 180 days. Thereafter interest is charged at
commercial rates.
The Group has financial risk management policies in place to ensure that all
payables are paid within the credit timeframe. Other creditors and accruals
relate to various accruals that have been recognised due to amounts known to
be outstanding for which the related invoices have not yet been received.
The Directors consider that the carrying amount of trade payables approximate
their fair value.
Accounting policy: Trade and other payables
These amounts represent liabilities for goods and services provided to the
Group prior to the end of the financial year which are unpaid. The amounts are
unsecured and are usually paid within 30 days of recognition. Trade and other
payables are presented as current liabilities unless payment is not due within
twelve months after the reporting period. They are recognised initially at
their fair value and subsequently measured at amortised cost using the
effective interest method.
Employee benefits
A liability is recognised for benefits accruing to employees in respect of
wages and salaries, annual leave, long service leave, bonuses, pensions, and
sick leave when it is probable that settlement will be required, and they are
capable of being measured reliably.
Liabilities recognised in respect of employee benefits expected to be settled
within twelve months, are measured at their nominal values using the
remuneration rate expected to apply at the time of settlement. Liabilities
recognised in respect of employee benefits which are not expected to be
settled within twelve months are measured at the present value of the
estimated future cash flows to be made by the consolidated entity in respect
of services provided by employees up to the reporting date.
Superannuation
The Company contributes to, but does not participate in, compulsory
superannuation funds (defined contribution schemes) on behalf of the
employees and Directors in respect of salaries and Directors' fees paid.
Contributions are charged against income as they are made.
2.13 Provisions
For the year ended For the year ended
31 December 31 December
2021 2020
US$'000 US$'000
Current
Employee benefits(1) 2,798 1,440
Provision for cost recovery items(2) - 5,089
Other current provisions(3) 1,819 951
4,617 7,480
Non-current
Restoration and rehabilitation(4) 42,647 20,496
Provision for cost recovery items(2) - 12,229
Other non-current provisions - 27
42,647 32,752
Movement in restoration and rehabilitation provision
Balance at beginning of the year 20,496 14,572
Additional provision recognised 21,875 5,574
Interest expense - unwinding of discount 276 350
Balance at end of the year 42,647 20,496
(1) Employee benefits relate to annual, sick, and long service leave
entitlements and bonuses.
(2) Provision was held for in-country settlement of cost recovery items
relating to EMRA, the amount is based on the written offer proposed to EMRA in
March 2021 to settle all outstanding matters which includes payment of US$17.6
million spread over a 5.5-year period. The recognised amount was discounted to
present value. The current year amount has been reclassified to other
liabilities (accruals) as the timing and amounts payable are now certain due
to a settlement agreement being signed with EMRA, refer to note 2.12.
(3) Provision for customs, rebates and withholding taxes.
(4) The provision for restoration and rehabilitation has been discounted
by 1.38% (2020: 1.35%) using a US$ applicable rate and inflation applied at
2.5% (2020: 1.23%). The annual review undertaken as at 31 December 2021 has
resulted in a US$21.9 million increase in the provision (2020: US$5.6
million). The key assumption within the estimate with the various ranges and
further detail disclosed in note 1.3.9.
ACCOUNTING POLICY: RESTORATION AND REHABILITATION
A provision for restoration and rehabilitation is recognised when there is a
present legal or constructive obligation as a result of exploration,
development and production activities undertaken, it is probable that an
outflow of economic benefits will be required to settle the obligation, and
the amount of the provision can be measured reliably. The estimated future
obligations include the costs of dismantling and removal of facilities,
restoration, and monitoring of the affected areas. The provision for future
restoration costs is the best estimate of the present value of the expenditure
required to settle the restoration obligation at the reporting date in
accordance with the requirements of the Concession Agreement. Future
restoration costs are reviewed annually and any changes in the estimate are
reflected in the present value of the restoration provision at each reporting
date.
The provision for restoration and rehabilitation represents the present value
of the Directors' best estimate of the future outflow of economic benefits
that will be required to decommission infrastructure, restore affected areas
by ripping and grading of compacted surfaces to blend with the surroundings,
closure of project components to ensure stability and safety at the Group's
sites at the end of the life of mine. This restoration and rehabilitation
estimate has been made based on benchmark assessments of restoration works
required following mine closure and after considering the projected area
disturbed to date.
Discount rates to present value the future obligations are determined by
reference to risk free rates for periods which approximate the period of the
associated obligation.
The initial estimate of the restoration and rehabilitation provision relating
to exploration, development and mining production activities is capitalised
into the cost of the related asset and amortised on the same basis as the
related asset, unless the present obligation arises from the production of the
inventory in the period, in which case the amount is included in the cost of
production for the period. Changes in the estimate of the provision of
restoration and rehabilitation are treated in the same manner, except that the
unwinding of the effect of discounting on the provision is recognised as a
finance cost within the income statement rather than capitalised to the
related asset.
2.14 Issued capital
31 December 2021 31 December 2020
Number US$'000 Number US$'000
Fully paid ordinary shares
Balance at beginning of the year 1,155,955,384 668,807 1,155,955,384 672,105
Own shares acquired during the year(1) - (1,391) - (3,298)
Employee share option scheme - proceeds from shares issued 495,311 - - -
Transfer from share option reserve - 2,115 - -
Balance at end of the year 1,156,450,695 669,531 1,155,955,384 668,807
(1) The US$1.4m (2020: US$3.3m) represents the cost of shares in
Centamin plc purchased in the market and held by the Centamin plc Employee
Benefit Trust to satisfy share awards under the Group's share options plans.
The authorised share capital is an unlimited number of no-par value shares.
Pursuant to the plan rules, at 31 December 2021, the trustee of the deferred
bonus share plan held 2,205,280 ordinary shares (2020: 2,373,049 ordinary
shares).
Fully paid ordinary shares carry one vote per share and carry the right to
dividends. See note 6.3 for more details of the share awards.
ACCOUNTING POLICY: ISSUED CAPITAL
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
Where the Company or other members of the consolidated Group purchase the
Company's equity share capital, the consideration paid is deducted from the
total shareholders' equity of the Group and/or of the Company as treasury
shares until they are cancelled. Where such shares are subsequently sold or
reissued, any consideration received is included in shareholders' equity of
the Group and/or the Company.
2.15 Share option reserve
For the year ended For the year ended
31 December 31 December
2021 2020
US$'000 US$'000
Share option reserve
Balance at beginning of the year 3,343 4,179
Share-based payments expense 4,044 3,190
Transfer to accumulated profits (297) (4,026)
Transfer to issued capital (2,115) -
Balance at the end of the year 4,975 3,343
The share option reserve arises on the grant of share options to employees
under the employee share option plan. Amounts are transferred out of the
reserve and into issued capital when the options and warrants are
exercised/vested. Amounts are transferred out of the reserve into accumulated
profits when the options and warrants are forfeited.
