REG - Central Asia Metals - 2022 Full Year Results
29/03/2023 07:00
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RNS Number : 5368U Central Asia Metals PLC 29 March 2023
29 March 2023
CENTRAL ASIA METALS PLC
('CAML' or the 'Company')
2022 Full Year Results
Central Asia Metals plc (AIM: CAML) today announces its full year results for
the 12 months ended 31 December 2022.
Financial highlights
2022 final dividend of 10 pence per share
· 2022 full year dividend of 20 pence per share (2021: 20 pence)
· Represents 47% of 2022 free cash flow(1) ('FCF'), (2021: 45%) in line
with stated dividend policy
· Final dividend payable on 23 May 2023 to shareholders registered on
28 April 2023
Financial results
· Group gross revenue(( 1 )) of $232.2 million (2021: $235.2 million)
o Group net revenue of $220.9 million (2021: $223.4 million)
· Group EBITDA(1) of $131.6 million (2021: $141.5 million)
· EBITDA margin(1) of 57% (2021: 60%)
· Group FCF(1) of $89.7 million (2021: $103.8 million)
· Adjusted EPS (excluding a non-cash impairment) of 48.15 cents,
reported EPS of 19.10 cents (2021: 47.69 cents)
Strong balance sheet
· Cash in the bank as at 31 December 2022 of $60.6 million(2) (2021:
$59.2million)
· Fully repaid $187.0 million corporate debt facility
· Non-cash impairment charge for Sasa of $55.1 million
1 See Financial Review section for definition of non-IFRS alternative
performance measures
2 The cash balance figure disclosed includes restricted cash balance
Sustainability and operational overview
· Zero lost time injuries ('LTIs') at Kounrad during 2022 (2021: zero)
· Two LTIs at Sasa during 2022 (2021: four)
· Reduction in GHG emissions of 40% against 2020 base line
· Climate change scenario analysis undertaken in 2022
· Record copper production of 14,254 tonnes (2021: 14,041 tonnes)
· Zinc in concentrate production of 21,473 tonnes (2021: 22,167 tonnes)
· Lead in concentrate production of 27,354 tonnes (2021: 27,202 tonnes)
2023 outlook
Guidance of:
· Copper, 13,000 to 14,000 tonnes
· Zinc in concentrate, 19,000 to 21,000 tonnes
· Lead in concentrate, 27,000 to 29,000 tonnes
Completion of:
· Paste Backfill and Dry Stack Tailings Plants at Sasa
· Initial phase of Central Decline at Sasa
· Kounrad Solar Power Plant
Nigel Robinson, Chief Executive Officer, commented:
"I am pleased to report a good set of financial results for 2022, and a year
of solid performance for CAML. We ended 2022 with a strong balance sheet,
having made the final payment on our corporate debt facility in August, with
cash in the bank of $60.6 million.
"Following this strong performance, we propose a 10 pence per share final
dividend, resulting in a full year dividend of 20 pence per share, comparable
with 2021. The full year dividend represents 47% of our 2022 FCF and is in
line with our stated policy of 30% to 50% of FCF.
"We have continued to focus our efforts on the five sustainability pillars, we
achieved an improvement in our lost time injury frequency rate ('LTIFR') and a
14% increase in Group health and safety training versus 2021. Our forthcoming
2022 annual, sustainability and climate change reports contain more
information on our efforts in this regard, and our reporting in relation to
the recommendations of the Taskforce for Climate-Related Financial Disclosures
('TCFD').
"We look forward to another positive year for CAML in 2023 and, in particular,
the completion of the Paste Backfill and Dry Stack Tailings plants, and the
initial phase of the Central Decline at Sasa. This project will ensure maximum
extraction of Sasa's resources, in the safest way, with improved tailings
management until at least 2039. The construction of the Solar Power Plant at
Kounrad will also be completed this year, and that will contribute to the
reduction of our Scope 2 GHG emissions.
"We were active in terms of business development during 2022, having appraised
40 opportunities, signed NDAs for 17 and visited two sites. Our efforts
continue into 2023 and, with our strong balance sheet, we are in a good
position to grow through acquisition.
"On a final note, we enjoyed celebrating 10 years of copper production at
Kounrad, in April, where we have generated cumulative gross revenue of $944.4
million and five years of ownership at Sasa in November and look forward to
seeing our operations continue to offer local employment and facilitate
socio-economic progress in the surrounding communities."
Analyst conference call and webcast
A live conference call and webcast hosted by Nigel Robinson (Chief Executive
Officer), Gavin Ferrar (Chief Financial Officer) and Louise Wrathall (Director
of Corporate Development) will take place at 09:30 (BST) today.
The conference call can be accessed by dialling +44 (0) 33 0551 0200 and
quoting the confirmation code 'Central Asia Metals - Results', and the
webcast can be accessed using the link:
https://stream.brrmedia.co.uk/broadcast/63d28f71777efd4a8b5164c1
(https://stream.brrmedia.co.uk/broadcast/63d28f71777efd4a8b5164c1) .
The presentation will be available on the Company's website and there will be
a replay of the call available following the presentation
at www.centralasiametals.com (https://www.centralasiametals.com/)
Presentation via Investor Meet Company
The Company will also hold a live presentation relating to the 2022 Full Year
Results via the Investor Meet Company platform on Wednesday 29 March 2023 at
15:00 (BST). The presentation is open to all existing and potential
shareholders. Questions can be submitted pre-event via the Investor Meet
Company dashboard until 09:00 (BST) the day before the meeting or at any time
during the live presentation. Investors can sign up to Investor Meet Company
for free and add to meet Central Asia Metals Plc via:
www.investormeetcompany.com/central-asia-metals-plc/register-investor
(https://www.investormeetcompany.com/central-asia-metals-plc/register-investor)
For further information contact:
Central Asia Metals Tel: +44 (0) 20 7898 9001
Nigel Robinson
CEO
Gavin Ferrar
CFO
Louise Wrathall louise.wrathall@centralasiametals.com
Director of Corporate Development
Emma Chetwynd Stapylton emma.chetwyndstapylton@centralasiametals.com
Investor Relations Manager
Peel Hunt (Nominated Advisor and Joint Broker) Tel: +44 (0) 20 7418 8900
Ross Allister
David McKeown
BMO Capital Markets (Joint Broker) Tel: +44 (0) 20 7236 1010
Thomas Rider
Pascal Lussier Duquette
BlytheRay (PR Advisors) Tel: +44 (0) 20 7138 3204
Tim Blythe
Megan Ray
Rachael Brooks
Note to editors:
Central Asia Metals, an AIM-listed UK company based in London, owns 100% of
the Kounrad SX-EW copper project in central Kazakhstan and 100% of the Sasa
zinc-lead mine in North Macedonia.
For further information, please visit www.centralasiametals.com
(http://www.centralasiametals.com/) and follow CAML on Twitter at
@CamlMetals and on LinkedIn at Central Asia Metals Plc
CHAIRMAN'S STATEMENT
Building the Business for the Future
I am pleased with our operational and financial performance during 2022, which
demonstrated the strength of our business. We also had a positive year in
appointing two new Directors to our Board, Dr Mike Armitage and Louise
Wrathall, both of whom have already brought their own experiences to our
discussions, and in the creation of a new Technical Committee. We have
advanced our sustainability efforts on the ground and in terms of reporting,
and I was pleased that we commenced construction of our Kounrad Solar Power
Plant towards the end of the year.
Fulfilling Our Purpose
Our purpose is to produce base metals, essential for modern living, profitably
in a safe and sustainable environment for all our stakeholders and we have
fulfilled this purpose during 2022.
Our solid 2022 operational performance generated for CAML EBITDA of $131.6
million and free cash flow of $89.7 million. This has enabled us to continue
deleveraging, and in August 2022 we made the final repayment of the debt that
we borrowed in order to acquire Sasa in 2017. We were pleased to report
adjusted (to exclude a non-cash impairment charge) EPS of 48.15 cents, above
the 47.69 cents reported last year.
We celebrated two anniversaries in 2022. In April, we marked 10 years of
copper production from Kounrad, during which time we have produced over
130,000 tonnes of cathode, supported a solely Kazakh workforce of 337
employees and 78 contractors, invested capital totalling $81.9 million and
generated $944.4 million in gross revenue.
In November, we celebrated five years since we acquired Sasa. Under our
ownership, we have maintained a workforce that is 98% Macedonian, generated
$525.0 million in gross revenue from zinc and lead sales and paid tax in
excess of $71.0 million to the Government of North Macedonia. We have set up
charitable foundations in both countries and continue to support the many
worthy causes in both jurisdictions, as well as promoting long-term
sustainable local development.
Sustainability
We have continued to devote much of our time and energy to advancing our
sustainability efforts during 2022. In Q2 2022, we published our third
standalone Sustainability Report. This was the Company's second report drafted
in accordance with the Global Reporting Initiative ('GRI') Standards 'Core
option'. As a result of technical work undertaken during 2021, we were able to
set ourselves additional environmental targets on water abstraction and
mineral waste to complement the greenhouse gas ('GHG') emission targets that
we set ourselves last year. Importantly, we also set ourselves a target to
increase our female employees by 25% by the end of 2025.
Given GRI's adjustment to the Universal Standards, we revisited our
stakeholder engagement-based materiality assessment with assistance from
consultants, Digby Wells, taking into account both societal and economic
factors. The results of this survey have informed our updated material topics
and we have reported on those in our forthcoming 2022 Sustainability Report.
We also undertook climate change scenario analysis during the year, which has
informed our risk management and climate strategy going forwards. In Q4 2022,
we commenced construction of our Kounrad solar power plant which is one of our
key initiatives that will help us to reduce our Scope 1 and Scope 2 emissions
by 50% by 2030 from a 2020 base.
Governance
In January 2022, CAML announced the appointment of Dr Mike Armitage to the
Board as an Independent Non-Executive Director. Mike brings a wealth of
international technical experience and has already supported management and
advised the Board, both in terms of our current operations and with our
business development activities. Mike's long career with SRK in particular has
seen him review, assist with due diligence and help to develop numerous
mineral properties globally.
Robert Cathery retired from the CAML Board at the conclusion of our 2022
Annual General Meeting ('AGM'). I want to express my thanks to Bob for his
hard work and dedication to the CAML business. His advice has been invaluable
and, in particular in his role as Chair of the Remuneration Committee, he has
been responsible for transforming our Long-Term Incentive Plan and
incorporating our wider sustainability targets into Executive Director and
management remuneration.
Also, at the conclusion of the 2022 AGM, Louise Wrathall, our Director of
Corporate Development, joined the CAML Board. Louise has been a key member of
the senior management team since she joined CAML in 2015 and further enhances
the skills of the Board, emphasising the importance we place on investor
relations, business development and environmental, social and governance
('ESG') initiatives.
During 2022, we made changes to our Board Committees as well. We created a new
Technical Committee, chaired by Roger Davey and additionally comprising
myself, Dr Mike Armitage and Nigel Robinson. During the year, the committee
has reviewed the engineering aspects of the Kounrad solar power project and
has provided guidance and support to Sasa's Cut and Fill Project team, which
included a specific Technical Committee site visit to review work underway.
Mike Prentis agreed to chair our Remuneration Committee and he is now ably
supported by Roger Davey and David Swan. The Nomination Committee continues to
comprise solely non-executive directors, so now includes Dr Mike Armitage.
Another key committee change was to invite Dr Gillian Davidson to join the
Audit Committee. Gillian brings experience from other board roles as well as
her expertise in sustainability. She is particularly focused on our risk
management processes and reporting on non-financial information as well.
Acknowledgements
I would like to thank the Board of Directors, our senior management team and
all of our employees for their dedication to our business during 2022. Your
efforts do not go unnoticed, and we very much appreciate your hard work. I
would like to extend my thanks to our stakeholders for their support.
NICK CLARKE
NON-EXECUTIVE CHAIRMAN
28 March 2023
CHIEF EXECUTIVE OFFICER'S STATEMENT
A strong performance in the face of global pressures
2022 has been a year of strong performance for CAML. Global inflationary
pressures which were exacerbated by the conflict in Ukraine served to
highlight the underlying strength of CAML's business and balance sheet, and we
are pleased with our 2022 results and to have made the final repayment in
August 2022 of the debt that we borrowed to acquire Sasa in 2017.
2022 Financial overview
Sasa produced 21,473 tonnes of zinc in concentrate and 27,354 tonnes of lead
in concentrate at a C1 zinc equivalent cash cost of production of $0.78 per
pound, reflecting in particular elevated electricity costs incurred during H2
2022.
Our Kounrad operations continued to perform well, and we increased our copper
cathode
production guidance to 13,500 - 14,000 tonnes during H2 2022 and ended the
year reporting production in excess of that at 14,254 tonnes. Kounrad's 2022
C1 copper cash cost of production remained very low by global standards at
$0.65 per pound, despite inflationary pressures.
Regardless of global challenges, the CAML business performed very well, due to
its inherent low-cost base and strong balance sheet. We reported gross revenue
of $232.2 million and an EBITDA of $131.6 million at an EBITDA margin of 57%
for 2022. We reported adjusted (to exclude a non-cash impairment charge,
arising following update to reserves & resources following LOM study as
well as inflationary pressures) EPS of 48.15 cents, higher than that reported
in 2021.
In August, we made our final repayment of the $187 million debt which we
secured to acquire Sasa less than five years before. CAML ended 2022 with cash
in the bank of $60.6 million.
The Group generated 2022 free cash flow of $89.7 million, enabling us to
recommend a 10
pence per share final dividend. This equates to a full-year dividend of 20
pence per share, which represents 47% of 2022 free cash flow.
Market performance
During 2022, the CAML share price traded within a range of £2.01 to £2.84,
ending the year at £2.48, which represents a 4.2% decrease on the 31 December
2021 price of £2.59. CAML outperformed the FTSE AIM All Share/Basic Resources
Index, which lost approximately 31.5% during 2022. The share price was
supported by solid base metal prices and by its low cost base. Since the
Company's IPO in September 2010, CAML's share price has significantly
outperformed the FTSE AIM All Share/Basic Resources Index, primarily due to
CAML's strong operational performance, low production costs and consistent
dividend payments.
Sustainability
We remain focused on safety and, while we were disappointed to report two LTIs
at Sasa during the year, this was an improvement on the four we recorded
during 2021. We recorded zero LTIs at Kounrad though, and therefore our 2022
total as a Group was two, with a LTIFR of 0.83, an improvement on our
performance in 2021. As ever, effective safety training and supervision for
our employees is a priority and is crucial to achieving an improving safety
record.
The strong financial performance we have reported underpins our business and
we place significant emphasis on ensuring that we are sustainable for all
stakeholders. To demonstrate our efforts and achievements, in this area, we
will soon be publishing our fourth Sustainability Report, our third to GRI
standards and our first to the new GRI 'Universal Standards'. These standards
are based on the concept of 'double materiality', looking at both the impact
of the Company on society and the environment, as well as the impact of the
material topics on the value of a company. Therefore, our updated materiality
assessment considers both materiality aspects and has informed reporting for
the Company's 2022 Sustainability Report.
In 2021, we began moving towards TCFD reporting. We shared our climate
strategy and our medium- and long-term goals that were the result of much
internal work undertaken and, in our 2021 annual and sustainability reporting,
we felt able to commit to a 50% reduction in our Kounrad and Sasa Scope 1 and
Scope 2 emissions by 2030 from a 2020 base, and to being net zero by 2050.
To understand our strategic resilience in terms of our climate risks and
opportunities, we undertook scenario analysis work during 2022. This analysis
has broadly validated our climate strategy and has helped us to identify our
risks and opportunities as well as key workstreams for us to focus on going
forwards. In 2023, we plan to collect data to enable us to report our Scope 3
emissions estimates in 2024 for the 2023 operating year.
Our sustainability strategy and practices continue to develop and, having
reviewed our material topics in 2022, we have also taken the opportunity to
consider and advance our approach to the UN sustainable development goals
('SDGs'). Following the review process, which involved mapping the underlying
targets to our activities and considering their alignment to our overall
strategy and approach, we have defined a two-tiered approach. We have
identified a total of eight SDGs (five primary and three supporting) which are
reflected in CAML's material topics.
WSP Golder delivered an Asset Retirement Obligation ('ARO') and site closure
plan report for Kounrad in 2022, which covers the responsible closure of the
leaching operations in the longer term.
At Sasa, consultants PrimePoint were appointed to further develop the Local
Environmental Action Plan ('LEAP') and Local Economic Development Plan
('LEDP') in conjunction with the local Municipality. During the year, several
workshops were organised between PrimePoint, the Municipality and the Sasa
Foundation to better assess the needs of the community and to identify
sustainable development opportunities for Makedonska Kamenica and adjacent
communities.