2.16 Cash flow information
(a) Reconciliation of cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents
includes cash on hand and at bank and deposits.
For the year ended For the year ended
31 December 31 December
2021 2020
US$'000 US$'000
Cash and cash equivalents 207,821 291,281
Most funds have been invested in international rolling short-term interest
money market deposits.
ACCOUNTING POLICY: CASH AND CASH EQUIVALENTS
Cash comprises cash on hand and demand deposits. Cash equivalents are short
term, highly liquid investments that are readily convertible to known amounts
of cash and which are subject to an insignificant risk of changes in value.
(b) Reconciliation of profit before tax for the year to cash flows from
operating activities
For the year ended For the year ended
31 December 31 December
2021 2020
US$'000 US$'000
Restated
Profit for the year before tax 153,647 314,999
Adjusted for:
Profit on financial assets at fair value through profit or loss - (960)
Impairment of exploration and evaluation assets 35,208 -
Depreciation/amortisation of property, plant, and equipment 139,454 124,512
Inventory written off 21 29
Prepayments written off - 986
Inventory obsolescence provision 3,135 958
Foreign exchange gains, net (5,158) (6,921)
Share-based payments expense/(credit) 3,747 (836)
Finance income (196) (1,554)
Loss on disposal of property, plant, and equipment 53 623
Changes in working capital during the year:
(Increase)/decrease in trade and other receivables (14,155) 28,637
Increase in inventories (13,036) (22,919)
Decrease/(increase) in prepayments 946 (2,785)
Increase in trade and other payables 8,823 7,076
(Decrease)/increase in provisions (2,616) 11,470
Cash flows generated from operating activities 309,873 453,315
(c) Non-cash financing and investing activities
During the year there have been no non-cash financing and investing
activities.
3. Group financial risk and capital management
3.1 Group financial risk management
3.1.1 Financial instruments
(a) Group risk management
The Group manages its capital to ensure that entities within the Group will be
able to continue as a going concern while maximising the return to
stakeholders through the optimisation of the cash and equity balance. The
Group's overall strategy remains unchanged from the previous financial year.
The Group has no debt and thus not geared at the year-end or in the prior
year. The capital structure consists of cash and cash equivalents and equity
attributable to equity holders of the parent, comprising issued capital and
reserves as disclosed in notes 2.14 and 2.15. The Group operates in Australia,
Jersey, Egypt, Burkina Faso, and Côte d'Ivoire. None of the Group's entities
are subject to externally imposed capital requirements.
The Group utilises inflows of funds toward the ongoing exploration and
development of SGM in Egypt and the exploration projects in Côte d'Ivoire and
Egypt.
Categories of financial assets and liabilities
For the year ended For the year ended
31 December 2021 31 December
US$'000 2020
US$'000
Financial assets
Cash and cash equivalents 207,821 291,281
Trade and other receivables 32,579 17,593
240,400 308,874
Financial liabilities
Non-current
Other payables 10,386 1,437
Current
Trade and other payables 75,759 64,488
Tax liabilities 253 267
(b) Financial risk management and objectives
The Group's overall risk management programme focuses on the unpredictability
of financial markets and seeks to minimise potential risk adverse effects and
ensure that net cash flows are sufficient to support the delivery of the
Group's financial targets whilst protecting future financial security. The
Group continually monitors and tests its forecast financial position against
these objectives.
The Group's activities expose it to a variety of financial risks: market,
commodity, credit, liquidity, foreign exchange, and interest rate. These risks
are managed under Board approved directives through the Audit and Risk
Committee. The Group's principal financial instruments comprise interest
bearing cash and cash equivalents. Other financial instruments include trade
receivables and trade payables, which arise directly from operations.
It is, and has been throughout the period under review, Group policy that no
speculative trading in financial instruments be undertaken.
(c) Market risk
The Group operates internationally and is exposed to foreign exchange risk
arising from various currency exposures, primarily with respect to the
Australian dollar, Great British pound, and Egyptian pound. Foreign exchange
risk arises from future commercial transactions and recognised assets and
liabilities that are denominated in a currency that is not the entity's
functional currency. The risk is measured by regularly monitoring,
forecasting and performing sensitivity analyses on the Group's financial
position.
Financial instruments denominated in Great British pounds, Australian dollars
and Egyptian pounds are as follows:
Great British pound Australian dollar Egyptian pound
31 December 31 December 31 December 31 December 31 December 31 December
2021 2020 2021 2020 2021 2020
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Financial assets
Cash and cash equivalents 1,392 4,997 16,063 17,566 2,147 2,057
1,392 4,997 16,063 17,566 2,147 2,057
Financial liabilities
Trade and other payables 1,835 2,682 15,530 19,883 23,727 13,829
1,835 2,682 15,530 19,883 23,727 13,829
Net exposure (443) 2,315 533 (2,317) (21,580) (11,772)
The following table summarises the sensitivity of financial instruments held
at the reporting date to movements in the exchange rate of the Great British
pound, Egyptian pound, and Australian dollar to the US dollar, with all other
variables held constant. The sensitivities are based on reasonably possible
changes over a financial year, using the observed range of actual historical
rates.
Impact on profit Impact on equity
31 December 2021 31 December 2020 31 December 2021 31 December 2020
US$'000 US$'000 US$'000 US$'000
US$/GBP increase by 10% 634 555 - -
US$/GBP decrease by 10% (774) (680) - -
US$/AUD increase by 10% 866 588 - -
US$/AUD decrease by 10% (1,058) (718) - -
US$/EGP increase by 10% (1,476) (655) - -
US$/EGP decrease by 10% 1,804 799 - -
The Group's sensitivity to foreign currency has increased at the end of the
current period mainly due to a decrease in GBP and AUD foreign currency cash
holdings significantly offset by a decrease in the payable's balances in the
same currencies. The EGP trade payables also significantly increased as
compared to the AUD and GBP trade payables. There is also a significant
decrease in US dollar cash holdings and an increase in US dollar
trade payables.
The amounts shown above are the main currencies which the Group is exposed to.
Centamin also has small deposits in Euro (US$37,552) and West African Franc
(US$863,807), and net payables in Euro (US$2,384,886) and in West African
Franc (US$1,105,789). A movement of 10% up or down in these currencies would
have a negligible effect on the assets/liabilities.
The Group has not entered into forward foreign exchange contracts. Natural
hedges are utilised wherever possible to offset foreign currency liabilities.
The Company maintains a policy of not hedging its currency positions and
maintains currency holdings in line with underlying requirements and
commitments.
(d) Commodity price risk
The Group's future revenue forecasts are exposed to commodity price
fluctuations, in particular gold and fuel prices. The Group has not entered
into forward gold hedging contracts.
Gold price
The table below summarises the impact of increases/decreases of the average
realised gold price on the Group's profit after tax for the year. The analysis
assumes that the average realised gold price per ounce had increased/decreased
by 10% with other variables held constant.
Decrease by 10% 31 December 2021 Increase by 10%
US$/oz US$/oz US$/oz
Average realised gold price 1,618 1,797 1,977
Decrease by 10% 31 December 2021 Increase by 10%
US$'000 US$'000 US$'000
Profit after tax 81,349 153,667 223,346
Fuel price
Any variation in the fuel price has an impact on the mine production costs.
The analysis assumes that the average fuel price had increased/decreased by a
few US cents per litre with all other variables held constant.
Decrease by 10% 31 December 2021 Increase by 10%
US$/litre US$/litre US$/litre
Fuel price 0.47 0.52 0.57
Decrease by 10% 31 December 2021 Increase by 10%
US$'000 US$'000 US$'000
Mine production costs (9,714) (368,327) 9,714
(e) Interest rate risk and liquidity risk
The Group's main interest rate risk arises from cash and short-term deposits
and is not considered to be a material risk due to the short-term nature of
these financial instruments. Cash deposits are placed on a term period of no
more than 30 days at a time.
The financial instruments exposed to interest rate risk and the Group's
exposure to interest rate risk as at the balance sheet date were as per the
table below.
The Group's liquidity position is managed to ensure that sufficient funds are
available to meet its financial commitments in a timely and cost-effective
manner.
Ultimate responsibility for liquidity risk management rests with the Board,
which has established an appropriate management framework for the management
of the Group's funding requirements. The Group manages liquidity risk by
maintaining adequate cash reserves and management monitors rolling forecasts
of the Group's liquidity based on expected cash flow. The tables in section
(a) to (c) of this note above reflect a balanced view of cash inflows and
outflows and show the implied risk based on those values. Trade payables and
other financial liabilities originate from the financing of assets used in the
Group's ongoing operations. These assets are considered in the Group's overall
liquidity risk. Management continually reviews the Group's liquidity position
including cash flow forecasts to determine the forecast liquidity position and
maintain appropriate liquidity levels.
Weighted average Less than one month One to twelve months One to two years Two to five years Total
effective interest rate US$'000 US$'000 US$'000 US$'000 US$'000
%
31 December 2021
Financial assets
Variable interest rate instruments 0.13% 60,278 125,058 - - 185,336
Non-interest bearing 0% 55,064 - - - 55,064
115,342 125,058 - - 240,400
Financial liabilities
Non-interest bearing 0% 73,535 3,111 2,461 7,291 86,398
73,535 3,111 2,461 7,291 86,398
31 December 2020
Financial assets
Variable interest rate instruments 0.42% 111,147 150,009 - - 261,156
Non-interest bearing - 47,718 - - - 47,718
158,865 150,009 - - 308,874
Financial liabilities
Non-interest bearing - 66,694 - - - 66,694
66,694 - - - 66,694
(f) Credit risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group. The Group
has adopted a policy of only dealing with creditworthy counterparties and
obtaining sufficient collateral or other security where appropriate, as a
means of mitigating the risk of financial loss from defaults. The Group
measures credit risk on a fair value basis. The Group's credit risk is
concentrated on one entity, the refiner Asahi Refining Canada Ltd, but the
Group has a good credit check on its customer and none of the trade
receivables from the customer has been past due. Also, the cash balances held
in all currencies are held with financial institutions with a high credit
rating.
The gross carrying amount of financial assets recorded in the financial
statements represents the Group's maximum exposure to credit risk without
taking account of the value of collateral or other security obtained.
(g) Fair value
The carrying amount of financial assets and financial liabilities recorded in
the financial statements represents their respective fair values, principally
as a consequence of the short-term maturity thereof.
(h) Mineral reserve and resource statement impact on ore reserves
The following disclosure provides information to help users of the financial
statements understand the judgements made about the future and other sources
of estimation uncertainty. The key sources of estimation uncertainty described
in note 1.3.5 above and the range of possible outcomes are described more
fully below.
Depreciation of capitalised underground mine development costs
Depreciation of capitalised underground mine development costs at SGM is based
on reserve estimates. Management and Directors believe that these estimates
are both realistic and conservative, based on current information. The
analysis assumes that the reserve estimate has increased/decreased by 25% with
all other variables held constant.
Decrease by 25% 31 December 2021 Increase by 25%
US$'000 US$'000 US$'000
Amortisation of rehabilitation asset (within mine development properties) (1,915) (1,436) (1,077)
Amortisation of mine development properties (remainder) (78,850) (59,138) (44,353)
Mine development properties - net book value 417,945 438,136 453,280
Property, plant, and equipment - net book value 937,951 958,142 973,286
The capitalised deferred stripping asset has been excluded from the above
sensitivity analysis as it is not yet being amortised.
3.2 Capital management
3.2.1 Risk management
The Group's objectives when managing capital are to:
• safeguard their ability to continue as a going concern, so that they
can continue to provide returns for shareholders and benefits for other
stakeholders; and
• maintain an optimal capital structure to reduce the cost of capital.
To maintain or adjust the capital structure, the Group may adjust the amount
of dividends paid to owners of the parent, return capital to owners of the
parent or issue new shares.
3.2.2 Dividends to owners of the parent
For the year ended For the year ended
31 December 31 December
2021 2020
US$'000 US$'000
Ordinary shares
Final dividend for the year ended 31 December 2020 of 3.0 US cents per share 34,461 69,240
(2020: Q1 interim dividend for the year ended 31 December 2020 of 6.0 US cents
per share)
Q2 Interim dividend for the year ended 31 December 2021 of 4.0 US cents per 46,056 69,485
share (2020: Q2 Interim dividend for the year ended 31 December 2020 of 6.0 US
cents per share)
Total dividends provided for or paid 80,517 138,725
Dividends to owners of the parent:
Paid in cash 80,517 138,725
4. Group structure
4.1 Subsidiaries and controlled entities
The parent entity of the Group is Centamin plc, incorporated in Jersey, and
details of its subsidiaries and controlled entities are as follows:
Nature of Country of incorporation Ownership interest
activity
31 December 31 December
2021 2020
% %
Centamin Egypt Limited Holding company Australia(2) 100 100
Pharaoh Gold Mines NL Holding company Australia(2) 100 100
(holder of an Egyptian branch)
Sukari Gold Mining Company(10) Mining Company Egypt(5) 50 50
Centamin Group Services UK Limited Services Company UK(3) 100 100
Centamin West Africa Holdings Limited Holding company UK(4) 100 100
Sheba Exploration Limited Holding company UK(4) 100 100
(holder of an Ethiopia branch)
Sheba Exploration Holdings Limited(1) Exploration Company UK(4) 100 100
Centamin Group Services Limited Services Company Jersey(9) 100 100
Centamin Holdings Limited Holding company Jersey(9) 100 100
MHA Limited Holding company Jersey(9) 100 100
Centamin Limited Holding company Bermuda(8) 100 100
Ampella Mining Limited Holding company Australia(2) 100 100
Ampella Mining Gold SARL Exploration Company Burkina Faso(6) 100 100
Ampella Mining SARL Exploration Company Burkina Faso(6) 100 100
Ampella Resources Burkina Faso Exploration Company Burkina Faso(6) 100 100
Konkera SA Mining Company Burkina Faso(6) 100 90
Ampella Mining Côte d'Ivoire Exploration Company Côte d'Ivoire(7) 100 100
Centamin Côte d'Ivoire Exploration Company Côte d'Ivoire(7) 100 100
Ampella Mining Exploration CDI Exploration Company Côte d'Ivoire(7) 100 100
Centamin Exploration CI Exploration Company Côte d'Ivoire(7) 100 100
Centamin Egypt Investments 1 (UK) Limited Holding Company UK((11)) 100 -
Centamin Egypt Investments 2 (UK) Limited Holding Company UK((11)) 100 -
Centamin Egypt Investments 3 (UK) Limited Holding Company UK((11)) 100 -
Centamin Mining Services LLC Services Company Egypt((12)) 100 -
Centamin Central Mining SAE Exploration Egypt((12)) 100 -
Centamin North Mining SAE Exploration Egypt((12)) 100 -
Centamin South Mining SAE Exploration Egypt((12)) 100 -
(1) Previously Sheba Exploration (UK) plc.