We have committed to reporting to the Global Industry Standard for Tailings
Management ('GISTM') for all tailings storage facilities ('TSFs') by the end
of H1 2024. A working group has been formed, comprising members of the
production, tailings, sustainability, and communications teams, overseen by
the Group Sustainability Director, to ensure all workstreams are effectively
covered.
To support employees during the current global inflationary environment, all
staff at both sites were given pay rises of at least 15% in local currencies.
During 2022, we spent a total of $0.3 million at Sasa and Kounrad supporting
the local
communities. This is a vital aspect of what we do in the areas close to our
operations and, as a result, we enjoy good relations with our neighbours, and
we believe we have brought some real, positive change. This year at Sasa funds
were allocated for the renovation of the local medical centre. At Kounrad, we
have financially supported a children's rehabilitation centre and provided
tuition fees for medical students from Balkhash.
Sasa
During H1 2022, significant permitting work was undertaken in preparation for
the construction phase of the Cut and Fill Project. The Environmental and
Social Impact Assessment ('ESIA') Study was completed and submitted to the
authorities. After the submission, a Public Hearing was held with
representatives from the Ministry of Environment and Physical Planning
('MoEPP'), the local municipality, including the Mayor of Makedonska Kamenica
and representatives from the local community. Feedback from the public hearing
was positive and Sasa achieved approval of the ESIA in August 2022.
In H2 2022, construction of the Paste Backfill Plant began, this is now well
underway and on track for completion in H1 2023. The Dry Stack Tailings part
of the project is scheduled for construction during H2 2023, and key long-lead
time item orders have been placed. We have made solid progress with over 1,000
metres of the Central Decline developed from both surface and underground
during the year.
Kounrad
During the year at Kounrad, leaching operations performed well, as did the
SXEW processing facilities which achieved availability of over 99%. We
continued to develop more of the Western Dumps for future leaching operations,
while focusing on maximising copper extraction in the Eastern Dumps.
Capital expenditure remained low at $2.5 million and included $0.1 million on
the commencement of construction activities related to the solar power plant
in Q4 2022. The 4.77MW unit will be constructed by Kounrad's engineering team
and is expected to provide between 16-18% of the site's electrical power
requirements.
Outlook
While we continue to foresee global challenges, we expect CAML to continue to
perform very well relatively.
Our production guidance for Sasa is 790,000 to 810,000 tonnes of ore, which
should lead to between 19,000 and 21,000 tonnes of zinc in concentrate and
between 27,000 and 29,000 tonnes of lead in concentrate. Our focus at Sasa
during 2023 will be finalising the Cut and Fill Project, which will see us
extract the maximum resources in a safer, more sustainable and efficient
manner. From a permitting perspective, the Paste Backfill and Dry Stack
Tailings aspects of the Cut and Fill Project are effectively viewed in North
Macedonia as an overarching yet much improved tailings storage solution for
the long term.
At Kounrad, we expect to produce between 13,000 and 14,000 tonnes of copper.
We also look forward to starting to generate our own renewable power once we
have completed construction of the solar power plant this year.
We expect 2023 Group capital expenditure of between $28 million and $30
million, of
which between $11 million and $13 million is expected to be committed to
sustaining capex. Total expected 2023 capex also includes approximately $5
million related to the Kounrad solar power plant. CAML expects Cut and Fill
Project capital expenditure in the order of $12 million in 2023.
Sasa has already generated EBITDA of $301.5 million during the last five years
under our ownership and we look forward to a long mine life continuing to
generate significant value from this asset until at least 2039.
We were active throughout 2022 in terms of business development, having
reviewed 40 opportunities, signed NDAs for 17 of them and conducted two site
visits.
This momentum has continued into 2023 and we remain in a very strong position
from
which to grow through acquisition, building the business for the future and
producing the base metals essential for modern living.
NIGEL ROBINSON
CHIEF EXECUTIVE OFFICER
28 March 2023
SUSTAINABILITY SUMMARY
Overview
Producing base metals, which are essential for modern living, profitably in a
safe and sustainable environment drives CAML's strategy and business model. In
turn, our sustainability strategy is built upon the five pillars shown on page
27. This means protecting the longevity of our operations and working towards
an enduring net positive outcome after the end of asset life by upholding
strong ethical practices throughout the Company and our supply chain,
prioritising the safety, health and development of our people, conducting
business in an environmentally responsible manner and positively contributing
to our communities and
countries of operation.
CAML's Board has accountability for risk management, including those relating
to the Company's impacts on the economy, environment and people. Our
Sustainability Committee has overall responsibility for overseeing these
impacts and its report can be found on page 79.
In our third year of reporting in line with Global Reporting Initiative
('GRI') standards, we have worked to further improve and develop disclosure.
We have continued to engage with stakeholders in 2022 and conducted a
comprehensive materiality process.
CAML's sustainability strategy and practices continue to develop, and we have
advanced our approach to contributing to the Sustainable Development Goals
('SDGs') in 2022. We recognise that all 17 SDGs are important and that many of
them are interconnected, however for the purposes of our sustainability
activities, we believe that it is helpful to prioritise and have therefore
identified these primary and supporting SDGs.
Delivering value through stewardship
At CAML, we set high standards that are crucial for the effective running of
our operations and the long-term sustainability of our business. With a robust
framework to promote ethical behaviour and strong corporate governance, we
believe we can contribute to a responsible and stable value chain and business
environment.
Leading from the top, the Board is responsible for setting the appropriate
culture to drive good governance and ethical behaviour throughout the Company.
We believe that a robust approach to human rights is vital to fulfilling our
corporate responsibilities, not only in respect of our employees but for the
workers along our supply chains and within the communities in which we
operate.
Maintaining health and safety
Safety has been identified both by the Company and our stakeholders as one of
our key material issues and is at the heart of everything we do. Our goal of
achieving zero harm in the workplace for all employees, contractors and
visitors, is laid out in the Company's Sustainability Policy and we have a
clear safety improvement target for the Group.
With fully integrated and robust health and safety management systems at both
sites, we aim to ensure the wellbeing of all personnel. We strive to implement
world-class health and safety practices across our operations. It is important
that both management and personnel are aware of their responsibilities and
accountability, and that they feel empowered to prioritise health and safety
in the workplace.
Wherever possible, we look to eliminate occupational health risks and believe
that a strong workforce, supported by the appropriate programmes to monitor
and promote health, is paramount in achieving high levels of productivity.
Focusing on our people
We recognise core labour and human rights principles and acknowledge workers'
freedom of association and the right for our employees to bargain collectively
within prescribed laws, communicating issues to management through designated
employee representatives.
We believe that by encouraging employee development, we can also foster
satisfaction and fulfilment amongst our employees. This involves a targeted
approach to training facilitated by comprehensive needs analysis. Succession
planning is a key focus for the Group in order to develop our leaders of
tomorrow.
CAML attaches importance on diversity, specifically when considering the
breadth of thought, approach and opinion that can be fostered by a diverse
group. By embracing diversity and fostering inclusion, we believe we can
unlock the power of all talent and work collaboratively and effectively.
Site-level diversity focus groups have been put in place to identify areas for
improvement and we have implemented long-term targets to improve levels of
gender diversity in the Group. We do not tolerate discrimination in any form
and have mechanisms in place to raise any issues.
Caring for the environment
CAML has robust and comprehensive environmental management systems which aim
to substantially reduce (if not avoid) the risk of any potential negative
environmental impacts from our operations.
We are mindful of our duty to manage and minimise waste responsibly and are
firmly committed to environmental and socially responsible tailings and dump
leach management, with safety at the centre of our approach.
We employ water management strategies and aim to minimise freshwater or makeup
usage wherever possible. Biodiversity, rehabilitation and closure programmes
are in place across our assets to avoid or mitigate any adverse effects of our
operations.
Tackling climate change is one of the most important challenges of our time
and we believe that every government, community, company and individual has a
vital role to play in reducing carbon emissions and safeguarding the future of
the planet. We recognise the growing importance of understanding and
addressing the impact of climate change on the environment and its potential
impact on the business. As such, we have adopted the Taskforce on Climate-
Related Financial Disclosures ('TCFD') framework.
In line with TCFD recommendations, we conducted a scenario planning exercise
in 2022 to increase our understanding of transition risks that may affect our
operations as well as extending our physical risk analysis to our supply
chain. In 2023 we will implement key recommended actions and will begin to
estimate our Scope 3 emissions in advance of reporting them in 2024.
Unlocking value for our communities
CAML aims to provide demonstrable benefits to stakeholders in our local
communities and host countries. By contributing to the economic security of
local workers, the provision of employment opportunities is one of the primary
ways the Company can provide a positive impact and CAML therefore prioritises
local hiring.
The Company is committed to providing philanthropic support, fostering
sustainable development, facilitating socioeconomic progress (specifically in
the field of community training and education) and helping the youth and most
vulnerable members of the community in line with our human rights commitments.
Our economically robust business that underpins our ability to generate
profits and dividends for our shareholders also ensures that our successes are
shared with other important stakeholders. This aligns with international
priorities such as the UN SDGs, in particular SDG 8 Decent Work and Economic
Growth. We strongly believe that by creating shared value we are ensuring the
long term sustainability of our operations and acting as a good corporate
citizen. CAML is proud of the value that it brings to its host countries, with
taxes of $293.6 million paid to the Governments of North Macedonia and
Kazakhstan during our ownership.
SASA
North Macedonia
In 2022, Sasa mined 806,069 tonnes of ore and processed 806,653 tonnes of ore.
The average head grades for the year were 3.15% zinc and 3.63% lead and the
average 2022 metallurgical recoveries were 84.6% for zinc and 93.4% for lead.
Sasa produces a zinc concentrate and a separate lead concentrate. Total
production for 2022 was 42,824 tonnes of zinc concentrate at an average grade
of 50.1% and 38,439 tonnes of lead concentrate at an average grade of 71.2%.
Sasa typically receives from smelters approximately 84% of the value of its
zinc in concentrate and approximately 95% of the value of its lead in
concentrate. Accordingly, total 2022 payable sales were 17,862 tonnes of zinc
in concentrate and 25,689 tonnes of lead in concentrate.
During 2022, Sasa sold 316,757 ounces of payable silver to Osisko Gold
Royalties in accordance with its streaming agreement.
Sasa Production Statistics
Units 2022 2021 2020
Ore mined t 806,069 818,609 826,421
Plant feed t 806,653 830,709 820,215
Zinc grade % 3.15 3.14 3.37
Zinc recovery % 84.6 84.9 86.1
Lead grade % 3.63 3.52 3.85
Lead recovery % 93.4 93.1 94.3
Zinc concentrate t (dry) 42,824 44,383 47,583
- Grade % 50.1 49.9 50.0
- Contained zinc t 21,473 22,167 23,815
Lead concentrate t (dry) 38,439 37,893 41,289
- Grade % 71.2 71.8 72.0
- Contained lead t 27,354 27,202 29,742
Health and Safety
At Sasa, there were two LTIs, two medical treatment injuries ('MTIs') and one
restricted
work case ('RWC') during the year.
Mining
A total of 806,069 tonnes of ore were mined using the sub-level caving method
during the year from the 990 metre and 910 metre working areas. The ore from
the underground operations is hoisted via the Golema Reka shaft to surface
(c.73%) and the remainder is trucked to surface via the existing XIVb decline
using a fleet of 20 tonne Epiroc trucks.
The average combined grade of the ore mined was 6.78% zinc and lead,
approximately 2% higher than 2021.
Ore development in the two working areas totalled 3,114 metres, which was
approximately 14% more than last year and involved accessing additional
sub-levels below the 910 metre level during H2 2022. Waste development for the
year totalled 2,378 metres, approximately 9% above last year for approximately
92,000 tonnes of waste, generated from internal ramp access and crosscuts to
the ore body, raise development and the development of the Central Decline.
The mine produced a total of 898,069 tonnes of ore and waste during the year,
approximately 1% more than last year.
Maintenance
A computerised maintenance management system for surface and underground
equipment is in the process of being commissioned. Underground communications
were improved with the introduction of underground Wifi, which will be
completed by
the end of H1 2023.
During the year, certain equipment was purchased to increase efficiency:
· An Epiroc Bolting Drill Rig Boltec S for the safe and efficient
installation of roof bolts.
· Two Paus utility units fitted with interchangeable platforms and
hydraulic hammers for rock scaling.
· A Putzmeister SPM 4210 wet shotcrete unit and mixer to enable
in-cycle support, replacing the handheld shotcrete units previously used
underground.
· A Manitou MHT-X790 Mining for installation of underground
reticulation system.
· A Paus Bus (Minca).
· A CAT rock crusher.
Processing
Sasa processed 806,653 tonnes of ore during the year, a fall of approximately
3% versus
2021, and the plant had an overall availability of 95% - an improvement of 2%
on 2021.
In addition to the planned maintenance works completed during the year,
automated oil lubrication systems and flow meters were installed and
commissioned on all of the mills. In November 2022, the reconfiguration of the
tertiary crusher and feed arrangements were completed and commissioned. The
tailings storage facility systems at Sasa ran to a high standard and without
incident during the year, managed by a designated tailings management team.
Knight Piésold audited the TSFs in H2 2022 and CAML appointed an experienced
Independent Technical Reviewer, who also reviewed the management of Sasa's
TSFs. Sasa is currently actioning the recommendations from both reports and
working to conformance with GISTM in H1 2024.
During the year, construction of the TSF4 waste rock toe continued with the
placement of 37,000 m3 of waste rock from the Sasa underground mine. A new
bridge transporting tailings to TSF4 from the processing plant was constructed
over the Soborski Dol River. A seismic monitoring system and piezometer
sensors were installed as part of an overall drive to automate TSF monitoring
systems and commissioning is underway.
The rehabilitation of the TSF3.2 facility continued throughout the year with
the placement of waste rock from the Sasa underground mine.
Drilling
A total of 6,670 metres of exploitation drilling was completed during the year
on the two working areas, the 910 metre and 990 metre levels, to provide
additional information on the
grade and thickness of the three orebodies on the sub-levels.
A total of 5,760 metres of exploration drilling was completed below the 830+14
metre level to improve the geological understanding of the mineralisation at
depth.
A total of 2,950 metres of exploration drilling in three holes was completed
from surface to test the geology at depth below the 700 metre level. One hole
intersected three zones of mineralisation down to at least the 580 metre level
proving the extension of the mineralisation at depth to the south-west and
adding to the Inferred Mineral Resources. The second and third hole proved the
limits of the north-western extents of the mineralisation.
There was no exploration drilling completed at Kozja Reka or Golema Reka
during the year.
A comprehensive dewatering programme was also completed during the year with
over 250 metres of drainage holes drilled.
2023 Production Guidance
At Sasa, 2023 will be a year of transition from the current sub-level caving
mining method to a paste fill mining approach. Therefore, CAML maintains its
ore mined guidance year on year of 790,000 to 810,000 tonnes. The Company
expects some adjustment in the split of its metal products this year, and
therefore provides production guidance of 19,000 to 21,000 tonnes of zinc in
concentrate and 27,000 to 29,000 tonnes of lead in concentrate.
CUT AND FILL PROJECT
The transition to using paste fill at Sasa will create a safer and sustainable
underground mining operation for the long term. The Cut and Fill Project
comprises the construction of a Paste Backfill Plant and associated
reticulation, development of a new Central Decline and the Dry Stack Tailings
Plant and associated landform.
Paste Backfill Plant
Following the ESIA approval for the Paste Backfill Plant in Q3 2022, a
contract was signed with local construction company, Activa, and excavation
and civil works began shortly after. The construction of the steel structure
began during Q4 2022 with 95% of the structural elements now complete.
Also, during Q4 2022, internal works started with the installation of the
continuous mixer. All equipment for the Paste Backfill Plant has been ordered
and any outstanding items are due for delivery in H1 2023, and the overall
project remains on track.
The underground reticulation required to transport the paste backfill material
to the voids underground consists of two phases and connects the surface Paste
Backfill Plant with the working areas on 910 and 990 metre levels, via the
XIVb and the Central Decline accesses.
In Q3 2022, a designated and trained team commenced the underground
installation of 2,109 metres of pipes and associated infrastructure (including
457 metres in the Central Decline). This project was completed during Q4 2022.
The construction of the services culvert from the processing plant to the
Paste Backfill Plant
started during Q3 2022. Concrete and steel works have been completed,
including the bridge over the Kozja Reka River, all necessary equipment, pipes
and valves were delivered to site in Q4 2022 for this aspect of the project,
and the installation of the pipes and electrical cable are on track to be
completed during H1 2023.
Central Decline
The development of the Central Decline continues to progress well, with 1,051
metres developed during 2022, and 1,554 metres in total, and is on schedule to
complete phase 1 to connect surface with the 910 metre production level by the
end of H1 2023.
The Central Decline is fully serviced with power, stage pumping and cuddies
mined at c. 200 metre intervals. In Q4 2022, a surface 75kW fan was installed
and commissioned, producing up to 24m3 per second for ventilation.