(2) Address of all Australian entities: Suite 8, 7 The Esplanade, Mount
Pleasant, WA 6153.
(3) Address of Centamin Group Services UK Limited, Second Floor, 9-10
Savile Row, London, W1S 3PF.
(4) Address of all other UK entities: Hill House, 1 Little New Street,
London, EC4A 3TR.
(5) Address of all Egypt entities (except the new exploration entities in
(11) and (12): 361 El-Horreya Road, Sedi Gaber, Alexandria, Egypt.
(6) Address of all Burkina Faso entities: Ampella Resources Burkina Faso:
11 BP 1974 Ouaga 11. Ampella Mining SARL: 01 BP 1621 Ouaga 01. Ampella Mining
Gold SARL: 11 BP 1974 CMS 11 Ouaga 11. Konkera SA: 11 BP 1974 Ouaga CM11.
(7) Address of all Côte d'Ivoire entities: 20 BP 945 Abidjan 20.
(8) Address of Bermuda entity: Appleby Corporate Services (Bermuda) Ltd,
Canon's Court, 22 Victoria Street, Hamilton HM EX, Bermuda.
(9) Address of all Jersey entities: 2 Mulcaster Street, St Helier, Jersey
JE2 3NJ.
(10) Sukari Gold Mining Company is fully consolidated within the Group under
IFRS 10 'Consolidated financial statements' as if it were a subsidiary due to
it being a controlled entity, reflecting the substance and economic reality of
the Concession Agreement ("CA") (see note 1.3.1, note 4.1 and note 4.2).
(11) Address of all the holding companies of the new Egypt exploration
companies; Hill House, 1 Little New Street, London, EC4A 3TR.
(12) Address of the new Egypt exploration companies: c/o Arabella Plaza,
Building 2 First Floor, Office no. 1 to 3, Gamal Abdelansser Street, New
Cairo
Through its wholly owned subsidiary, PGM, the Company entered into the
Concession Agreement ("CA") with EMRA and the ARE granting PGM and EMRA the
right to explore, develop, mine and sell gold and associated minerals in
specific concession areas located in the Eastern Desert of Egypt. The CA came
into effect under Egyptian law on 13 June 1995.
In 2005 PGM, together with EMRA, were granted an exploitation lease over
160km2 surrounding the Sukari Gold Mine site. The exploitation lease was
signed by PGM, EMRA and the Egyptian Minister of Petroleum and gives tenure
for a period of 30 years, commencing 24 May 2005 and extendable by PGM for an
additional 30 years upon PGM providing reasonable commercial justification.
In 2006 SGM was incorporated under the laws of Egypt. SGM was formed to
conduct exploration, development, exploitation, and marketing operations in
accordance with the CA. Responsibility for the day-to-day management of the
project rests with the general manager, who is appointed by PGM.
The fiscal terms of the CA require that PGM solely funds SGM. PGM is however
entitled to recover from sales revenue recoverable costs, as defined in the
CA. EMRA is entitled to a share of SGM's net production surplus or profit
share (defined as revenue less payment of the fixed royalty to ARE and
recoverable costs). As at 31 December 2015, PGM had not recovered its cost
and, accordingly, no EMRA entitlement had been recognised at that date. During
2016, payments to EMRA commenced as advance profit share distributions. Any
payment made to EMRA pursuant to these provisions of the CA are recognised as
dividend paid to the non-controlling interest in SGM.
4.2 Joint arrangements
The consolidated entity has interests in the following joint arrangements:
Name of joint operation Percentage interest
31 December 31 December
2021 2020
% %
Sukari Gold Mining Company (1) 50 50
Egyptian Pharaoh Investments (2) 50 50
(1) Sukari Gold Mining Company is fully consolidated within the Group
under IFRS 10 'Consolidated financial statements' as if it were a subsidiary
due to it being a controlled entity, reflecting the substance and economic
reality of the Concession Agreement ("CA") (see note 1.3.1, note 4.1 and note
4.2).
(2) Dormant company.
The Group has a US$1 (cash) interest in the Egyptian Pharaoh Investments joint
operation. The amount is included in the consolidated financial statements of
the Group. There are no capital commitments arising from the Group's interests
in this joint operation.
Accounting policy: Interests in joint arrangements
The Group applies IFRS 11 'Joint arrangements'. Under IFRS 11, investments in
joint arrangements are classified as either joint operations or joint ventures
depending on the contractual rights and obligations of each investor. Joint
ventures are accounted for using the equity method. In relation to its
interests in joint operations, the Group recognises its share of assets and
liabilities; revenue from the sale of its share of the output; and its share
of expenses.
SGM is wholly consolidated within the Centamin Group of companies, reflecting
the substance and economic reality of the CA (see note 1.3.1 note 4.1 and
note 4.2).
5. Unrecognised items
5.1 Contingent liabilities and contingent assets
Contingent liabilities
Fuel supply
In January 2012 the Group was notified by Chevron, its supplier of Diesel Fuel
Oil, that, on the instructions of the Egyptian General Petroleum Corporation
("EGPC"), Chevron (which has since been taken over by Total Marketing Egypt)
would only be able to supply Diesel Fuel Oil to the mine at Sukari at
international prices rather than at local subsidised prices which had been
charged prior to that date. It is understood that EGPC had been advised by the
Legal Advice Department of the Council of State (an internal government
advisory department) that companies operating in the gold mining sector in
Egypt were not entitled to such subsidies. On 19 June 2012, legal proceedings
were issued by PGM in the Administrative Court against EGPC and the Minister
of Petroleum, alleging that the withdrawal of the subsidy was unlawful. In
November 2012, the Group received a further demand from Chevron for the
repayment of fuel subsidies received during the period from late 2009 through
to January 2012, amounting to EGP403 million (approximately US$25.9 million at
current exchange rates). EGPC filed a counterclaim against PGM for this
amount.
In June 2020 the Administrative Court issued a judgement rejecting PGM's claim
on procedural grounds, and at the same time it rejected EGPC's counterclaim
(also on procedural grounds). The Court did not consider the merits of either
PGM's case or the counterclaim. At the time the Group's legal advisers
remained of the view that the Group had a strong case and advised that the
judgement against PGM was based on an error of law. The Group therefore
submitted an appeal, as did EGPC. In December 2021 a further hearing was
held, at which both appeals were rejected on procedural grounds, again without
consideration of the merits of the case. Although the Group's Egyptian legal
advisers are of the opinion that the Court made an error of law, this decision
is final and PGM does not have any further right of appeal available to
it.
However, although the Group believed that its grounds for challenging EGPC's
decision were strong and that there was a good prospect of success, as a
practical matter, and to ensure the continuation of supply whilst the matter
was resolved, the Group continued to advance funds to its fuel supplier based
on the international price for fuel from 2012 until the full withdrawal of the
domestic subsidy for Diesel Fuel Oil in 2020. No provision has been made in
respect of the historical subsidies prior to January 2012.
Even if PGM's claim had been successful, management recognised the practical
difficulties associated with reclaiming funds from the government and for this
reason had fully provided against the prepayment of US$367 million. The
financial statements have always reflected the position and costs on a gross
basis including the effect of paying the international fuel price, on
rejection of the court case the prepayment has been removed and the disclosure
is no longer shown in the financial statements.
Concession Agreement court case
On 30 October 2012, the Administrative Court in Egypt handed down a judgement
in relation to a claim brought by, amongst others, an independent member of a
previous parliament, in which he argued for the nullification of the agreement
that confers on the Group rights to operate in Egypt. This agreement, the
Concession Agreement, was entered into between the ARE, EMRA and Centamin's
wholly owned subsidiary Pharaoh Gold Mines NL, and was approved by the
People's Assembly as Law 222 of 1994.
In summary, that judgement states that, although the Concession Agreement
itself remains valid and in force, insufficient evidence had been submitted to
court to demonstrate that the 160km² exploitation lease between PGM and EMRA
had received approval from the relevant minister as required by the terms of
the Concession Agreement. Accordingly, the Court found that the exploitation
lease in respect of the area of 160km² was not valid although it stated that
there was in existence such a lease in respect of an area of 3km². Centamin,
however, is in possession of the executed original lease documentation which
clearly shows that the 160km² exploitation lease was approved by the Minister
of Petroleum and Mineral Resources. It appears that an executed original
document was not supplied to the court in the first instance.
Upon notification of the judgement the Group took immediate steps to protect
its ability to continue to operate the mine at Sukari. These included lodging
a formal appeal before the Supreme Administrative Court on 26 November 2012.
In addition, in conjunction with the formal appeal, the Group applied to the
Supreme Administrative Court to suspend the initial decision until such time
as the court was able to consider and rule on the merits of the appeal. On 20
March 2013, the Court upheld this application thus suspending the initial
decision and providing assurance that normal operations would be able to
continue whilst the appeal process was underway.
EMRA lodged its own appeal in relation to this matter on 27 November 2012, the
day after the Company's appeal was lodged, supporting the Group's view in this
matter. Furthermore, in late December 2012, the Minister of Petroleum lodged a
supporting appeal and shortly thereafter publicly indicated that, in his view,
the terms of the Concession Agreement were fair, and that the exploitation
lease was valid. The Minister of Petroleum also expressed support for the
investment and expertise that Centamin brings to the country.
The Group believes this demonstrates the government's commitment to their
investment at Sukari and the government's desire to stimulate further
investment in the Egyptian mining industry.
In 2016 the Supreme Administrative Court stayed the Concession Agreement
appeal until the Supreme Constitutional Court has ruled on the validity of Law
no. 32 of 2014. Law no. 32 of 2014 restricts the right of third parties to
challenge contractual agreements between the Egyptian government and an
investor and has partial retrospective effect, applying to any cases then
before the courts but in which no final judgement had been given. The validity
of this law, which was ratified by the Egyptian parliament in 2016, is
currently under review by the Supreme Constitutional Court ("SCC"). In 2017,
the SCC re-referred the case to the State Commissioner to prepare a
complementary report to an initial report provided by the State Commissioner
in Q1 2017 which took the view that Law no. 32 was unconstitutional. The State
Commissioner's report and complementary report are advisory and non-binding on
the SCC. If Law 32 is upheld, it is expected that a decision to uphold the
Company's appeal would be taken in a relatively short time frame. If Law 32 is
held to be invalid, it is possible that the Egyptian Government could
introduce further legislative changes either to amend or replace Law 32, in
which case the stay on proceedings would remain in place until the position is
clear. If the Government decides against legislative action, then the stay on
proceedings would be lifted and PGM's appeal would proceed to be considered on
its merits.
The Group continues to believe that it has a strong legal position and that in
the event that the SCC rules that Law no. 32 is invalid, it remains confident
that its appeal would be successful.
Consequently, at this stage, it is not possible to say when the appeal will
conclude, although there is the potential for court process in Egypt to be
lengthy. The Company has taken extensive legal advice on the merits of its
appeal from several leading Egyptian law firms, who have confirmed that the
proper steps were followed regarding the grant of the 160km² lease. It
therefore remains of the view that the appeal is based on strong legal grounds
and will ultimately be successful. In the event that the appellate court fails
to be persuaded of the merits of the case put forward by the Group, the
operations at Sukari may be adversely affected to the extent that the Group's
operation exceeds the exploitation lease area of 3km² referred to in the
original court decision.
The Company remains confident that normal operations at Sukari will be
maintained whilst the appeal case is heard.
Other contingent assets
There were no contingent assets at year-end (2020: nil).
5.2 Dividends per share
The dividends paid in 2021 were US$80,516,907 and are reflected in the
consolidated statement of changes in equity for the year (2020:
US$138,724,519).
A final dividend in respect of the year ended 31 December 2021 of 5 US cents
per share, totalling approximately US$57.8 million has been proposed by the
Board of Directors and is subject to shareholder approval at the annual
general meeting on 10 May 2022. These financial statements do not reflect the
dividend payable.
As announced on 9 January 2017, the update to the Company's dividend policy
sets a minimum payout level relative to cash flow while considering the
financial condition of, and outlook for, the Company. When determining the
amount to be paid, the Board will take into consideration the underlying
profitability of the Company and significant known or expected funding
commitments. Specifically, the Board will aim to approve an annual dividend of
at least 30% of the Company's net cash flow after sustaining capital costs and
following the payment of profit share due to the government of Egypt.
5.3 Subsequent events
As referred to in note 5.2, subsequent to the year end, the Board proposed a
final dividend for 2021 of 5 US cents per share. Subject to shareholder
approval at the annual general meeting on 10 May 2022, the final dividend will
be paid on 03 June 2022 to shareholders on record date of 20 May 2022.