Dry Stack Tailings Plant
Following an ongoing review of the dry stack tailings plant and landform
conducted by Knight Piésold, as well as local experts, Geing and Atrium and
local academic Professors, a number of enhancements have been included in the
Dry Stack Tailings project. The review will be completed in H1 2023, and
construction is scheduled to start in H2 2023 and be completed during that
period. Orders for longlead items such as the Metso-Outotec filter press have
been placed.
Tailings Management
A key benefit to the Cut and Fill Project is the improved storage of tailings.
Currently, all tailings generated from Sasa's processing plant are stored in
TSF4. During the life of the mine, tailings will be stored in the following
three locations:
· Backfill: 34% of the flotation tailings will be used to produce paste
backfill
· Dry Stack Tailings: Sasa aims to introduce dry stack storage
technology for 35% of the flotation tailings
· TSF4: Approximately 31% of tailings will be stored in the existing
storage facility using the existing methodology.
· Investigation is underway to identify additional voids to store
tailings as paste backfill underground to allow for any extensions to Sasa's
life of mine.
SASA MINERAL RESOURCES, ORE RESERVES AND LIFE OF MINE ('LOM')
During Q4 2021, CAML bolstered its technical team, in particular with the
recruitment of a
new Group Geologist and Group Technical Services Director. During 2022, the
technical services team revisited Sasa's Mineral Resource Estimate ('MRE') for
its Svinja Reka deposit, as well as its Ore Reserves.
The updated work took into account recent additional drilling at depth and was
completed using new modelling software as well as incorporating the net
smelter return ('NSR') cut-off method for polymetallic orebodies instead of
the cut-off grade method previously applied. Sasa's MRE and Ore Reserves are
shown in the following tables.
Total Svinja Reka Mineral Resources have decreased to 12.3Mt at 4.2% Pb and
2.9% Zn compared to 13.5Mt at 4.6% Pb and 3.0% Zn reported as of 31 December
2021. This is due to 2022 mining depletion and an adjustment of approximately
0.5Mt due to geological reinterpretation based on the results of the recent
exploration drilling.
The Svinja Reka Ore Reserve has decreased to 8.8Mt at 3.9% Pb and 2.6% Zn from
9.5Mt at 4.1% Pb and 2.8% Zn reported as of 31 December 2021. The most
material factors in this adjustment are related to 2022 mining depletion,
resource model changes, the inclusion of some deeper Indicated Resources not
previously included and mine design changes, including the use of Long Hole
Stoping with paste fill as an additional mining method. The introduction of
Long Hole Stoping will support a reduced minimum mining width and reduced
dilution as well as enable an increased sub-level height, reducing development
requirements and improving overall mine productivities.
Following review of the Mineral Resources and Ore Reserves, detailed mine
planning work was undertaken and CAML now plans for a maximum production from
Svinja Reka of 830,000 tonnes per year, reduced from the 900,000 tonnes per
year previously anticipated for the longer term. As a result, Sasa's expected
LoM has increased to 2039 from 2037.
Approximately 10,600 metres of exploration drilling is planned at Sasa for
2023, which will focus on underground drilling of the Kozja Reka deposit from
the Central Decline to explore for down dip extensions of the previously mined
mineralisation. In addition, surface drilling into the Golema Reka deposit is
planned, as well as down dip exploration and infill drilling at Svinja Reka.
Mineral resource estimate for Svinja Reka and Golema Reka
Sasa's technical services team has updated the Mineral Resource Estimate
('MRE') for the Svinja Reka deposit as of 31 December 2022. The Golema Reka
MRE was updated on 1 January 2020.
Classification Deposit Grades Contained metal
Mt Pb (%) Zn (%) Ag(g/t) Pb (kt) Zn (kt) Ag(koz)
Indicated Mineral Resources Svinja Reka 10.3 4.5 3.0 31.6 459 306 10,499
Golema Reka 1.3 3.8 1.6 13.0 48 20 528
Total Indicated 11.6 4.4 2.8 29.5 509 327 11,042
Inferred Mineral Resources Svinja Reka 2.0 2.9 2.4 21.6 56 47 1,354
Golema Reka 6.3 3.5 1.4 12.0 217 86 2,444
Total Inferred 8.3 3.4 1.6 14.3 273 133 3,798
Total Indicated and Inferred Resources 19.9 4.0 2.3 23.2 782 460 14,840
Notes
· Mineral Resources have an effective date of 31
December 2022.
· The Competent Person for the declaration of Mineral
Resources is Graham Greenway, BSc.Honours (Geology), PGeo. Graham Greenway,
CAML's Group Geologist, is a Practising Registrant of the Professional
Geoscientists of Ontario and has over 34 years' experience in the exploration,
definition and mining of precious and base metal Mineral Resources, and has
sufficient experience relevant to the style of mineralisation and type of
deposit under consideration, and to the type of activity which he is
undertaking to qualify as a 'Competent Person' as defined by JORC and as
required by the June 2009 Edition of the AIM Note for Mining and Oil & Gas
Companies. He has reviewed, and consents to, the inclusion in the Annual
Report of the matters based on their information in the form and context in
which it appears and confirms that this information is accurate and not false
or misleading.
· Mineral Resources are reported inclusive of Ore
Reserves.
· The Svinja Reka Mineral Resource is reported based on
a NSR cut-off of $46/t for Sub-Level Caving and $53/t for Cut and Fill and
Long Hole Stoping and are based on metal price assumptions of $2,755/t for
zinc, $2,290/t for lead and $22/oz for silver.
· The Golem Reka Mineral Resource is reported above a
cut-off grade of 2% combined lead and zinc.
· Mineral Resources are reported as undiluted. No
mining recovery has been applied in the Statement.
· Tonnages are reported in metric units, grades in
percent (%) or grams per tonne (g/t), and the contained metal in metric units
or ounces. Tonnages, grades, and contained metal totals are rounded
appropriately.
· Rounding may result in apparent summation differences
between tonnes, grade and contained metal content.
Svinja Reka Ore Reserve Statement
The following Ore Reserve Statement has been prepared by Sasa's technical
services team based on a Life of Mine ('LoM') plan that includes a transition
from the Sub-Level Caving mining method to Cut and Fill as well as Long Hole
Stoping with paste backfill. The Ore Reserve Statement considers the updated
Indicated Resources constrained within a practical and economic mine design
only. NSR cut-off values and design modifying factors for each mining method
were applied as follows:
· Sub-Level Caving,
o NSR Cut-Off Value = $46/t
o Planned Dilution 25%
o Mining Recovery 85%
· Cut and Fill
o NSR Cut-Off Value = $53/t
o Planned Dilution 5%
o Mining Recovery 98%
· Long Hole Stoping
o NSR Cut-Off Value = $53/t
o Planned Dilution 17.4%
o Mining Recovery 90%
· Ore Development
o NSR Cut-Off Value = $37/t
o Planned Dilution 5%
o Mining Recovery 98%
Svinja Reka Mt Grades Contained metal
Pb (%) Zn (%) Ag(g/t) Pb (kt) Zn (kt) Ag(koz)
Probable 8.8 3.9 2.6 27.0 346 232 7,662
Total 8.8 3.9 2.6 27.0 346 232 7,662
Notes
· Ore Reserves have an effective date of 31 December 2022.
· The Competent Person who has reviewed the Ore Reserves is
Scott Yelland, C. Eng, FIMMM, MSc, who is a full-time employee and Chief
Operating Officer of CAML. He is a mining engineer with over 38 years'
experience in the mining and metals industry, including operational experience
in underground zinc and lead mines, and as such qualifies as a Competent
Person as defined in the JORC Code (2012).
· The Ore Reserve is reported using a NSR cut-off of $46/t
for Sub-Level Caving, $53/t for Cut and Fill and Long Hole Stoping and $37/t
for Ore Development drives that are required to establish stope access and are
based on metal price assumptions of $2,395/t for zinc, $1,992/t for lead and
$19.3/oz for silver.
· Rounding may result in apparent summation differences
between tonnes, grade and contained metal content.
· The Mineral Resources and Ore Reserves are reported in
accordance with the guidelines of the 2012 Edition of the Australasian Code
for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the
'JORC Code').
KOUNRAD
Kazakhstan
The Kounrad team was proud to exceed its production target during 2022. Most
importantly, this copper was produced safely and, to 31 December 2022, there
have been 1,689 days since the last LTI at Kounrad.
2022 Cathode Production
The SX-EW plant produced a record 14,254 tonnes of copper cathode during 2022,
a slight increase from the previous year of 14,041 tonnes. The total Kounrad
copper production since operations commenced in April 2012 is now 138,395
tonnes, equating to 55% of the forecast life of operation extractable tonnage.
During 2022, copper was leached from the Eastern and Western Dumps, with both
areas performing well.
Health and Safety
There were no LTIs, RWCs or MTIs at Kounrad during 2022. There have now been
1,689 days since the last LTI at Kounrad.
Leaching Operations
Both the Eastern and Western Dumps were simultaneously leached during 2022,
with the production split being 18% and 82% respectively.
In the Eastern Dumps, the team focused on irrigating previously leached blocks
in order to maximise the recovery of copper from the resource. This technique
was implemented on various blocks that had been allowed to rest for periods
of, in some cases, almost two years. During this rest period, bacterial and
chemical activity continued to degrade and solubilise copper mineralisation,
especially the more leach resistant species such as chalcopyrite. In addition,
with the purchase of a new bulldozer, the summer period was spent pushing and
levelling side walls along Dump 7. This new area of exposed material will be
leached during 2023. Adopting these approaches resulted in the typical
pregnant leach solution ('PLS') grade pick-up averaging about 0.7 grammes per
litre ('gpl'), similar to that achieved in 2021. This was somewhat better than
anticipated due to leaching the fresher, side slope material and resulted in
extracted copper of around 2,625 tonnes from this area.
This takes the total quantity of copper recovered from the Eastern Dumps,
since operations commenced, to over 82,000 tonnes, slightly higher than the
quantity forecast at the time of the CAML Initial Public Offering ('IPO') in
2010. Typically, the daily average area under irrigation at the Eastern Dumps
during the year was 18.5 hectares, noting that winter leaching is restricted
to an area of around 12 hectares.
The project to relocate approximately 180,000 cubic metres of material,
containing approximately 2,000 tonnes of copper close to the Kazakhmys railway
line, was completed by the end of April 2022 using a local contractor. A
cut-back leaving a 30-metre distance to the railway line from the dump toe has
now been completed, through which a lined trench extension of 876 metres has
been installed. This newly exposed area of fresh, previously unleached
material is scheduled for irrigation during 2023, although depending upon
overall outputs this might be deferred until 2024.
The continued successful and economic generation of copper from the Eastern
Dumps is anticipated to continue into 2025.
Kounrad Copper Production
At the Western Dumps, the focus of irrigation remained on parts of Dumps 16,
21, 22 and 1A, from which 11,629 tonnes of copper were recovered, contributing
approximately 82% of the total Kounrad copper production. The average daily
area under irrigation on the Western Dumps increased to 38.2 hectares (37.5
hectares in 2021) of both new and previously leached material. The volume of
raffinate pumped around the site averaged 1,228 cubic metres per hour
('m3/hr'). As in previous summer periods, a proportion of the off-flow
solutions from the Eastern Dumps were recycled across to the Western Dumps
with the aim of maintaining broadly stable PLS grades to the solvent
extraction ('SX') plant.
The second phase of the Intermediate Leaching System ('ILS') was completed in
mid-July and at the beginning of August was commissioned and put into test
operation. All aspects of the engineering design parameters were validated,
and the test was operated with a flow rate of 340m3/hr for six weeks until
mid-September, when it was stopped to commence winter leaching switch-over
preparations. Whilst the test run was quite short indications of additional
pick-up from leaching old blocks appeared positive, with a typical gain of
around 0.7 grams per litre ('gpl') achieved during this trial period. However,
the very positive leaching performance of the dumps, which continues to
generate the required copper transfer to the SX-EW facility, confirms that the
ILS circuit will probably not be required as an integral component of the
circuit until 2025 or so. During the intervening period we are undertaking
additional column tests, replicating the ILS system, in order to better
advance our understanding of optimum parameters for when it is utilised more
permanently. The first such samples have been collected, prepared, and loaded
to columns with testing scheduled to start in January 2023.
Application rates of solution to the dumps were maintained at a level of 2.32
litres per square metre per hour ('l/m2/hr') throughout the year, slightly
higher than in 2021.
During the course of the year, 820 metres of the extended interceptor trench
around Dump 21 were lined with HDPE and are ready for operations in 2023.
Additionally, the extension of the trench encircling Dump 16 by 890 metres,
between blocks 22 and 32 was fully excavated but the HDPE lining will only be
installed as leaching of the relevant side blocks commences.
Our two dozers continued with their work of significant levelling and shaping
earthworks, primarily on the Western Dumps. At the Eastern Dumps, dozer work
was relatively limited to the preparation of unleached side slope and road
access areas.
The new winter measurement and control systems, which were designed and
prepared in late 2021, operated extremely well during the winter period
through to March 2022. They allowed excellent control of dripper end
temperatures and resulted in an optimised consumption of coal by the three
Western Dump area boilers, with a saving of around c.15% compared to the
previous winter.
SX-EW Plant
The SX-EW plant continued to operate efficiently during 2022 and the overall
operational availability throughout the year was 99.3%. This was 0.1% below
that of 2021, primarily due to a planned increase in maintenance schedules to
reflect the needs of the process equipment which has been in almost permanent
operation for 10 years.
With the average Western Dumps copper grade of around 0.1% and largely fully
leached Eastern Dump materials, the average PLS grade for the year was
2.25gpl, approximately 0.1gpl lower than in 2021. Solution flow rates through
the SX averaged 1,018m3/hr, with summer rates averaging approximately
1,150m3/hr. During the year, each of the four extract settler units were taken
off-line to facilitate inspection and any necessary repairs and, after 10
years of operation, their condition was found to be excellent.
At the start of Q2 2022, 960 anodes were renewed in the EW2 building, these
being the first replacements in that plating unit for seven years. As a
consequence, both EW sections are fitted with excellent quality anodes and no
replacement orders are expected to be made until around 2024. In respect of
cathodes a local factory has been identified that can refurbish them, without
the requirement to send them to either Chile or Germany. This has obvious cost
benefits in terms of shipment and other savings, and of course means that
turnaround of the plates is faster and therefore more flexible.
During the year, increased focus on reagent consumptions and controls,
particularly imported organic reagents, was made by the operations team with
success. Additionally, due to supply chain disruptions, it was decided to
increase on-site storage of the Escaid reagent and, by December, an additional
two tanks with storage capacity of 180m3 were installed and filled.
The focus for the operations team has been on continued safe, efficient plant
operations and the tight control of all operating costs. The management
changes introduced in Q3 2021 are now fully embedded and working extremely
well under the guidance and control of the site based Technical Director.
Copper Sales
Throughout the year, the quality of CAML's copper cathode product has once
again been maintained at high levels both chemically and visually and there
have been no negative quality claims. Regular in-house and independent
metallurgical analyses have consistently reported 2022 copper purity of around
99.998%. The Company continues to sell the majority of copper production
through its off take arrangements with Traxys.
2022 Production Guidance
The 2023 guidance for Kounrad's copper cathode production is between 13,000
and 14,000 tonnes.
Solar Power Project
Following detailed engineering works by TGS, a Kazakh engineering firm
specialising in renewable energy installations, the CAML Board approved the
construction of a 4.77MW solar panel facility in 2022.
The facility has an estimated capital cost of up to $5 million and is forecast
to generate approximately 9.2 million kWh per year or around 16 to 18% of
annual power consumption. This is expected to reduce Kounrad's Scope 1 and 2
GHG emissions by c.10% versus 2020.
Upon receipt of all necessary regulatory approvals, the levelling earthworks
on the 10-hectare site were undertaken during Q4 2022 and were fully completed
by year end. Additionally, by late December the orders were placed for the two
long-lead components of the project, which are 8,850 solar panels and 24 DC-AC
inverters.
The project will be undertaken by our inhouse engineering and procurement
teams, supported by TGS especially during the commissioning phase. Provided
there are no issues with supply chain delivery, the forecast completion and
commissioning date is scheduled for H2 2023.
FINANCIAL REVIEW
Strong Balance Sheet
CAML reports a 2022 Group EBITDA of $131.6 million. This result was achieved
despite global inflationary pressures resulting in some cost increases which
were mitigated by weaker operating currencies. CAML has now completely repaid
the $187.0 million debt which was secured to acquire Sasa. These repayments
have been made while we remained consistently among the sector leading
dividend payers, delivered value for all our stakeholders, and invested in our
operations.
2022 MARKET OVERVIEW
Kazakhstan
According to the National Bank of Kazakhstan, where CAML produces its copper,
Kazakhstan's 2022 GDP expanded by 3.2%, and official inflation was 20.3%.