As referred to in note 1.3.5, the Group Mineral Reserve and Resource statement
for SGM has been published with an effective date of 30 June 2021. The changes
from the previous statement published with an effective date of 31 December
2020 will have a prospective effect on the amortisation of the rehabilitation
asset and mine development properties. Please refer to the Mineral Reserve and
Resource statement impact on ore reserves note 3.1.1 (h) where these
sensitivities to the change have been disclosed.
There were no other significant events occurring after the reporting date
requiring disclosure in the financial statements.
6. Other information
6.1 Related party transactions
(a) Equity interests in related parties
Equity interests in subsidiaries
Details of the percentage of ordinary shares held in subsidiaries are
disclosed in note 4.1.
Equity interest in associates and jointly controlled arrangements
Details of interests in joint ventures are disclosed in note 4.2.
(b) Key management personnel compensation
Key management personnel are persons having authority and responsibility for
planning, directing, and controlling the activities of the Group, directly or
indirectly, including any Director (executive or otherwise) of the Group.
The aggregate compensation made to key management personnel of the
consolidated entity is set out below:
For the year ended For the year ended
31 December 2021 31 December 2020
US$ US$
Short-term employee benefits 7,370,964 7,627,053
Post-employment benefits 7,852 7,292
Share-based payments 1,500,304 1,564,277
8,879,120 9,198,622
(c) Key management personnel equity holdings
The details of the movement in key management personnel equity holdings of
fully paid ordinary shares in Centamin plc during the financial year ended 31
December 2021 are as follows:
For the year ended Balance at Granted as remuneration ("DBSP") Granted as remuneration ("PSP") Net other change - share plan lapse(1) Net other change(2) Balance at
1 January 2021
31 December 2021((3))
31 December 2021
M Horgan 606,405 - 650,000 - 25,000 1,281,405
R Jerrard 1,882,000 - 570,000 (408,000) 33,000 2,077,000
J Rutherford 200,000 - - - 50,000 250,000
S Eyre - - - - 15,000 15,000
M Bankes 190,000 - - - 99,000 289,000
M Cloete 15,000 - - - - 15,000
C Farrow - - - - 30,000 30,000
I Fawzy - - - - 140,000 140,000
H Faul - - - - - -
Y El-Raghy 691,662 - 160,000 (104,000) - 747,662
Gustav Du Toit - 510,000 440,000 - - 950,000
H Bills 200,000 - 300,000 - - 500,000
P Cannon - - 250,000 - - 250,000
J Singleton 746,000 - 250,000 - - 996,000
C Murray 200,000 - 250,000 - 24,000 474,000
A Carse 539,000 - 250,000 (168,000) 25,096 646,096
D Le Masurier 437,300 - 200,000 (120,000) - 517,300
R Nel 330,000 - 200,000 (96,000) (32,027) 401,973
(1) "Net other change - share plan lapse" relates to awards that have
lapsed due to the full performance conditions not being met on the 2018 grant.
(2) "Net other change" relates to the on-market acquisition or disposal of
fully paid ordinary shares.
(3) Balance includes unvested grants under the Company's performance share
plan.
Since 31 December 2021 to the date of this report there have been no
transactions notified by the Company in accordance with the requirements of
Article 19 of the UK Market Abuse Regulation (Regulation (EU) 596/2014.
The details of the movement in key management personnel equity holdings of
fully paid ordinary shares in Centamin plc during the financial year ended 31
December 2020 are as follows:
For the year ended Balance at Granted as remuneration ("DBSP") Granted as remuneration ("PSP") Net other change - share plan lapse(1) Net other change(2) Balance at
1 January 2020
31 December 2020((3))
31 December 2020
M Horgan - - 590,000 - 16,405 606,405
R Jerrard 1,897,000 - 390,000 (420,000) 15,000 1,882,000
J Rutherford - - - - 200,000 200,000
S Eyre - - - - - -
M Bankes 190,000 - - - - 190,000
M Cloete 15,000 - - - - 15,000
C Farrow - - - - - -
I Fawzy - - - - - -
H Faul - - - - - -
Y El-Raghy 793,662 60,000 110,000 (72,000) (200,000) 691,662
H Bills - - 200,000 - - 200,000
P Cannon - - - - - -
J Singleton 546,000 - 200,000 - - 746,000
C Murray - - 200,000 - - 200,000
A Carse 379,000 80,000 80,000 - - 539,000
D Le Masurier 527,000 67,500 67,500 (107,000) (117,700) 437,300
R Nel 230,000 50,000 50,000 - - 330,000
(1) "Net other change" relates to the on-market acquisition or disposal of
fully paid ordinary shares.
(2) Includes shareholdings attributable to the El-Raghy family.
(3) Balance includes unvested grants under the Company's performance share
plan.
(d) Key management personnel share option holdings
There were no options held, granted, or exercised during the year by Directors
or senior management in respect of ordinary shares in Centamin plc.
(e) Other transactions with key management personnel
The related party transactions for the year ended 31 December 2021 are
summarised below:
• salaries, superannuation contributions, bonuses, LTIs, consulting
and directors' fees paid to Directors during the year ended 31 December 2021
amounted to US$3,694,236 (31 December 2020: US$3,915,877); and
(f) Transactions with the government of Egypt
Royalty costs attributable to the government of Egypt of US$21,671,928 (2020:
US$24,792,435) were incurred in 2021. Profit share to EMRA of US$75,200,000
(2020: US$174,275,000) was incurred in 2021.
(g) Transactions with other related parties
Other related parties include the parent entity, subsidiaries, and other
related parties.
During the financial year, the Company recognised tax payable in respect of
the tax liabilities of its wholly owned subsidiaries.
Payments to/from the Company are made in accordance with terms of the tax
funding arrangement.
During the financial year the Company provided funds to and received funding
from subsidiaries.
All amounts advanced to related parties are unsecured. No expense has been
recognised in the year for bad or doubtful debts in respect of amounts owed by
related parties.
Transactions and balances between the Company and its subsidiaries were
eliminated in the preparation of the consolidated financial statements of the
Group.
6.2 Contributions to Egypt
(a) Gold sales agreement
On 20 December 2016, SGM entered a contract with the Central Bank of Egypt
("CBE"). The agreement provides that the parties may elect, on a monthly
basis, for the CBE to supply SGM with its local Egyptian currency requirements
for that month to a maximum value of EGP80 million (2020: EGP80 million). In
return, SGM facilitates the purchase of refined gold bullion for the CBE from
SGM's refiner, Asahi Refining Canada Ltd. This transaction has been entered
into as SGM requires local currency for its operations in Egypt (it receives
its revenue for gold sales in US dollars). Thirty-four transactions have been
entered into at the date of this report, eight of which in the current year,
pursuant to this agreement, and the values related thereto are as follows:
For the year ended For the year ended
31 December
31 December
2021 2020
US$'000
US$'000
Gold purchased 56,147 29,319
Refining costs 31 15
Freight costs 55 30
56,233 29,364
For the year ended For the year ended
31 December 2021
31 December
Oz
2020
Oz
Gold purchased 31,219 16,262
At 31 December 2021 the net payable in EGP owing from the Central Bank of
Egypt is approximately the equivalent of US$24,761 (2020: US$42,987 net
receivable from CBE).
(b) University grant
During 2018, the Group together with Sami El-Raghy and the University of
Alexandria Faculty of Science initiated a sponsored scholarship agreement, the
Michael Kriewaldt Scholarships, to outstanding geology major students to enrol
at the postgraduate research programme of the geology department of the
University for their MSc and/or PhD in mining and mineral resources. An amount
of EGP10,000,000 was deposited with an Egyptian bank as a nucleus of the
scholarship fund in a fixed deposit account, with contributions of
EGP7,330,000 from PGM and EGP2,670,000 from Sami El-Raghy. The interest earned
on the account will be put towards the cost of the scholarships and will be
administered by the University on the conditions set out in the agreement.
This amount has been accounted for under donations expense in profit and loss
in 2020 and in 2021 the interest earned has also been accounted for under
donations expense.
6.3 Share-based payments
Performance share plan
The Company's shareholder approved Performance Share Plan ("PSP") allows the
Company the right to grant awards (as defined below) to employees of the
Group. Awards may take the form of either conditional share awards, where
shares are transferred conditionally upon the satisfaction of performance
conditions; or share options, which may take the form of nil cost options or
have a nominal exercise price, the exercise of which is again subject to
satisfaction of applicable performance conditions.
The awards due to be granted in June 2021 will vest following the passing of
three years. Vesting will be subject to the satisfaction of the performance
conditions (and for Executive Directors a full two-year post-vesting holding
period). Awards will vest based upon a blend of three-year relative TSR, cash
flow and production targets, full details of which are set out in the
Directors' Remuneration Report. These measures are assessed by reference to
current market practice and the Remuneration Committee will have regard to
current market practice when establishing the precise performance conditions
for awards.
To date, the Company has granted the following conditional awards to employees
of the Group:
June 2018 awards
Of the 4,908,000 awards granted on 27 June 2018 under the PSP, 495,311 awards
vested to eligible participants (27 in total).
June 2019 awards
Due to the performance conditions not being met, all remaining awards eligible
to participants shall lapse.
June 2020 awards
Of the 2,582,500 awards granted on 5 June 2020 under the PSP, 2,137,500 awards
remain granted to eligible participants (11 in total) applying the following
performance criteria:
• 50% of the award shall be assessed by reference to a target total
shareholder return;
• 25% of the award shall be assessed by reference to compound growth
in adjusted free cash flow; and
• 25% of the award shall be assessed by reference to compound growth
in gold production.
April 2021 awards
Of the 5,945,000 awards granted on 30 April 2021 under the PSP, 5,485,000
awards remain granted to eligible participants (32 in total) applying the
following performance criteria:
• 50% of the award shall be assessed by reference to a target total
shareholder return;
• 25% of the award shall be assessed by reference to compound growth
in adjusted free cash flow; and
• 25% of the award shall be assessed by reference to compound growth
in gold production.
Conditional share awards and options together constitute "awards" under the
plan and those in receipt of awards are "award holders".
A detailed summary of the scheme rules is set out in the 2022 AGM proxy
materials which are available at www.centamin.com. In brief, awards will vest
following the passing of three years from the date of the award and vesting
will be subject to satisfaction of performance conditions. The above measures
are assessed by reference to current market practice and the Remuneration
Committee will have regard to market practice when establishing the precise
performance conditions for future awards.
Where the performance conditions have been met, in the case of conditional
awards awarded to certain participants, 50% of the total shares under the
award will be issued or transferred to the award holders on or as soon as
possible following the specified vesting date, with the remaining 50% being
issued or transferred on the second anniversary of the vesting date.
Performance share plan awards granted during the year:
Grant date PSP 2021
30 April 2021
Number of instruments 1,380,000
TSR: fair value at grant date GBP(1)(2) 0.55
TSR: fair value at grant date US$(1)(2) 0.77
Adjusted free cash flow and gold production: fair value at grant date 0.89
GBP(1)(2)
Adjusted free cash flow and gold production: fair value at grant date 1.24
US$(1)(2)
Vesting period (years) 3
Holding period applicable to the award (years)(2) 2
Expected volatility (%) 55.3%
Expected dividend yield (%) 0%
Number of instruments 4,565,000
TSR: fair value at grant date GBP(1) 0.67
TSR: fair value at grant date US$(1) 0.93
Adjusted free cash flow and gold production: fair value at grant date GBP(1) 1.07
Adjusted free cash flow and gold production: fair value at grant date US$(1) 1.50
Vesting period (years) 3
Holding period applicable to the award (years) 0
Expected volatility (%) 55.3%
Expected dividend yield (%) 0%
(1) The vesting of 50% of the awards granted under this plan are dependent
on a TSR performance condition. As relative TSR is defined as a market
condition under IFRS 2 'Share-based payments', this requires that the
valuation model used considers the anticipated performance outcome. We have
therefore applied a Monte-Carlo simulation model. The simulation model
considers the probability of performance based on the expected volatility of
Centamin and the peer group companies and the expected correlation of returns
between the companies in the comparator group. The remaining 50% of the awards
are subject to adjusted free cash flow and gold production performance
conditions. As these are classified as non-market conditions under IFRS 2 they
do not need to be considered when determining the fair value. These grants
have been valued using a Black‑Scholes model. The fair value calculated was
then converted at the closing GBP:US$ foreign exchange rate on that day.
(2) A discount for lack of marketability has been applied to account for
the decrease in value of the award by reason of the two-year holding period
restriction.
Deferred bonus share plan ("DBSP")
In 2012, the Company implemented the DBSP, which is a long-term share
incentive arrangement for senior management (but not Executive Directors) and
other employees (participants).
The DBSP awards shall be subject to the terms and conditions of the DBSP and
shall ordinarily vest in three equal tranches on the anniversary of the grant
date, conditional upon the continued employment with the Group.
DBSP awards granted during the year:
Grant date DBSP 2021
30 April 2021
Number of instruments 1,977,000
Share price/fair value at grant date Tranche 1 £(1) 1.01
Share price/fair value at grant date Tranche 1 US$(1) 1.41
Share price/fair value at grant date Tranche 2 £(1) 0.98
Share price/fair value at grant date Tranche 2 US$(1) 1.36
Share price/fair value at grant date Tranche 3 £(1) 0.94
Share price/fair value at grant date Tranche 3 US$(1) 1.32
Vesting period Tranche 1 (years)(2) 1
Vesting period Tranche 2 (years)(2) 2
Vesting period Tranche 3 (years)(2) 3
Expected dividend yield Tranche 1 (%) 5.77%
Expected dividend yield Tranche 2 (%) 4.65%
Expected dividend yield Tranche 3 (%) 4.26%
(1) The fair value of the shares awarded under the DBSP were calculated by
using the closing share price on grant date, converted at the closing GBP:US$
foreign exchange rate on that day. No other factors were considered in
determining the fair value of the shares awarded under the DBSP.