Copper
During 2022 copper prices have been hit by two significant macro headwinds:
China's Zero Covid policy and the US's monetary policy tightening. While
China's Zero Covid policy has resulted in a marked slowdown in domestic
economic growth and weaker end-user consumption in China, the normalisation of
the US monetary policy tightening has led to a firmer dollar, tighter
financial conditions and weaker economic growth globally, which has also
undermined copper consumption and prices. Copper prices rebounded in December
2022 as a result of China's reopening plans, weakening dollar and low visible
copper inventories.
During the year the increase in demand of 3.0% has slightly lagged behind the
increase in supply of refined copper production of 3.5%. The International
Copper Study Group ('ICSG') indicated a 2022 global refined copper deficit of
376,000 tonnes.
North Macedonia
According to the National Bank of North Macedonia, North Macedonia's 2022 GDP
is expected to have expanded by 2.1%, with inflation of 14.2%.
Zinc
The zinc price in 2022 remained robust but volatile, averaging $3,486 per
tonne. The factors affecting the zinc (and lead) markets and balances were
largely macroeconomic. The rise in energy costs due to the conflict in Ukraine
interrupted trade patterns and hit the energy-intensive metal refining
industry in Europe. The proportion of energy costs in smelting is estimated to
have risen from 55% pre-pandemic to 72% in 2022, hence smelters' closure.
In 2022 zinc mine production remained similar to 2021 at approximately 13
million tonnes, but zinc smelting saw a 4% drop. This is equivalent to 500,000
tonnes of metal and approximately c.50% of the drop was at European smelters.
The zinc concentrate market moved from a deficit in the first half with a
tight spot market, to becoming relatively weak in Q4 2022 as concentrate
supply exceeded demand.
The 2022 Benchmark treatment charges ('TCs') increased from $159 to $230 per
dry metric tonne ('dmt'), while spot concentrate TCs reached $260-300/dmt by
year end.
Zinc demand, in contrast, flattened during the first half 2022 and further
weakened in the second half. The main reasons were China (representing c.50%
of global zinc demand) maintaining its Zero Covid policy until late in the
year and fears of a recession in Europe, the region most affected by the
conflict in Ukraine. Smelter cutbacks meant that global metal inventories
fell, particularly on the LME. Metal premiums charged by smelters reached
historical highs in Q4 2022, which enabled some smelter capacity to reopen,
but not enough to dampen the strong metal price.
The global refined zinc market recorded a further sizable monthly deficit in
December 2022, bringing the overall deficit last year to 306,100 tonnes,
according to initial estimates from the International Lead & Zinc Study
Group (ILZSG), broadly aligned with the 291,000-tonne deficit implied by our
supply-demand model.
Lead
The global refined lead market recorded a further modest monthly deficit
totaling 6,100 tonnes in December, according to initial estimates from the
International Lead & Zinc Study Group (ILZSG). Global lead production was
less affected by energy price rises and demand continued to grow (+1.3% vs
2021). The overall lead market is driven by the availability of scrap, which
comprises c.65% of the global market. This continued to be tight. Lead mine
production in 2022 fell by c.2.3% which helped to keep the concentrate market
tight throughout the year, in spite of the fact that one large European
smelter remained closed (Stolberg). At the end of 2022 the market was becoming
stronger again as spot TCs fell.
Performance Overview
Group profit before tax from continuing operations decreased by 50% to $54.6
million (2021: $109.3 million). This result reflects a noncash impairment
charge of $55.1 million related to the Sasa operation as explained below.
There was a foreign exchange gain of $6.8 million (2021: $1.2 million) and
reduced finance costs of $2.1 million (2021: $3.9 million) due to the
repayment of the corporate debt during the year. Recent global inflation has
adversely affected several key costs such as electricity and salaries which
have increased the Group cost base.
CAML's 2022 gross revenue was $232.2 million (2021: $235.2 million). In H1
2022, record interim financial results were reported, aided by the strength in
the metal prices and strong markets. During H2 2022, market conditions
worsened as metal prices generally fell and inflation affected operations, not
least the electricity prices in North Macedonia.
The Group generated 2022 EBITDA of $131.6 million (2021: $141.5 million), and
an EBITDA margin of 57% (2021: 60%) which, despite the global inflationary
pressures, reflects the Group's ability to maintain relatively low costs
across the operations.
Adjusted earnings per share ('EPS') from continuing operations was higher than
the previous year at 48.15 cents (2021: 47.69 cents). EPS from continuing
operations, including the impairment charge, was 19.10 cents (2021: 47.69
cents). See note 18 to the financial statements for more information.
CAML generated free cash flow of $89.7 million (2021: $103.8 million),
allowing the Board to propose a final 10 pence dividend within policy. The
Group fully repaid the corporate debt during the year. As at 31 December 2022,
drawn overdraft facilities totalled $1.4 million (2021: $9.6 million)
resulting in net cash of $58.9 million (2021: $22.7 million).
Sasa's 2022 EBITDA was $56.4 million (2021: $57.5 million), with a margin of
52% (2021: 56%). The average zinc price received increased by 11% and the
average lead price received decreased by 4% compared to the prior year.
Treatment charges reduced from April 2022 onwards. Sasa faced some cost
increases due to inflationary pressures including an increase in electricity
costs. The impact of cost increases has been reduced by a favourable movement
in the North Macedonian Denar exchange rate to the US Dollar.
Kounrad's 2022 EBITDA was $94.9 million (2021: $106.0 million), with a margin
of 77% (2021: 80%). Kounrad's gross revenue decreased due to the average
copper price received decreasing by 8%. Kounrad's EBITDA reflects an increase
in costs due to employee pay rises. The impact of cost increases has been
somewhat mitigated by a favourable movement in the Kazakhstan Tenge exchange
rate to the US Dollar.
INCOME STATEMENT
Revenue
CAML generated 2022 gross revenue of $232.2 million (2021: $235.2 million),
which is reported after deduction of treatment charges, but before deductions
including offtake buyers' fees and silver purchases for the Sasa silver
stream. Net revenue after these deductions was $220.9 million (2021: $223.4
million).
Sasa
Overall, Sasa generated 2022 gross revenue of $108.5 million (2021: $103.1
million). A total of 17,862 tonnes (2021: 18,586 tonnes) of payable zinc in
concentrate and 26,320 tonnes (2021: 25,245 tonnes) of payable lead in
concentrate were sold during 2022. The payable lead in concentrate sales is
631 tonnes higher than that disclosed in the Operational Review as the final
lead concentrate shipment of the prior year was delayed until January 2022
and, under the Free on Board ('FOB') terms, this revenue was recognised in the
2022 financial year.
The zinc price received increased by 11% to an average of $3,358 per tonne
(2021: $3,036 per tonne) and, for lead, the price decreased by 4% to an
average of $2,113 per tonne (2021: $2,209 per tonne), leading to an overall
increase in gross revenue generated from the mine.
Treatment charges during the year reduced to $16.2 million (2021: $18.8
million) due to improved negotiated terms for both zinc and lead. Lead
treatment charges are expected to decrease in 2023 whilst zinc treatment
charges are expected to increase as a result of the higher availability of
zinc concentrate.
During 2022, the offtake buyers' fee for Sasa was $1.2 million (2021: $1.2
million). Zinc and lead concentrate sales agreements have been extended with
Traxys on a one year rolling basis for 100% of Sasa production. Sasa has an
existing silver streaming agreement with Osisko Gold Royalties whereby Sasa
receives approximately $6 per ounce for its silver production for the life of
the mine.
Kounrad
A total of 14,192 tonnes (2021: 13,983 tonnes) of copper cathode from Kounrad
were sold as part of the Company's offtake arrangement with Traxys. The
offtake arrangement with Traxys has been extended from 1 January 2023 on a
one-year rolling basis. The commitment is for a minimum of 95% of Kounrad's
annual production. A further 150 tonnes (2021: 68 tonnes) were sold locally.
Total Kounrad copper sales were 14,342 tonnes (2021: 14,051 tonnes).
Gross revenue decreased due to the copper price received decreasing by 8% to
an average of $8,625 per tonne (2021: $9,384 per tonne). This generated gross
revenue for Kounrad of $123.7 million (2021: $132.0 million). During 2022, the
offtaker's fee for Kounrad increased to $3.1 million (2021: $2.6 million) due
to higher transportation costs as a result of the conflict in Ukraine.
Cost of sales
The Group cost of sales for the year was $87.3 million (2021: $80.5 million).
This includes
depreciation and amortisation charges of $26.7 million (2021: $28.9 million).
Global macro-economic conditions led to an increase in key production cost
components such as electricity and salaries. The impact of these cost
increases has been somewhat mitigated by favourable foreign exchange movements
during the year. The Company continues to focus on factors such as disciplined
capital investments, working capital initiatives and other cost control
measures.
Sasa
Sasa's cost of sales for the year was 10% higher than the previous year at
$60.8 million (2021: $55.4 million). During the year, Sasa faced some cost
increases due to inflationary pressures including an increase in electricity
costs of $5.5 million, as spot energy prices increased throughout 2022 during
which time Sasa had a largely fixed price contract that expired in June. The
impact of these overall cost increases was mitigated by a weakening in the
North Macedonian Denar. The Denar, which is pegged to the Euro, weakened by
12% to an average of 58.36 against the US Dollar versus a 2021 average of
52.06.
2022 depreciation decreased by $2.0 million versus 2021, due primarily to the
weakening of the local currency.
2022 royalties were $2.9 million (2021: $2.8 million). This tax is calculated
at the rate of 2% (2021: 2%) on the value of metal recovered during the year.
Kounrad
Kounrad's 2022 cost of sales was $26.5 million (2021: $25.1 million).
There was an increase of $1.7 million due to employee pay rises during the
year. There was a $0.2 million decrease in reagent costs due to temporary
increased consumption in the prior year which occurred due to a metallurgical
adjustment arising from solely leaching the Western Dumps during the prior
winter period. The depreciation and amortisation charges during the year
reduced to $3.7 million (2021: $3.9 million).
Mineral Extraction Tax ('MET') is a royalty charged by the Kazakhstan
authorities at the rate of 5.7% (2021: 5.7%) on the value of metal recovered
during the year. MET for the year was $7.2 million (2021: $7.3 million). From
1 January 2023, the MET rate increased to 8.55%.
The impact of the above cost increases was mitigated by a 8% weakening in the
Kazakhstan Tenge. The Tenge weakened to an average of 460 against the US
Dollar versus a 2021 average of 426.
C1 cash cost of production
C1 cash cost of production is a standard metric used in the mining industry to
allow comparison across the sector. In line with the industry standard, CAML
calculates C1 cash cost by including all direct costs of production at Kounrad
and Sasa (reagents, power, production labour and materials, as well as
realisation charges such as freight and treatment charges), in addition to
local administrative expenses. Royalties, depreciation, and amortisation
charges are excluded from C1 cash cost.
Sasa
Sasa's on-site operating costs increased by 24% to $44.8 million (2021: $36.1
million). The on-site unit cost increased by 26% to $55.6 per tonne (2021:
$44.1 per tonne) due to the higher costs explained above and a 2% reduction in
tonnes of ore mined in 2022 versus 2021.
Sasa's total C1 cash cost base, including realisation costs, increased to
$64.3 million (2021: $58.2 million), and Sasa's C1 zinc equivalent cash cost
of production increased to $0.78 per pound (2021: $0.63 per pound). The $0.15
per pound increase in the C1 calculation was primarily due to the decreased
production volumes of zinc and higher electricity costs.
Kounrad
Kounrad's 2022 C1 cash cost of copper production was $0.65 per pound (2021:
$0.57 per pound) which remains amongst the lowest in the copper industry. The
increase in C1 cash cost versus 2021 is due primarily to higher costs
resulting from employee pay increases and higher transportation costs.
Group
CAML reports its Group C1 cash cost on a copper equivalent basis incorporating
the production costs at Sasa and by also converting lead and zinc production
into copper equivalent tonnes. The Group's 2022 C1 copper equivalent cash cost
was $1.39 per pound (2021: $1.32 per pound). This number is calculated based
on Sasa's 2022 zinc and lead payable production, which equated to 13,402
copper equivalent tonnes (2021: 11,959 copper equivalent tonnes) added to
Kounrad's 2022 copper production of 14,254 tonnes (2021: 14,041 tonnes). The
C1 cash cost increase on a copper equivalent basis is due to the higher C1
cost base at both Sasa and Kounrad.
CAML also reports a fully inclusive cost that includes sustaining capital
expenditure, local taxes including MET and concession fees, interest on loans
and corporate overheads associated with the Kounrad and Sasa projects as well
as the C1 cost component. The Group's fully inclusive copper equivalent unit
cost for the year was $1.92 per pound (2021: $1.89 per pound). The increase is
a result of the higher C1 cost components at Sasa and Kounrad somewhat offset
by a reduction in interest on loans.
Impairment of non-current assets
At 31 December 2022, the Group recognised an impairment charge of $55.1
million related to the Sasa operation due to the following factors:
· Completion of the life of mine study at the year end and therefore
amending the financial model inputs for updated reserves, resources and
expected 830,000 tonne long-term plant throughput capacity per annum (reduced
from 900,000 tonnes). The Resource and Reserves are both reported using Net
Smelter Return cut-off values and the Resources have decreased due to
management's assessment of those which are economically viable and capable of
future extraction.
· An increase in the discount rate used to calculate the net present
value of future cash flows to 12.52% (2021: 10.21%) due to external economic
conditions.
· Cost increases for energy and wages to reflect near-term inflationary
pressures.
· The key economic assumptions used in the review were a five-year
forecast average nominal zinc and lead price of $2,760 and $2,081 per tonne
respectively and a real long-term price of $2,467 and $1,874 per tonne
respectively with an inflationary factor applied.
Administrative expenses
During the year, administrative expenses increased to $27.1 million (2021:
$22.1 million), largely due to an increased non-cash share-based payment
charge of $4.5 million (2021: $2.4 million). This increase was due to options
exercised at a share price more than the fair value of the options at the date
of grant, arising from the Company electing to settle in cash, as well as
recognising a full year's charge in relation to the 2021 mid-year share option
grants.
There was also an increase in employee-related costs due to staff pay
increases and new hires as well as an increase in business travel costs.
Other losses
During the prior year, the Group entered into commodity price hedge contracts
resulting in $6.7 million of realised losses on financial derivatives. These
financial instruments expired at the end of 2021 and the Group has not put in
place any further hedge contracts.
Foreign exchange gain
The Group incurred a foreign exchange gain of $6.8 million (2021: $1.2
million) resulting from the retranslation of USD denominated monetary assets
held by foreign subsidiaries with a local functional currency. The gain was
significant due to the weakening of the Kazakhstan Tenge and North Macedonian
Denar as mentioned above.
Finance costs
The Group incurred lower finance costs of $2.1 million (2021: $3.9 million)
resulting from the scheduled debt repayments during the year.
Taxation
2022 Group corporate income tax decreased to $20.6 million (2021: $25.1
million) as a result of lower profits at Kounrad taxed at a corporate income
tax rate of 20% and at Sasa taxed at a corporate income tax rate of 10%. The
decrease also resulted from a reduction in the deferred tax liability due to
the Sasa impairment charge.
Discontinued operations
The Group continues to report the results of the Copper Bay entities within
discontinued operations. These assets were fully written off in prior years.
BALANCE SHEET
Capital expenditure
During the year, there were additions to property, plant, and equipment of
$17.4 million (2021: $14.8 million). The additions were a combination of $2.5
million (2021: $2.7 million) Kounrad sustaining capital expenditure, $7.7
million (2021: $6.2 million) Sasa sustaining capital expenditure and $7.2
million (2021: $5.9 million) in relation to the Sasa Cut and Fill Project.
Sasa sustaining capital expenditure includes capitalised mine development of
$2.5 million, $1.4 million on flotation equipment and $1.7 million on
underground fleet. Kounrad's sustaining capital expenditure includes $0.5
million on new anodes, $0.6 million on dripper pipes and $0.1 million on the
solar power plant.
Cut and Fill Project
The Group continues to invest significantly at Sasa with the implementation of
the Cut and Fill Project, comprising the construction of a Paste Backfill
Plant and associated underground reticulation infrastructure, a Dry Stack
Tailings Plant and associated landform and the development of the new Central
Decline.
During 2022, capital expenditure on the Cut and Fill Project totalled $11.9
million of which $7.2 million has been capitalised and $4.7 million prepaid.
This includes $2.6 million of Central Decline costs and $5.6 million on the
Paste Backfill Plant. There was a further $1.6 million spent on underground
reticulation and $1.8 million spent on the Dry Stack Tailings Plant and
associated landform.
CAML expects 2023 capital expenditure of between $28.0 million and $30.0
million, of which between $11.0 million and $13.0 million is expected to be
committed to sustaining capex. Total expected 2023 capex also includes
approximately $5.0 million related to the Kounrad solar power plant. CAML
expects Cut and Fill Project capital expenditure in the order of $12.0 million
in 2023. This will be largely related to construction of the dry stack
tailings landform as well as capitalised decline development.
Working capital
As at 31 December 2022, current trade and other receivables were $8.7 million
(31 December 2021: $6.2 million), which includes trade receivables from the
offtake sales of $2.4 million (31 December 2021: $1.2 million) and $3.0
million in relation to prepayments and accrued income (31 December 2021: $2.5
million).
Non-current trade and other receivables were $11.5 million (31 December 2021:
$7.3 million). As at 31 December 2022, a total of $3.4 million (31 December
2021: $3.3 million) of VAT receivable was owed to the Group by the Kazakhstan
authorities. Recovery is still expected through a continued dialogue with the
authorities for cash recovery and further offsets.
As at 31 December 2022, current trade and other payables were $16.6 million
(31 December 2021: $16.1 million).
Asset retirement obligation
During the year, an updated Kounrad conceptual closure plan was prepared by
independent
external consultants WSP Golders. The report reassessed the estimated closure
costs at the end of the life of the operation including rehabilitation,
remediation, decommissioning and demolition. The Group asset retirement
obligation provision has been increased by $1.2 million to account for
additional estimated costs in aggregate across Kounrad and Sasa and using
latest assumptions on discount and inflation rates.
Cash and borrowings
As at 31 December 2022, the Group had cash in the bank of $60.6 million (31
December 2021: $59.2 million) and current borrowings of $1.4 million (31
December 2021: $33.0 million). Current borrowings comprise $1.4 million of
North Macedonian overdraft facilities. The corporate debt facility with Traxys
was repaid in full in August 2022.
The reduction in current borrowings of $31.6 million reflects corporate debt
repaid during the year of $23.8 million, repayments of overdrafts of $7.5
million, a foreign exchange impact of $0.6 million as well as an effective
interest rate amount of $0.4 million relating to unwinding directly
attributable fees.
Allotment and issue of shares
In September 2022, the Company issued and allotted 5,600,000 Ordinary Shares
of $0.01 each (the 'New Ordinary Shares') to the trustee of the Central Asia
Metals employee benefit trust. These New Ordinary Shares were issued for the
purposes of satisfying current awards granted under the Company's Employee
Share Plans together with any future awards that may be granted by the
Company. Under the Trust deed the trustee must waive dividends and refrain
from voting unless the Board directs otherwise. The New Ordinary Shares rank
pari passu with the existing issued Ordinary Shares of the Company.
CASH FLOWS
Net cash flow generated from operations was $99.8 million (2021: $112.6
million).
During the year, corporate debt repayments of $23.8 million were made in
relation to the Traxys loan (2021: $48.4 million) and a further $7.5 million
of overdraft was repaid (2021: net drawdown $0.6 million). In addition,
interest of $0.6 million was paid (2021: $2.4 million).
In 2022, corporate income tax payments to governments totalled $22.2 million
(2021: $21.6 million). This included $1.7 million (2021: $0.5 million) of
North Macedonia corporate income tax paid in cash in addition to a $4.5
million (2021: $3.5 million) non-cash payment offset against VAT and corporate
income receivable. $20.5 million (2021: $21.1 million) of Kazakhstan corporate
income tax was paid during the year.
Considering sustaining capital expenditure, excluding project capex, CAML's
free cash flow for 2022 was $89.7 million (2021: $103.8 million).
DIVIDEND
The Company's dividend policy is to return to shareholders a range of between
30% and 50% of free cash flow, defined as net cash generated from operating
activities less sustaining capital expenditure. The dividends will only be
paid provided there is sufficient cash remaining in the Group to meet any
contractual debt repayments and that any banking covenants are not breached.
Total dividends paid to shareholders during the year of $48.2 million
comprised the final 2021 dividend of 12 pence per Ordinary Share and the
interim 2022 dividend of 10 pence per Ordinary Share.
In conjunction with CAML's 2022 annual results, the Board proposes a final
2022 dividend of 10 pence per Ordinary Share. This brings total dividends
(proposed and declared) for the year to 20 pence (2021: 20 pence) which
represents 47% of free cash flow. The final dividend is payable on 23 May 2023
to shareholders registered on 28 April 2023. This latest dividend will
increase the amount returned to shareholders in dividends since the 2010 IPO
listing to $299.0 million.
GOING CONCERN
The Group sells and distributes its copper cathode product primarily through
an annual rolling offtake arrangement with Traxys Europe S.A. ('Traxys') with
a minimum of 95% of the SX-EW plant's forecasted output committed as sales.
The Group sells Sasa's zinc and lead concentrate product through an annual
rolling offtake arrangement with Traxys. The
commitment is for 100% of the Sasa concentrate production.
The Group meets its day-to-day working capital requirements through its
profitable and cash generative operations at Kounrad and Sasa. The Group
manages liquidity risk by maintaining adequate committed borrowing facilities
and the Group has substantial cash balances as at 31 December 2022.
The Board has reviewed forecasts for the period to December 2024 to assess the
Group's liquidity which demonstrate substantial headroom. The Board has
considered additional sensitivity scenarios in terms of the Group's commodity
price forecasts, expected production volumes, operating cost profile and
capital expenditure. The Board has assessed the key risks which could impact
the prospects of the Group over the going concern period including commodity
price outlook, cost inflation and supply chain disruption with reverse stress
testing of the forecasts in line with best practice. Liquidity headroom was
demonstrated in each reasonably possible scenario. Accordingly, the Directors
continue to adopt the going concern basis in preparing the consolidated
financial statements.
OUTLOOK
During the second half of the year commodity prices declined and inflation
increased which brought into focus the Company's cost control measures. The
full repayment of debt provided additional liquidity which mitigated against
any cost increases that were outside of the Company's control, such as
electricity prices. However, actions taken by governments to increase gas
storage in the latter part of the year as well as a mild winter resulted in
easing of energy prices and alleviated cost pressures for the Company. Demand
for the metals produced by the Group remains robust and metal stocks are at
low levels which should continue to support prices and allow the Company to
maximise cash flow and hence value creation.
NON-IFRS FINANCIAL MEASURES
The Group uses alternative performance measures, which are not defined by
generally accepted accounting principles ('GAAP') such as IFRS, as additional
indicators. These measures are used by management, alongside the comparable
GAAP measures, in evaluating the business performance. The measures are not
intended as a substitute for GAAP measures and may not be comparable to
similarly reported measures by other companies. The following non-IFRS
alternative performance financial measures are used in this report:
Earnings before interest, tax, depreciation and amortisation (EBITDA)
EBITDA is a valuable indicator of the Group's ability to generate liquidity
and is frequently used by investors and analysts for valuation purposes. It is
also a non-IFRS financial measure which is reconciled as follows:
2022 2021
$'000 $'000
Profit for the year 33,805 84,176
Plus/(less):
Income tax expense 20,588 25,147
Depreciation and amortisation 27,285 29,572
Impairment of noncurrent assets 55,116 -
Foreign exchange gain (6,829) (1,214)
Other income (86) (166)
Other expenses - 139
Finance income (515) (74)
Finance costs 2,060 3,920
Loss from discontinued operations 187 4
EBITDA 131,611 141,504
Gross revenue
Gross revenue is presented as the total revenue received from sales of all
commodities after
deducting the directly attributable treatment charges associated for the sale
of zinc, lead and silver. This figure is presented as it reflects the total
revenue received in respect of the zinc and lead concentrate and is used to
reflect the movement in commodity prices and treatment charges during the
year. The Board considers gross revenue, together with the reconciliation to
net IFRS revenue to provide valuable information on the drivers of IFRS
revenue.
Net cash
Net cash is a measure used by the Board for the purposes of capital management
and is
calculated as the total of the borrowings held plus the cash and cash
equivalents held at the
end of the year. This balance does not include the restricted cash balance of
$0.3 million (31
December 2021: $3.5 million):
31-Dec-22 31-Dec-21
$'000 $'000
Borrowings (1,390) (32,978)
Cash and cash equivalents excluding restricted cash 60,298 55,695
Net cash 58,908 22,717
Free cash flow
Free cash flow is a non-IFRS financial measure of the cash from operations
less sustaining capital expenditure on property, plant and equipment and
intangible assets and is presented as follows:
2022 2021
$'000 $'000
Net cash generated from operating activities 99,845 112,605
Less: Purchase of property, plant and equipment (10,124) (8,750)
Less: Purchase of intangible assets (68) (56)
Free cash flow 89,653 103,799
The purchase of sustaining property, plant and equipment figure above does not
include the $7.2 million (2021: $5.9 million) of capitalised expenditure on
the Sasa Cut and Fill Projects. These costs are not considered sustaining
capital expenditure as they are expansionary development costs required for
the transition to the paste fill mining techniques. These exceptional costs
are expected to continue until 2024.
Sustainability reporting standards Sustainability is at the core of our
business values, and we have reported in accordance with Global Reporting
Initiative ('GRI') Standards for the period 1 January 2022 to 31 December
2022.
We have an economically robust business that underpins our ability to generate
profits and
dividends for our shareholders and ensures that our successes are also felt by
other important stakeholders. We strongly believe that by creating shared
value we are ensuring the long-term sustainability of our operations and
acting as a good corporate citizen. The table below highlights the economic
value that has been distributed amongst CAML stakeholders during 2022.
Stakeholder 2022 2021
$'m $'m
Direct economic value generated 232.2 235.2
Economic value distributed:
Operating expenses Suppliers & contractors 58.0 48.6
Wages and other payments to employees Employees 35.8 30.5
Dividend payments to shareholders Shareholders 48.2 38.8
Payment to creditors: Interest payments on loans Lenders 0.5 2.4
Payments of tax(1) Government 35.5 36.7
Community investments Local communities 0.3 0.5
Economic value distributed 178.4 157.5
Economic value retained (generated - distributed) 53.8 77.7
(1) The tax disclosed is the total corporate income tax recognised in the
income statement, MET, concession fees and property taxes. The figure excludes
the payroll taxes and additional cash payments made on corporate income tax
during the year.
On behalf of the Board
GAVIN FERRAR
CHIEF FINANCIAL OFFICER
28 March 2023
Consolidated Income Statement
for the year ended 31 December 2022
Group
Note 2022 2021
$'000 $'000
Continuing operations
Revenue 6 220,855 223,372
Presented as:
Gross revenue(1) 6 232,206 235,152
Less:
Silver stream purchases 6 (7,080) (8,040)
Offtake buyers' fees 6 (4,271) (3,740)
Revenue 220,855 223,372
Cost of sales 7 (87,271) (80,511)
Distribution and selling costs 8 (2,166) (2,116)
Gross profit 131,418 140,745
Administrative expenses 9 (27,092) (22,077)
Impairment of non-current assets 19,20 (55,116) -
Other losses 10 - (6,875)
Other income 11 86 166
Foreign exchange gain 6,829 1,214
Operating profit 56,125 113,173
Finance income 15 515 74
Finance costs 16 (2,060) (3,920)
Profit before income tax 54,580 109,327
Income tax 17 (20,588) (25,147)
Profit for the year from continuing operations 33,992 84,180
Discontinued operations
Loss for the year from discontinued operations 22 (187) (4)
Profit for the year 33,805 84,176
Profit attributable to:
Non-controlling interests 21 (6) (1)
Owners of the parent 33,811 84,177
Profit for the year 33,805 84,176
Earnings/(loss) per share from continuing and discontinued operations
attributable to owners of the parent during the year (expressed in cents per
share) $ cents $ cents
Basic earnings/(loss) per share
From continuing operations 18 19.10 47.69
From discontinued operations (0.10) -
From profit for the year 19.00 47.69
Diluted earnings/(loss) per share
From continuing operations 18 18.39 46.23
From discontinued operations (0.10) -
From profit for the year 18.29 46.23
(1) Gross revenue is a non-IFRS financial measure which is used by management,
alongside the comparable GAAP measures, in evaluating the business
performance. The measures are not intended as a substitute for GAAP measures
and may not be comparable to similarly reported measures by other companies.
Consolidated Statement of Comprehensive Income
Group
for the year ended 31 December 2022 Note
2022 2021
$'000 $'000
Profit for the year 33,805 84,176
Other comprehensive income/(expense):
Items that may be subsequently reclassified to profit or loss:
Currency translation differences 27 (29,311) (31,283)
Other comprehensive income/(expense) for the year, net of tax (29,311) (31,283)
Total comprehensive income for the year 4,494 52,893
Attributable to:
Non-controlling interests (6) (1)
Owners of the parent 4,500 52,894
Total comprehensive income for the year 4,494 52,893
Total comprehensive income/(expense) attributable to equity shareholders 4,681 52,897
arises from:
Continuing operations
Discontinued operations (187) (4)
4,494 52,893
Statements of Financial
Position
Registered no. 5559627
as at 31 December 2022
Group
Company
Note 2022 2021 2022 2021
$'000 $'000 $'000 $'000
Assets
Non-current assets
Property, plant and equipment 19 322,197 384,889 184 410
Intangible assets 20 26,552 52,090 - -
Deferred income tax asset 37 328 352 - -
Investments 21 - - 5,107 5,107
Other non-current receivables 23 11,478 7,347 268,750 269,241
360,555 444,678 274,041 274,758
Current assets
Inventories 24 13,149 10,452 - -
Trade and other receivables 23 8,715 6,210 19,577 34,204
Restricted cash 25 264 3,516 - 3,284
Cash and cash equivalents 25 60,298 55,695 35,812 40,189
82,426 75,873 56,789 77,677
Assets of disposal group classified as held for sale 22 64 38 - -
82,490 75,911 55,389 77,677
Total assets 443,045 520,589 329,430 352,435
Equity attributable to owners of the parent
Ordinary shares 26 1,821 1,765 1,821 1,765
Share premium 26 205,437 191,988 205,437 191,988
Treasury shares 26 (15,831) (2,360) (15,831) (2,360)
Currency translation reserve 27 (134,092) (104,781) - -
Retained earnings 312,107 323,951 94,354 77,943
369,442 410,563 285,781 269,336
Non-controlling interests 21 (1,322) (1,316) - -
Total equity 368,120 409,247 285,781 269,336
Liabilities
Non-current liabilities
Silver streaming commitment 30 17,085 18,220 - -
Deferred income tax liability 37 17,286 23,229 - -
Lease liability 10 334 - 199
Provisions for other liabilities and charges 32 20,744 18,917 - -
55,125 60,700 - 199
Current liabilities
Borrowings 31 1,390 32,978 - 23,406
Silver streaming commitment 30 1,095 1,229 - -
Trade and other payables 29 16,643 16,056 43,471 59,311
Lease liability 295 302 178 183
Provisions for other liabilities and charges 32 333 49 - -
19,756 50,614 43,649 82,900
Liabilities of disposal group classified as held for sale 22 44 28 - -
19,800 50,642 43,649 82,900
Total liabilities 74,925 111,342 43,649 83,099
Total equity and liabilities 443,045 520,589 329,430 352,435
The Company has elected to take the exemption under section 408 of the
Companies Act 2006 not to present the parent company income statement or
statement of comprehensive income. The profit for the parent company for the
year was $62,066,000 (2021: $13,585,000).