(2) Variable vesting dependent on one to three years of continuous
employment.
ACCOUNTING POLICY: SHARE-BASED PAYMENTS
Equity settled share-based payments with employees and others providing
similar services are measured at the fair value of the equity instrument at
grant date. Fair value is measured using the Black-Scholes model. Where
share-based payments are subject to market conditions, fair value was measured
using a Monte-Carlo simulation. A discount for lack of marketability has been
applied to account for the decrease in value of the award by reason of the
two-year holding period restriction. The fair value determined at the grant
date of the equity settled share-based payments is expensed over the vesting
period, based on the consolidated entity's estimate of shares that will
eventually vest.
Share-based payments
Equity settled share-based transactions with other parties are measured at the
fair value of the goods or services received, except where the fair value
cannot be estimated reliably, in which case they are measured at the fair
value of the equity instruments granted, measured at the date the entity
obtains the goods or the counterparty renders the service. The fair value of
the employee services received in exchange for the grant of the options is
recognised as an expense. The total amount to be expensed is determined by
reference to the fair value of the options granted:
• including any market performance conditions (for example, an
entity's share price);
• excluding the impact of any service and non-market performance
vesting conditions (for example, profitability and remaining an employee of
the entity over a specified period); and
• including the impact of any non-vesting conditions (for example, the
requirement for employees to save or holding shares for a specific period).
When the options are exercised, the Company issues new shares. The proceeds
received net of any directly attributable transaction costs are credited to
share capital (nominal value) and share premium. The expected life used in the
model has been adjusted, based on management's best estimate, for the effects
of non-transferability, exercise restrictions, and behavioural considerations.
Further details on how the fair value of equity settled share-based
transactions has been determined can be found above. At each reporting date,
the Group revises its estimate of the number of equity instruments expected to
vest. The impact of the revision of the original estimates, if any, is
recognised in profit or loss over the remaining vesting period, with
corresponding adjustment to the equity settled employee benefits reserve.
6.4 Earnings per share ("EPS") attributable to owners of the parent
For the year ended For the year ended
31 December 2021 31 December 2020
US cents per share US cents per share
Basic earnings per share 8.811 13.531
Diluted earnings per share 8.738 13.453
Basic earnings per share attributable to owners of the parent
The earnings and weighted average number of ordinary shares used in the
calculation of basic earnings per share are as follows:
For the year ended For the year ended
31 December 31 December
2021 2020
US$'000 US$'000
Earnings used in the calculation of basic EPS 101,527 155,979
For the year ended For the year ended
31 December 31 December
2021 2020
Number of shares Number of shares
Weighted average number of ordinary shares for the purpose of basic EPS 1,152,246,924 1,152,715,180
Diluted earnings per share attributed to owners of the parent
The earnings and weighted average number of ordinary shares used in the
calculation of diluted earnings per share are as follows:
For the year ended For the year ended
31 December 31 December
2021 2020
US$'000 US$'000
Earnings used in the calculation of diluted EPS 101,527 155,979
For the year ended For the year ended
31 December 31 December
2021 2020
Number of shares Number of shares
Weighted average number of ordinary shares for the purpose of basic EPS 1,152,246,924 1,152,715,180
Shares deemed to be issued for no consideration in respect of employee options 9,717,092 6,703,214
Weighted average number of ordinary shares used in the calculation of diluted 1,161,964,016 1,159,418,394
EPS
No potential ordinary shares were excluded from the calculation of weighted
average number of ordinary shares for the purpose of diluted earnings per
share.
6.5 Auditors' remuneration
The analysis of the auditors' remuneration is as follows:
For the year ended For the year ended
31 December 31 December
2021 2020
US$'000 US$'000
Fees payable to the Company's auditors and their associates for the audit of
the Company's annual financial statements
Audit fee for the current year audit (1) 586 564
Non-recurring audit fee in relation to scope changes (2) - 151
Fees payable to the Company's auditors and their associates for other services
to the Group
Audit fee of the Company's subsidiaries 132 65
Total audit fees 718 780
Non-audit fees:
Audit related assurance services - interim review 138 134
Total non-audit fees 138 134
(1) 2021 fee includes amounts in relation to the base audit fee US$566k
(2020: US$437k), new applicable regulatory and auditing standards US$ nil
(2020: US$40k), changes in scope and timetable of the audit US$ nil (2020:
US$48k) and corporate reporting review US$20k (2020: US$18k) and COVID-19
going concern assessments US$ nil (2020: US$21k).
(2) Non-recurring audit fees relate to the prior year audit addressing
going concern assessments US$51k, impairment assessments US$51k and changes in
scope and timetable of the audit as a result of Covid-19 US$73k.
All audit fees are billed in GBP and were translated at a foreign exchange
rate on 31 December 2021 of US$1.35:GB£1 (rate on 31 December 2020:
US$1.37:GB£1). Not included within the above amounts are auditors' expenses
(recharged to the company) of US$10k (2020: US$9k).
The Audit and Risk Committee and the external auditors have safeguards in
place to avoid the possibility that the auditors' objectivity and independence
could be compromised. These safeguards include the implementation of a policy
on the use of the external auditors for non-audit related services.
Where it is deemed that the work to be undertaken is of a nature that is
generally considered reasonable to be completed by the auditors of the Company
for sound commercial and practical reasons, the conduct of such work will be
permissible provided that it has been pre-approved. All these services are
also subject to a predefined fee limit. Any work performed in excess of this
limit must be approved by the Audit and Risk Committee.
6.6 General information
Centamin plc (the "Company") is a listed public company, incorporated and
domiciled in Jersey and operating through subsidiaries and jointly controlled
entities operating in Egypt, Burkina Faso, Côte d'Ivoire, United Kingdom, and
Australia. It is the Parent Company of the Group, comprising the Company and
its subsidiaries and joint arrangements.
Registered office and principal place of business:
Centamin plc 2 Mulcaster Street St Helier, Jersey JE2 3NJ
The nature of the Group's operations and its principal activities are set out
in the Governance Report and the Strategic Report of the Annual Report.
( )
-END-
1 EBITDA margin is EBITDA as a percentage of gross revenue.
2 Adjustments made to free cash flow, for example acquisitions or disposals
of financial assets at fair value through profit or loss, which are completed
through or add to specific allocated available cash reserves.
3 Cash costs of production, AISC, Adjusted EBITDA, Cash, bullion on hand,
gold and silver sales debtor, financial assets at fair value through profit or
loss (also known as Cash and liquid assets) and Adjusted free cash flow are
Non-GAAP Financial Measures as defined at the end of the Financial Review
section.
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