Consolidated Statement of Changes in Equity
for the year ended 31 December 2022
Note Ordinary shares Share Treasury Currency translation reserve Retained earnings Non-controlling interests Total
$'000 premium shares $'000 $'000 $'000 equity
Attributable to owners of the parent $'000 $'000 Total $'000
$'000
Balance as at 1 January 2021 1,765 191,537 (3,840) (73,498) 278,103 394,067 (1,315) 392,752
Profit for the year - - - - 84,177 84,177 (1) 84,176
Other comprehensive expense - currency translation differences - - - (31,283) - (31,283) - (31,283)
27
Total comprehensive income/(expense) - - (31,283) 84,177 52,894 (1) 52,893
-
Transactions with owners
Share based payments 28 - - - - 2,449 2,449 - 2,449
Exercise of options 28 - 451 1,480 - (1,931) - - -
Dividends 35 - - - - (38,847) (38,847) - (38,847)
Total transactions with owners, recognised directly in equity - 451 1,480 - (38,329) (36,398) - (36,398)
Balance as at 31 December 2021 1,765 191,988 (2,360) (104,781) 323,951 410,563 (1,316) 409,247
Profit for the year - - - - 33,811 33,811 (6) 33,805
Other comprehensive expense - currency translation differences - - - (29,311) - (29,311) - (29,311)
27
- - - (29,311) 33,811 4,500 (6) 4,494
Total comprehensive income/(expense)
Transactions with owners
Shares issued 26 56 13,440 (13,496) - - - - -
Share based payments 28 - - - - 3,818 3,818 - 3,818
Exercise of options 28 - 9 25 - (1,263) (1,229) - (1,229)
Dividends 35 - - - - (48,210) (48,210) - (48,210)
Total transactions with owners, recognised directly in equity 56 13,449 (13,471) - (45,655) (45,621) - (45,621)
Balance as at 31 December 2022 1,821 205,437 (15,831) (134,092) 312,107 369,442 (1,322) 368,120
Company Statement of Changes in Equity
for the year ended 31 December 2022
Company Ordinary Share Treasury Retained Total
Note Shares premium shares earnings equity
$'000 $'000 $'000 $'000 $'000
Balance as at 1 January 2021 1,765 191,537 (3,840) 102,687 292,149
Profit for the year - - - 13,585 13,585
Total comprehensive income - - - 13,585 13,585
Transactions with owners
Share based payments 28 - - - 2,449 2,449
Exercise of options 28 - 451 1,480 (1,931) -
Dividends 35 - - - (38,847) (38,847)
Total transactions with owners, recognised directly in equity - 451 1,480 (38,329) (36,398)
Balance as at 31 December 2021 1,765 191,988 (2,360) 77,943 269,336
Profit for the year - - - 62,066 62,066
Total comprehensive income - - - 62,066 62,066
Transactions with owners
Shares issued 26 56 13,440 (13,496) - -
Share based payments 28 - - - 3,818 3,818
Exercise of options 28 - 9 25 (1,263) (1,229)
Dividends 35 - - (48,210) (48,210)
Total transactions with owners, recognised directly in equity
56 13,449 (13,471) (45,655) (45,621)
Balance as at 31 December 2022 1,821 205,437 (15,831) 94,354 285,781
Consolidated Statement of Cash Flows
for the year ended 31 December 2022
Note 2022 2021
$'000 $'000
Cash flows from operating activities
Cash generated from operations 33 122,565 136,555
Interest paid (554) (2,378)
Corporate income tax paid (22,166) (21,572)
Net cash flow generated from operating activities 99,845 112,605
Cash flows from investing activities
Purchase of property, plant and equipment (17,396) (14,692)
Proceeds from sale of property, plant and equipment 7 16
Purchase of intangible assets (68) (56)
Interest received 15 515 74
Decrease in restricted cash 25 3,252 125
Net cash used in investing activities (13,690) (14,533)
Cash flows from financing activities
Drawdown of overdraft 31 - 644
Repayment of overdraft 31 (7,531) -
Repayment of borrowings 31 (23,820) (48,400)
Dividends paid to owners of the parent 35 (48,210) (38,847)
Cash settlement of share options (1,939) -
Receipt on exercise of share options 28 6 13
Net cash used in financing activities (81,494) (86,590)
Effect of foreign exchange loss on cash and cash equivalents (31) (38)
Net increase in cash and cash equivalents 4,630 11,444
Cash and cash equivalents at the beginning of the year 25 55,731 44,287
Cash and cash equivalents at the end of the year 25 60,361 55,731
Cash and cash equivalents at 31 December 2022 includes cash at bank and on
hand included in assets held for sale of $63,000 (31 December 2021: $36,000)
(note 22). The consolidated statement of cash flows does not include the
restricted cash balance of $264,000 (2021: $3,516,000) (note 25).
The notes below are an integral part of the consolidated financial
information.
Notes to the Financial Information
for the year ended 31 December 2022
1. General information
Central Asia Metals plc ('CAML' or the 'Company') and its subsidiaries (the
'Group') are a mining organisation with operations in Kazakhstan and North
Macedonia and a parent holding company based in England in the United Kingdom
('UK').
The Group's principal business activities are the production of copper cathode
at its Kounrad operations in Kazakhstan and the production of lead, zinc and
silver at its Sasa operations in North Macedonia. CAML owns 100% of the
Kounrad SX-EW copper project in Kazakhstan and 100% of the Sasa zinc-lead mine
in North Macedonia. The Company also owns a 76% equity interest in Copper Bay
Limited which is currently held for sale. See note 22 for details.
CAML is a public limited company, which is listed on the AIM market of the
London Stock Exchange and incorporated and domiciled in England, UK. The
address of its registered office is Masters House, 107 Hammersmith Road,
London, W14 0QH. The Company's registered number is 5559627.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of the
consolidated financial information are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
Basis of preparation of the Financial Information
The financial information set out herein does not constitute the Group's
statutory financial statements for the year ended 31 December 2022, but is
derived from the Group's audited financial statements. The auditors have
reported on the 2022 financial statements and their reports were unqualified
and did not contain statements under s498(2) or (3) Companies Act 2006, nor
did they contain a material uncertainty in relation to going concern. The 2022
Annual Report was approved by the Board of Directors on 28 March 2023, and
will be mailed to shareholders in April 2023. The financial information in
this statement is audited but does not have the status of statutory accounts
within the meaning of Section 434 of the Companies Act 2006.
The Group's consolidated financial statements, which form part of the 2022
Annual Report, have been prepared in accordance with international accounting
standards as adopted in the United Kingdom and the Companies Act 2006. The
consolidated financial statements have been prepared under the historical cost
convention with the exception of assets held for sale which have been held at
fair value. The accounting policies which follow set out those policies which
apply in preparing the financial statements for the year ended 31 December
2022. The Group financial information is presented in US Dollars ($) and
rounded to the nearest thousand.
The parent company meets the definition of a qualifying entity under FRS 100
(Financial Reporting Standard 100) issued by the Financial Reporting Council.
The parent company financial statements have therefore been prepared in
accordance with FRS 101
(Financial Reporting Standard 101) 'Reduced Disclosure Framework' as issued by
the Financial Reporting Council. As permitted by
FRS 101, the Company has taken advantage of the disclosure exemptions
available under that standard in relation to share-based
payments, financial instruments, fair value measurements, capital management,
presentation of a cash flow statement, new
standards not yet effective, impairment of assets and related party
transactions. Where relevant, equivalent disclosures have been
given in the Group financial statements of Central Asia Metals plc.
The preparation of the Group financial information in conformity with IFRS
requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group's
accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the
consolidated financial information are explained in note 4.
Going concern
The Group sells and distributes its copper cathode product primarily through
an annual rolling offtake arrangement with Traxys Europe S.A. ('Traxys') with
a minimum of 95% of the SX-EW plant's forecasted output committed as sales.
The Group sells Sasa's zinc and lead concentrate product through an annual
rolling offtake arrangement with Traxys. The commitment is for 100% of the
Sasa concentrate production.
The Group meets its day to day working capital requirements through its
profitable and cash generative operations at Kounrad and
Sasa. The Group manages liquidity risk by maintaining adequate committed
borrowing facilities and the Group has substantial cash
balances as at 31 December 2022.
The Board has reviewed forecasts for the period to December 2024 to assess the
Group's liquidity which demonstrate substantial headroom. The Board have
considered additional sensitivity scenarios in terms of the Group's commodity
price forecasts, expected production volumes, operating cost profile and
capital expenditure. The Board have assessed the key risks which could
impact the prospects of the Group over the going concern period including
commodity price outlook, cost inflation and supply chain disruption with
reverse stress testing of the forecasts in line with best practice. Liquidity
headroom was demonstrated in each reasonably possible scenario. Accordingly,
the Directors continue to adopt the going concern basis in preparing the
consolidated financial information.
Please refer to notes 6, 25 and 29 for information on the Group's revenues,
cash balances and trade and other payables.
New and amended standards and interpretations adopted by the Group
The Group has adopted the following standards and amendments for the first
time for the annual reporting period commencing 1 January 2022, however there
is no impact on the current reporting period:
IAS 37 - Onerous Contracts - Cost of Fulfilling a Contract amending the
standard regarding costs a company should include as the cost of fulfilling a
contract when assessing whether a contract is onerous.
IAS 16 - Property, Plant and Equipment - Proceeds before Intended Use
regarding proceeds from selling items produced while bringing an asset into
the location and condition necessary for it to be capable of operating in the
manner intended by management.
New standards, interpretations, and amendments not yet effective
Certain new accounting standards and interpretations have been published that
are not mandatory for 31 December 2022 reporting periods and have not been
early adopted by the Group. These standards include:
IAS 1 - Presentation of Financial statements - The classification of
liabilities as current or non-current basing the classification on contractual
arrangements at the reporting date. These amendments are effective for periods
beginning 1 January 2024.
Amendments to IAS 8 - Definition of Accounting Estimates effective 1 January
2023.
Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting
policies effective 1 January 2023.
These standards are not expected to have a material impact on the entity in
the current or future reporting periods and on foreseeable future
transactions.
Basis of consolidation
The Group financial statements consolidate the financial statements of CAML
and the entities it controls drawn up to 31 December 2022.
Subsidiaries are all entities (including structured entities) over which the
Group has control. 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.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that control
ceases.
Intercompany transactions, balances and unrealised losses/gains on
transactions between Group companies are eliminated. Unrealised losses/gains
are also eliminated but considered an impairment indicator of the asset
transferred. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Group.
Business combinations
The Group applies the acquisition method to account for business combinations.
The consideration transferred for the acquisition of a subsidiary is the fair
value of the assets transferred, the liabilities incurred to the former owners
of the acquiree and the equity interests issued by the Group. The
consideration transferred includes the fair value of any asset or liability
resulting from a contingent consideration arrangement. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition
date. The Group recognises any non-controlling interest in the acquiree on an
acquisition-by-acquisition basis, either at fair value or at the
non-controlling interest's proportionate share of the recognised amounts of
the acquiree's identifiable net assets. Acquisition-related costs are
expensed as incurred and reported within other expenses.
Goodwill
The excess of the consideration transferred of a business combination, the
amount of any non-controlling interest in the acquired entity, and
acquisition-date fair value of any previous equity interest in the acquired
entity over the fair value of the net identifiable assets acquired is recorded
as goodwill. If those amounts are less than the fair value of the net
identifiable assets of the business acquired, the difference is recognised
directly in profit or loss as a bargain purchase. Goodwill is capitalised as
an intangible asset with any impairment in carrying value being charged to the
consolidated statement of comprehensive income. Where the fair value of
identifiable assets, liabilities and contingent liabilities exceed the fair
value of consideration paid, the excess is credited in full to the
consolidated statement of comprehensive income on the acquisition date.
After initial recognition, goodwill is stated at cost less any accumulated
impairment losses, with the carrying value being reviewed for impairment, at
least annually and whenever events or changes in circumstances indicate that
the carrying value may be impaired.
For the purpose of impairment testing, goodwill is allocated to the
cash-generating unit expected to benefit from the business combination in
which the goodwill arose. Where the recoverable amount is less than the
carrying amount, including goodwill, an impairment loss is recognised in the
income statement. The carrying amount of goodwill allocated to an entity is
taken into account when determining the gain or loss on disposal of the unit.
Where settlement of any part of cash consideration is deferred, the amounts
payable in the future are discounted to their present value as at the date of
exchange. The discount rate used is the entity's incremental borrowing rate,
being the rate at which a similar borrowing could be obtained from an
independent financier under comparable terms and conditions.
Non-controlling interests
Non-controlling interests represent the portion of profit or loss and net
assets in subsidiaries that are not held by the Group and are presented
separately within equity in the consolidated statement of financial position
distinct from parent shareholder's equity.
Where losses are incurred by a partially owned subsidiary, they are
consolidated such that the non-controlling interests' share in the losses is
apportioned in the same way as profits.
Where profits are then made in future periods, such profits are then allocated
to the parent company until all unrecognised losses attributable to the
non-controlling interests but absorbed by the parent are recovered at which
point, profits are allocated as normal.
Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker which is considered
to be the Board. The Group's segmental reporting reflects the operational
focus of the Group. The Group has been organised into geographical and
business units based on its principal business activities of mining
production, having two reportable segments as follows:
· Kounrad (production of copper cathode) in Kazakhstan
· Sasa (production of lead, zinc and silver) in North Macedonia
Included within the unallocated segment are corporate costs for Central Asia
Metals Plc and other holding companies within the Group which are not
separately reported to the Board.
Foreign currency translation
The functional currency for each entity in the Group is determined as the
currency of the primary economic environment in which it operates. The
consolidated financial statements are presented in US Dollars, which is the
Group and Company presentation currency. The functional currency of the
Company is US Dollars.
Transactions in currencies other than the currency of the primary economic
environment in which they operate are initially recorded at the rate ruling at
the date of the transaction. Foreign currency monetary assets and liabilities
denominated in foreign currencies are retranslated at the functional currency
rate of exchange ruling at the reporting date. Exchange differences arising
on the retranslation of unsettled monetary assets and liabilities are
recognised immediately in profit or loss.
Exchange gains and losses arising on the retranslation of monetary financial
assets are treated as a separate component of the change in fair value and
recognised in profit or loss. Exchange gains and losses on non-monetary OCI
financial assets form part of the overall gain or loss in OCI recognised in
respect of that financial instrument.
On consolidation, the results of overseas operations are translated into USD
at rates approximating to those ruling when the transactions took place. All
assets and liabilities of overseas operations, including goodwill arising on
the acquisition of those operations, are translated at the rate ruling at the
reporting date. Exchange differences arising on translating the opening net
assets at opening rate and the results of overseas operations at actual rates
are recognised in other comprehensive income and accumulated in the foreign
exchange reserve.
On disposal of a foreign operation, the cumulative exchange differences
recognised in the foreign exchange reserve relating to that operation up to
the date of disposal are transferred to the consolidated statement of
comprehensive income as part of the profit or loss on disposal.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and accumulated impairment losses. Cost comprises the aggregate amount paid
and the fair value of any other consideration given to acquire the asset and
includes costs directly attributable to making the asset capable of operating
as intended.
The cost of the item also includes the cost of decommissioning any buildings
or plant and equipment and making good the site, where a present obligation
exists to undertake the rehabilitation work.
Development costs relating to specific mining properties are capitalised once
management determines a property will be developed. A development decision is
made based upon consideration of project economics, including future metal
prices, reserves and resources, and estimated operating and capital costs.
Capitalisation of costs incurred and proceeds received during the development
phase ceases when the property is capable of operating at levels intended by
management and is considered commercially viable. Costs incurred during the
production phase to increase future output by providing access to additional
reserves, are deferred and depreciated on a units-of-production basis over the
component of the reserves to which they relate. Ore reserves may be declared
for an undeveloped mining project before its commercial viability has been
fully determined. Development costs incurred after the commencement of
production are capitalised to the extent they are expected to give rise to a
future economic benefit. Development costs are not depreciated until such
time as the areas under development enter production.
Depreciation is provided on all property, plant and equipment on a
straight-line basis over its total expected useful life. As at 31 December
2022 the remaining useful lives were as follows:
· Construction in progress
- not depreciated
·
Land
- not depreciated
· Plant and equipment
- over 5 to 16
years
· Mining
assets
- over 2 to 16 years
· Motor vehicles
- over 2 to 10
years
· Office equipment
- over 2 to 10
years
· Right of use assets
- term of lease agreement
Mineral rights are depreciated on a Unit of Production basis ('UoP'), in
proportion to the volume of ore mined in the year compared with total proven
and probable reserves as well as measured, indicated and certain inferred
resources which are considered to have a sufficiently high certainty of
commercial extraction at the beginning of the year. Assets within operations
for which production is not expected to fluctuate significantly from one year
to another or which have a physical life shorter than the related mine are
depreciated on a straight-line basis.
Construction in progress is not depreciated until transferred to other classes
of property, plant and equipment.
The carrying values of property, plant and equipment are reviewed for
impairment if events or changes in circumstances indicate the carrying value
may not be recoverable and are written down immediately to their recoverable
amount. Useful lives and residual values are reviewed annually and where
adjustments are required, these are made prospectively.
An item of property, plant and equipment is de-recognised upon disposal or
when no future economic benefits are expected to arise from the continued use
of the asset. Any gain or loss arising on de-recognition of the asset is
included in the income statement.
Leases
Leases are recognised as a right-of-use asset and a corresponding liability at
the date at which the leased asset is available for use by the Group.
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities include the net present value of the
following lease payments:
· fixed payments (including in-substance fixed payments), less any
lease incentives receivable and variable payments based on index or rate;
· amounts expected to be payable by the Group under residual value
guarantees; and
· payments of penalties for terminating the lease, if the lease
term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also
included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be readily determined, which is generally the case
for leases in the Group, the lessee's incremental borrowing rate is used,
being the rate that the individual lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value to the right-of-use asset
in a similar economic environment with similar terms, security and conditions.
The Group leases offices and equipment. Rental contracts are typically made
for fixed periods of six months to five years and have extension options.
Lease terms are negotiated on an individual basis and contain a wide range of
different terms and conditions. The lease agreements do not impose any
covenants other than the security interests in the leased assets that are held
by the lessor. Leased assets may not be used as security for borrowing
purposes.
Intangible assets
a) Exploration and evaluation expenditure
Capitalised costs include costs directly related to any Group exploration and
evaluation activities in areas of interest for which there is a high degree of
confidence in the feasibility of the project. Exploration and evaluation
expenditure capitalised includes acquisition of rights to explore,
topographical, geological, geochemical and geophysical studies, exploration
drilling, trenching, sampling and activities in relation to the evaluation of
the technical feasibility and commercial viability of extracting a mineral
resource.
Exploration and evaluation assets are measured at cost less provision for
impairment, where required.
b) Mining licences, permits and computer software
The historical cost model is applied, with intangible assets being carried at
cost less accumulated amortisation and accumulated impairment losses.
Intangible assets with a finite life have no residual value and are amortised
on a straight-line basis over their expected useful lives with charges
included in either cost of sales or administrative expenses:
Computer software
- over 2 to 5 years
Mining licences and permits -
over the duration of the legal agreement
The carrying value of intangible assets is reviewed for impairment whenever
events or changes in circumstances indicate the carrying value may not be
recoverable.
Impairment of non-financial assets
The Group carries out impairment testing on all assets when there exists an
indication of an impairment. If any such indication exists, the Group makes an
estimate of the asset's recoverable amount. An asset's recoverable amount is
the higher of an asset's or cash-generating unit's fair value less costs to
sell or its value in use.
Where the carrying amount of an asset exceeds its recoverable amount, the
asset is considered impaired and is written down to its recoverable amount.
Impairment losses are recognised in the income statement.
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
assessments of the time value of money and risks specific to the asset.
The best evidence of an asset's fair value is the value obtained from an
active market or binding sale agreement. Where neither exists, fair value less
costs to sell is based on the best available information to reflect the amount
the Group could receive for the cash-generating unit in an arm's length sale.
In some cases, this is estimated using a discounted cash flow analysis on a
post-tax basis.
A previously recognised impairment loss is reversed if the recoverable amount
increases as a result of a reversal of the conditions that originally resulted
in the impairment. This reversal is recognised in the income statement and is
limited to the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised in prior years.
Goodwill is also reviewed annually, as well as whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
Non-financial assets other than goodwill which have suffered an impairment are
reviewed for possible reversal of the impairment at each reporting date.
Revenue
IFRS 15 establishes a comprehensive framework for determining whether, how
much and when revenue is recognised. These steps are as follows:
identification of the customer contract; identification of the contract
performance obligations; determination of the contract price; allocation of
the contract price to the contract performance obligations; and revenue
recognition as performance obligations are satisfied.
Under IFRS 15, revenue is recognised when the performance obligations are
satisfied and the customer obtains control of the goods or services, usually
when title has passed to the buyer and the goods have been delivered in
accordance with the contractual delivery terms.
Revenue is measured at the fair value of consideration received or receivable
from sales of metal to an end user, net of any buyers' discount, treatment
charges and value added tax. The Group recognises revenue when the amount of
revenue can be reliably measured and when it is probable that future economic
benefits will flow to the entity.
The value of consideration is fair value which equates to the contractually
agreed price. The offtake agreements provide for provisional pricing i.e.
the selling price is subject to final adjustment at the end of the quotation
period based on the average price for the month following delivery to the
buyer. Such a provisional sale contains an embedded derivative which is not
required to be separated from the underlying host contract, being the sale of
the commodity. At each reporting date, if any sales are provisionally
priced, the provisionally priced copper cathode, zinc and lead sales are
marked-to-market using forward prices, with any significant adjustments (both
gains and losses) being recorded in revenue in the income statement and in
trade receivables in the statement of financial position.
The Company may mitigate commodity price risk by fixing the price in advance
for its copper cathode with the offtake partner and also its zinc and lead
sales with the banks where a facility has been set up and agreed. The price
fixing arrangements are outside the scope of IFRS 9 Financial Instruments:
Recognition and Measurement and do not meet the criteria for hedge accounting.
The Group reports both a gross revenue and revenue line. Gross revenue is
reported after deductions of treatment charges but before deductions of
offtaker fees and silver purchases under the Silver Stream (note 6).
Inventory
Inventories are stated at the lower of cost and net realisable value. Cost is
determined using the weighted average method.
The cost of finished goods and work in progress comprises raw materials,
direct labour and all other direct costs associated with mining the ore and
processing it to a saleable product.
Net realisable value is the estimated selling price in the ordinary course of
business, less any further costs expected to be incurred to completion.
Provision is made, if necessary, for slow-moving, obsolete and defective
inventory.
Non-current assets (or disposal groups) held for sale and discontinued
operations
Non-current assets (or disposal groups) are classified as held for sale if
their carrying amount will be recovered principally through a sale transaction
rather than through continuing use and a sale is considered highly probable.
They are measured at the lower of their carrying amount and fair value less
costs to sell, except for assets such as deferred tax assets, assets arising
from employee benefits, financial assets and investment property that are
carried at fair value and contractual rights under insurance contracts, which
are specifically exempt from this requirement.
An impairment loss is recognised for any Initial or subsequent write-down of
the asset (or disposal group) to fair value less costs to sell. A gain is
recognised for any subsequent increases in fair value less costs to sell an
asset (or disposal group), but not in excess of any cumulative impairment loss
previously recognised. A gain or loss not previously recognised by the date of
the sale of the non-current asset (or disposal group) is recognised at the
date of derecognition.
Non-current assets (including those that are part of a disposal group) are not
depreciated or amortised while they are classified as held for sale. Interest
and other expenses attributable to the liabilities of a disposal group
classified as held for sale continue to be recognised.
Non-current assets classified as held for sale and the assets of a disposal
group classified as held for sale are presented separately from the other
assets in the balance sheet. The liabilities of a disposal group classified as
held for sale are presented separately from other liabilities in the balance
sheet.
A discontinued operation is a component of the entity that has been disposed
of or is classified as held for sale and that represents a separate major line
of business or geographical area of operations, is part of a single
co-ordinated plan to dispose of such a line of business or area of operations,
or is a subsidiary acquired exclusively with a view to resale. The results of
discontinued operations are presented separately in the statement of
comprehensive income.
Current and deferred income tax
The current income tax charge is calculated based on the tax laws enacted or
substantively enacted at the reporting date in the countries where the Group's
subsidiaries operate and generate taxable income.
Deferred income tax assets and liabilities are recognised where the carrying
amount of an asset or liability in the consolidated statement of financial
position differs from its tax base, except for differences arising on:
· The initial recognition of goodwill,
· The initial recognition of an asset or liability in a transaction
which is not a business combination and at the time of the transaction affects
neither accounting or taxable profit, and
· Investments in subsidiaries and joint arrangements where the
Group is able to control the timing of the reversal of the difference and it
is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it
is probable that taxable profit will be available against which the difference
can be utilised. The amount of the asset or liability is determined using tax
rates that have been enacted or substantively enacted by the reporting date
and are expected to apply when the deferred tax liabilities/(assets) are
settled/(recovered). When there is uncertainty concerning the Group's filing
position regarding the tax bases of assets or liabilities, the taxability of
certain transactions or other tax-related assumptions, then the Group:
· Considers whether uncertain tax treatments should be considered
separately, or together as a group, based on which approach provides better
predictions of the resolution;
· Determines if it is probable that the tax authorities will accept
the uncertain tax treatment; and
· If it is not probable that the uncertain tax treatment will be
accepted, measure the tax uncertainty based on the most likely amount or
expected value, depending on whichever method better predicts the resolution
of the uncertainty. This measurement is required to be based on the assumption
that each of the tax authorities will examine amounts they have a right to
examine and have full knowledge of all related information when making those
examinations.
Deferred income tax assets and liabilities are offset when the Group has a
legally enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax
authority on either:
· The same taxable group company, or
· Different group entities which intend either to settle current
tax assets and liabilities on a net basis, or to realise the assets and settle
the liabilities simultaneously, in each future period in which significant
amounts of deferred tax assets or liabilities are expected to be settled or
recovered.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with
banks and other short-term highly liquid investments with original maturities
of three months or less.
Restricted cash
Restricted cash is cash with banks that is not available for immediate use by
the Group. Restricted cash is shown separately from cash and cash
equivalents on the statement of financial position.
Investments
Investments in subsidiaries are recorded at cost less provision for
impairment.
Share capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares are shown in equity as a deduction,
net of tax, from the proceeds.
Treasury shares
Where any Group company purchases the Company's equity share capital (treasury
shares), the consideration paid, including any directly attributable
incremental costs (net of income taxes) is deducted from equity attributable
to the Company's equity holders until the shares are cancelled or reissued.
Where such ordinary shares are subsequently reissued, any consideration
received, net of any directly attributable incremental transaction costs and
the related income tax effects, is included in equity attributable to the
Company's equity holders.
Share based compensation
Where equity settled share options are awarded to employees, the fair value of
the options at the date of grant is charged to the consolidated statement of
comprehensive income over the vesting period. Non-market vesting conditions
are taken into account by adjusting the number of equity instruments expected
to vest at each reporting date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of options that
eventually vest. Non-vesting conditions and market vesting conditions are
factored into the fair value of the options granted. As long as all other
vesting conditions are satisfied, a charge is made irrespective of whether the
market vesting conditions are satisfied. The cumulative expense is not
adjusted for failure to achieve a market vesting condition or where a
non-vesting condition is not satisfied. An option pricing model is used to
measure the fair value of the options.
Where the terms and conditions of options are modified before they vest, the
increase in the fair value of the options, measured immediately before and
after the modification, is also charged to the consolidated statement of
comprehensive income over the remaining vesting period.
Where the Company has no choice but to settle in cash, for example due to the
inability to settle in shares, the Company shall recognise an additional
expense for the excess value given at the settlement date.
Trade and other receivables
Trade and other receivables are accounted for under IFRS 9 using the expected
credit loss model and are initially recognised at fair value and subsequently
measured at amortised cost less any allowance for expected credit losses.
Impairment of financial assets
Impairment provisions for current and non-current trade receivables are
recognised based on the 'simplified approach' within IFRS 9 using a provision
matrix in the determination of the lifetime expected credit losses. During
this process the probability of the non-payment of the trade receivables is
assessed. This probability is then multiplied by the amount of the expected
loss arising from default to determine the lifetime expected credit loss for
the trade receivables. For trade receivables, which are reported net, such
provisions are recorded in a separate provision account with the loss being
recognised in profit or loss. On confirmation that the trade receivable will
not be collectable, the gross carrying value of the asset is written off
against the associated provision.
Impairment provisions for receivables from subsidiaries and loans to
subsidiaries are recognised based on the 'general approach' within IFRS 9. The
methodology used to determine the amount of the provision is based on whether
there has been a significant increase in credit risk since initial recognition
of the financial asset with the assessment also taking into account the
ability of the subsidiary to repay the receivable or loan in the event that it
was called due. For those where the credit risk has not increased
significantly since initial recognition of the financial asset, twelve month
expected credit losses along with gross interest income are recognised. For
those for which credit risk has increased significantly, lifetime expected
credit losses along with the gross interest income are recognised. For those
that are determined to be credit impaired, lifetime expected credit losses
along with interest income on a net basis are recognised. Lifetime expected
credit losses are the expected credit losses that result from all possible
default events over the expected life of the loan whereas twelve month
expected credit losses are a portion of lifetime expected credit losses that
represent the expected credit losses that result from default events that are
possible within twelve months of the reporting date.
From time to time, the Group elects to renegotiate the terms of trade
receivables due from customers with which it has previously had a good trading
history. Such renegotiations will lead to changes in the timing of payments
rather than changes to the amounts owed and, in consequence, the new expected
cash flows are discounted at the original effective interest rate and any
resulting difference to the carrying value is recognised in the consolidated
statement of comprehensive income (operating profit).
Trade and other payables
Trade and other payables are not interest bearing and are initially recognised
at fair value and subsequently measured at amortised cost using the effective
interest method.
Silver stream commitment
The silver stream arrangement has been accounted for as a commitment as the
Group has obligations to deliver silver to a third party at a price below
market value. On acquisition, following completion of the business
combination, the silver stream commitment was identified as an unfavourable
contract and recorded at fair value. Payments received under the arrangement
prior to the acquisition by the Group were not considered to be a transaction
with a customer. Management has determined that the agreement is not a
derivative as it will be satisfied through the delivery of non-financial items
(i.e. silver commodity from the Company's production), rather than cash or
financial assets. Subsequent to initial recognition the silver stream
commitment is not revalued and is amortised on a units of production basis to
cost of sales.
The fair value of consideration received for delivered silver under the
agreement is recorded as revenue. In addition, silver produced in
conjunction with the Group's lead and zinc production and sold under the
offtake agreement is recorded in gross revenue with a corresponding deduction
for silver purchased to deliver under the silver stream recorded in arriving
at net revenue.
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs
incurred. Borrowings are subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the borrowings using
the effective interest method. Fees paid on the establishment of loan
facilities are recognised as transaction costs of the loan to the extent that
it is probable that some or all of the facility will be drawn down. In this
case, the fee is deferred until the draw down occurs. To the extent there is
no evidence that it is probable that some or all of the facility will be drawn
down, the fee is capitalised as a prepayment for liquidity services and
amortised over the period of the facility to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in
the contract is discharged, cancelled or expired. The difference between the
carrying amount of a financial liability that has been extinguished or
transferred to another party and the consideration paid, including any
non-cash assets transferred or liabilities assumed, is recognised in profit or
loss as other income or finance costs.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12
months after the reporting period.
Derivative financial instruments
The Group may use commodity price contracts to reduce its exposure to risks
from commodity price movements. Derivative financial instruments are primarily
used as a means of managing exposure to price in line with the Group risk
management strategy. Derivative financial liabilities are initially recognised
and measured at fair value on the date a derivative contract is entered into
and then subsequently re-measured at fair value by reference to valuation
models and the probability of outcome scenarios and categorised as level 2
measurements:
· Quoted prices (unadjusted) in active markets for identical assets
or liabilities (level 1)
· Inputs other than quoted prices within level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices) (level 2)
· Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level 3). For the
derivative contracts held the Group are recognising the financial instruments
with level 2 data as the valuation is obtained using MTM market data using the
forward curve of the commodity prices. However, there is no readily observable
market information for these exact derivative instruments. The realised losses
gains are recognised in other gains and losses in the income statement.
Provisions
a) Asset retirement obligation
Provisions for environmental restoration of mining operations are recognised
when the Group has a present legal or constructive obligation as a result of
past events; it is probable that an outflow of resources will be required to
settle the obligation; and the amount can be reliably estimated. Provisions
are not recognised for future operating losses.
Provisions are measured at the present value of the expenditures expected to
be required to settle the obligation using a pre-tax rate that reflects
current market assessments of the time value of money and the cash flows
incorporate assessments of risk. The increase in the provision due to passage
of time is recognised as interest expense.
b) Employee benefits - pension
The Group, in the normal course of business, makes payments on behalf of its
employees for pensions, health-care, employment and personnel tax, which are
calculated based on gross salaries and wages according to legislation. The
cost of these payments is charged to the consolidated statement of
comprehensive income in the same period as the related salary cost.
c) Employee benefits - retirement benefits and jubilee awards
Pursuant to the labour law prevailing in the North Macedonian subsidiaries,
the Group is obliged to pay retirement benefits for an amount equal to two
average monthly salaries, at their retirement date. According to the
collective labour agreement, the Group is also obliged to pay jubilee
anniversary awards for each ten years of continuous service of the employee.
Due to the long-term nature of these plans, such estimates are subject to
uncertainty.
Retirement benefit obligations arising on severance pay are stated at the
present value of expected future cash payments towards the qualifying
employees. These benefits have been calculated by an independent actuary in
accordance with the prevailing rules of actuarial mathematics and recognised
as a liability with no pension plan assets (note 32). Actuarial gains and
losses arising from experience adjustments and changes in actuarial
assumptions are charged or credited to profit and loss over the employees'
expected average remaining working lives.
3. Financial instruments - risk management
The Group's activities expose it to a variety of financial risks; market price
risk (including foreign currency exchange risk, commodity price risk and
interest rate risk), liquidity risk, capital risk and credit risk. These
risks are mitigated wherever possible by the Group's financial management
policies and practices described below. The Group's risk management is
carried out by a central treasury department (Group treasury) under policies
approved by the Board. Group treasury identifies, evaluates and hedges
financial risks in close co-operation with the Group's operating units.
Foreign currency exchange risk
The Group operates internationally and is exposed to foreign exchange risk
arising from various currency exposures. The primary Group currency
requirements are US Dollar, British Pound, Kazakhstan Tenge, Euro and North
Macedonian Denar.
The following table highlights the major currencies the Group operates in and
the movements against the US Dollar during the course of the
year:
Average rate Reporting date spot rate
2022 2021 Movement 2022 2021 Movement
Kazakhstan Tenge 460.15 425.91 8% 462.65 431.67 7%
Macedonian Denar 58.36 52.06 12% 57.65 54.37 6%
British Pound 0.80 0.73 10% 0.83 0.74 12%
Foreign exchange risk does not arise from financial instruments that are
non-monetary items or financial instruments denominated in the functional
currency. Kazakhstan Tenge and North Macedonian Denar denominated monetary
items are therefore not reported in the tables below, as the functional
currency of the Group's Kazakhstan-based and North Macedonian-based
subsidiaries is the Tenge and Denar respectively.
The Group's exposure to foreign currency risk based on US Dollar equivalent
carrying amounts at the reported date:
In $'000 equivalent
Group
2022
USD EUR GBP
Cash and cash equivalents 20,055 556 886
Trade and other receivables - 2 167
Trade and other payables (20) (333) (3,268)
Net exposure 20,035 225 (2,215)
In $'000 equivalent
Group
2021
USD EUR GBP
Cash and cash equivalents 10,495 865 2,452
Trade and other receivables 203 151 187
Trade and other payables (66) (353) (3,395)
Net exposure 10,632 663 (756)
Trade and other receivables excludes prepayments and VAT receivable and trade
and other payables excludes corporation tax, social security and other taxes
as they are not considered financial instruments.
At 31 December 2022, if the foreign currencies had weakened/strengthened by
10% against the US Dollar, post-tax Group profit for the year would have been
$1,804,000 lower/higher (2021: $1,021,000 lower/higher).
Commodity price risk
The Group has a hedging policy in place to manage commodity price risk however
the Directors elected not to hedge during 2022.
The offtake agreement at Kounrad and Sasa provides for the option of
provisional pricing i.e. the selling price is subject to final adjustment at
the end of the quotation period based on the average price for the month
following delivery to the buyer. This could result in fluctuations of
revenue recognised ultimately. The Company may mitigate commodity price risk
by fixing the price in advance for its copper cathode sales with the offtake
partner.
The following table details the Group's sensitivity to a 10% increase and
decrease in the copper, zinc and lead price against the invoiced price. 10% is
the sensitivity used when reporting commodity price internally to management
and represents management's assessment of the possible change in price. A
positive number below indicates an increase in profit for the year and other
equity where the price increases.
Estimated effect on earnings and equity
2022 2021
$'000 $'000
10% increase in copper, zinc and lead price 23,931 17,312
10% decrease in copper, zinc and lead price (23,931) (17,535)
Liquidity risk
Liquidity risk relates to the ability of the Group to meet future obligations
and financial liabilities as and when they fall due. The Group currently has
sufficient cash resources and a material income stream from the Kounrad and
Sasa projects.
The following table sets out the contractual maturities (representing
undiscounted contractual cash-flows) of financial liabilities. They agree to
those amounts presented in the statement of financial position because the
impact of discounting is immaterial.
Future expected payments: Group
31 Dec 22 $'000 31 Dec 21 $'000
Trade and other payables within one year 12,751 8,224
Borrowings payable within one year (note 31) 1,390 32,978
Lease liability payable within one year 295 302
Lease liability payable later than one year but not later than five years 10 334
14,446 41,838
Capital risk
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal
structure to reduce the cost of capital.
The Group manages its capital in order to provide sufficient funds for the
Group's activities. Future capital requirements are regularly assessed and
Board decisions taken as to the most appropriate source for obtaining the
required funds, be it through internal revenue streams, external fund raising,
issuing new shares or selling assets. In order to maintain or adjust the
capital structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets
to reduce debt.
Consistent with others in the industry, the Group monitors capital on the
basis of the following gearing ratio:
Net cash
2022 2021
Note $'000 $'000
Cash and cash equivalents excluding restricted cash 25 60,298 55,695
Bank overdraft 31 (1,390) (9,572)
Borrowings repayable within one year 31 - (23,406)
Net cash 58,908 22,717
Total equity 368,120 409,247
Net cash to equity ratio 16% 6%
Changes in liabilities arising from financing activities
The total borrowings as at 1 January 2022 were $32,978,000 (1 January 2021:
$80,412,000). During the year, total repayments on the corporate debt package
were $23,820,000 (2021: $48,400,000). During the year, there were drawdowns on
unsecured overdrafts of $nil (2021: $644,000) and repayments of $7,531,000
(2021: $nil). Other changes amounted to a reduction of $237,000 (2021:
increase of $322,000) leading to a closing debt balance of $1,390,000 (2021:
$32,978,000). See note 31 for more details.
The cash and cash equivalents including cash at bank and on hand in assets
held for sale brought forward were $55,731,000 (2021: $44,287,000) with a net
$4,630,000 inflow (2021: $11,444,000 inflow) during the year and therefore a
closing balance of $60,361,000 (2021: $55,731,000).
Credit risk
Credit risk refers to the risk that the Group's financial assets will be
impaired by the default of a third party. The Group is exposed to credit risk
primarily on its cash and cash equivalents as set out in note 25 and on its
trade and other receivables as set out in note 23. The Group sells a minimum
of 95% of Kounrad's copper cathode production to the offtake partner which
pays on the day of dispatch and during the year 100% of Sasa's zinc and lead
concentrate was sold to Traxys which assumes the credit risk.
For banks and financial institutions, only parties with a minimum rating of
BBB- are accepted. 91% of the Group's cash and cash equivalents including
restricted cash at the year-end were held by banks with a minimum credit
rating of A- (2021: 98%). The rest of the Group's cash was held with a mix of
institutions with credit ratings between A to BB- (2021: A to BBB-). The
Directors have considered the credit exposures and do not consider that they
pose a material risk at the present time. The credit risk for cash and cash
equivalents is managed by ensuring that all surplus funds are deposited only
with financial institutions with high quality credit ratings.
The expected credit loss for intercompany loans receivable is considered
immaterial (note 23).
Interest rate risk
The Group's main interest rate risk arose from the corporate debt which was
repaid during the year.
Categories of financial instruments
Financial assets
Cash and receivables: Group
31 Dec 22 $'000 31 Dec 21 $'000
Cash and cash equivalents including restricted cash (note 25) 60,562 59,211
Trade and other receivables 4,178 2,343
64,740 61,554
Trade and other receivables excludes prepayments and VAT receivable as they
are not considered financial instruments. All trade and other receivables
are receivable within one year for both reporting years.
Financial liabilities
Measured at amortised cost: Group
31 Dec 22 $'000 31 Dec 21 $'000
Trade and other payables within one year 12,751 8,224
Borrowings payable within one year (note 31) 1,390 32,978
Lease liability within one year 295 334
Lease liability payable later than one year but not later than five years 10 302
14,446 41,838
Trade and other payables excludes the silver streaming commitment, corporation
tax, social security and other taxes as they are not considered financial
instruments.
4. Critical accounting estimates and judgements
The preparation of the consolidated financial statements requires management
to make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities,
income, and expense. Actual results may differ from these judgements and
estimates. The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. In the future, actual
experience may differ from these estimates and assumptions.
Significant accounting estimates and judgements
The following are significant accounting estimates and judgements that have a
significant risk of a material change to the carrying value of assets and
liabilities within the next financial year:
Impairment of non-current assets
The carrying value of the goodwill generated by accounting for the business
combination of the Group acquiring an additional 40% in the Kounrad project in
May 2014 (the "Kounrad Transaction") and the CMK Resources Limited acquisition
in November 2017 requires an annual impairment review. The carrying values of
property, plant and equipment are reviewed for impairment if events or changes
in circumstances indicate the carrying value may not be recoverable. This
review determines whether the value of the goodwill and property, plant and
equipment can be justified by reference to the carrying value of the business
assets and the future discounted cash flows of the respective CGUs. The key
assumptions used in the Group's impairment assessments and sensitivity
analysis are disclosed in note 20.
Estimates are required periodically to assess assets for impairment. The
critical accounting estimates are future commodity prices, treatment charges,
future ore production, discount rates and projected future costs of
development and production. Ore reserves and resources included in the
forecasts include certain resources considered to be sufficiently certain and
economically viable. The Group's resources statements include additional
resources which are not included in the life of mine plan or impairment test.
Decommissioning and site rehabilitation estimates
Provision is made for the costs of decommissioning and site rehabilitation
costs ("asset retirement obligation") when the related environmental
disturbance takes place. External expert consultants conducted an independent
assessment and judgement and experience is used in determining the expected
timing, closure and decommissioning methods, which can vary in response to
changes in the relevant legal requirements or decommissioning technologies.
The estimated Sasa decommissioning costs included a re-assessment of the
surrounding managing surface water in-line with the GISTM and lining of the
tailings facilities as well as updating the discount rate using latest
assumptions on inflation rates and discount rates.
During the year, the Group engaged an external expert consultant to prepare a
conceptual closure plan and asset retirement obligation for the Kounrad
operation and associated infrastructure. The increase in estimate in relation
to the asset retirement obligation is primarily due to additional estimated
costs.
The discounted provision recognised represents management's best estimate of
the costs that will be incurred, and many of these costs will not crystallise
until the end of the life of the mine. Estimates are reviewed annually and are
based on current contractual and regulatory requirements and the estimated
useful life of mines. Engineering and feasibility studies are undertaken
periodically and in the interim management make assessments for appropriate
changes based on the environmental management strategy; however significant
changes in the estimates of contamination, restoration standards, timing of
expenditure and techniques will result in changes to provisions from period to
period.
The Group has performed sensitivity analysis of reasonable possible changes in
the significant assumptions taking into account historical experience, however
the estimates may vary by greater amounts. A 2% change in the discount rate
would result in an impact of $4,591,000 on the provision for asset retirement
obligation. A 2% change in the inflation rate would result in an impact of
$6,339,000 on the provision for asset retirement obligation. A 20% change in
cost would result in an impact of $3,976,000 on the provision for asset
retirement obligation.
Mineral reserves and resources
The major value associated with the Group is the value of its mineral reserves
and resources. The value of the reserves and resources have an impact on the
Group's accounting estimates in relation to depreciation and amortisation,
impairment of assets and the assessment of going concern. These resources
are the Group's best estimate of product that can be economically and legally
extracted from the relevant mining property.
The Group's estimates are supported by geological studies and drilling samples
to determine the quantity and grade of each deposit. The Group estimates its
mineral reserves and resources based on information compiled by Competent
Persons as defined in accordance with the Joint Ore Reserves Committee (JORC)
code. The Kounrad resources were classified as JORC Compliant in 2013 and
mineral resources were estimated in June 2017 and the Sasa JORC ore reserves
and mineral resources were estimated on 31 December 2022.
The estimation of mineral reserves and resources requires judgement to
interpret available geological data to select an appropriate mining method.
Estimation requires assumptions about future commodity prices, exchange rates,
production costs, closure costs and discount rates. Ore resource estimates
may vary from period to period. This judgement has a significant impact on
impairment consideration and the period over which capitalised assets are
depreciated within the financial statements.
Tax
Management make judgements in relation to the recognition of various taxes
payable and receivable by the Group and VAT recoverability for which the
recoverability and timing of recovery is assessed. The Group operates in
jurisdictions which necessarily require judgment to be applied when assessing
the applicable tax treatment for transactions and the Group obtains
professional advice where appropriate to ensure compliance with applicable
legislation. To the extent that a final tax outcome is different than the
amounts recorded, such differences will impact income tax in the period in
which such determination is made.
5. Segmental information
The segmental results for the year ended 31 December 2022 are as follows:
Kounrad $'000 Sasa Unallocated Total
$'000 $'000 $'000
Gross revenue 123,657 108,549 - 232,206
Silver stream purchases - (7,080) - (7,080)
Offtake buyers' fees (3,090) (1,181) - (4,271)
Revenue 120,567 100,288 - 220,855
EBITDA 94,920 56,397 (19,706) 131,611
Depreciation and amortisation (3,705) (23,330) (250) (27,285)
Foreign exchange gain 3,287 3,318 224 6,829
Impairment of non-current assets (note 19,20) - (55,116) - (55,116)
Other income (note 11) 50 36 - 86
Finance income (note 15) 29 - 486 515
Finance costs (note 16) (214) (1,040) (806) (2,060)
Profit/(loss) before income tax 94,367 (19,735) (20,052) 54,580
Income tax (20,588)
Profit for the year after tax from continuing operations 33,992
Loss from discontinued operations (187)
Profit for the year 33,805
Depreciation and amortisation include amortisation on the fair value uplift on
acquisition of Sasa and Kounrad of $15,419,000.
The segmental results for the year ended 31 December 2021 are as follows:
Kounrad $'000 Sasa Unallocated Total
$'000 $'000 $'000
Gross revenue 132,039 103,113 - 235,152
Silver stream purchases - (8,040) - (8,040)
Offtake buyers' fees (2,586) (1,154) - (3,740)
Revenue 129,453 93,919 - 223,372
EBITDA 105,966 57,472 (21,934) 141,504
Depreciation and amortisation (4,007) (25,321) (244) (29,572)
Foreign exchange gain/(loss) 673 599 (58) 1,214
Other income (note 11) 147 7 12 166
Other expenses (note 10) (4) - (135) (139)
Finance income (note 15) 14 - 60 74
Finance costs (note 16) (157) (479) (3,284) (3,920)
Profit/(loss) before income tax 102,632 32,278 (25,583) 109,327
Income tax (25,147)
Profit for the year after tax from continuing operations 84,180
Loss from discontinued operations (4)
Profit for the year 84,176
Depreciation and amortisation include amortisation on the fair value uplift on
acquisition of Sasa and Kounrad of $16,900,000.
A reconciliation between profit for the year and EBITDA is presented in the
Financial Review section.
Group segmental assets and liabilities for the year ended 31 December 2022 are
as follows:
Segmental assets Additions to non-current assets Segmental liabilities
31 Dec 22 31 Dec 21 31 Dec 22 31 Dec 21 31 Dec 22 31 Dec 21
$'000 $'000 $'000 $'000 $'000 $'000
Kounrad 82,258 70,316 2,525 2,704 (13,928) (11,637)
Sasa 324,197 405,928 14,920 12,104 (54,718) (69,980)
Assets held for sale (note 22) 64 38 - - (44) (28)
Unallocated including corporate 36,526 44,307 19 17 (6,235) (29,697)
443,045 520,589 17,464 14,825 (74,925) (111,342)
6. Revenue
2022 2021
Group $'000 $'000
International customers (Europe) - copper cathode 122,371 131,464
International customers (Europe) - zinc and lead concentrate 106,578 101,241
Domestic customers (Kazakhstan) - copper cathode 1,286 574
International customers (Europe) - silver 1,971 1,873
Total gross revenue 232,206 235,152
Less:
Silver stream purchases (7,080) (8,040)
Offtake buyers' fees (4,271) (3,740)
Revenue 220,855 223,372
Kounrad
The Group sells and distributes its copper cathode product primarily through
an offtake arrangement with Traxys. The offtake arrangements are for a minimum
of 95% of the SX-EW plant's output. Revenue is recognised at the Kounrad mine
gate when the goods have been delivered in accordance with the contractual
delivery terms.
The offtake agreement provides for the option of provisional pricing i.e. the
selling price is subject to final adjustment at the end of the quotation
period based on the average price for the month following delivery to the
buyer. The Company may mitigate commodity price risk by fixing the price in
advance for its copper cathode sales with the offtake partner.
The costs of delivery to the end customers have been effectively borne by the
Group through means of an annually agreed buyer's fee which is deducted from
the selling price.
During 2022, the Group sold 14,192 tonnes (2021: 13,983 tonnes) of copper
through the offtake arrangements. Some of the copper cathodes are also sold
locally and during 2022, 150 tonnes (2021: 68 tonnes) were sold to local
customers.
Sasa
The Group sells Sasa's zinc and lead concentrate product to smelters through
an offtake arrangement with Traxys. The commitment is for 100% of the Sasa
concentrate production. The agreements with the smelters provide for
provisional pricing i.e. the selling price is subject to final adjustment at
the end of the quotation period based on the average price for the month, two
months or three months following delivery to the buyer and subject to final
adjustment for assaying results.
The Group sold 17,862 tonnes (2021: 18,856 tonnes) of payable zinc in
concentrate and 26,320 tonnes (2021: 25,245 tonnes) of payable lead in
concentrate.
The revenue arising from silver relates to a contract with Osisko Gold
Royalties where the Group has agreed to sell all of its silver at
approximately $6 per ounce for the life of the mine, significantly below
market value and arising from the silver stream commitment inherited on
acquisition (note 30).
7. Cost of sales
Group 2022 2021
$'000 $'000
Reagents, electricity and materials 27,989 21,157
Depreciation and amortisation 26,709 28,937
Silver stream commitment (note 30) (1,971) (1,873)
Royalties 10,117 10,062
Employee benefit expense 17,951 16,356
Consulting and other services 6,106 5,491
Taxes and duties 370 381
87,271 80,511
8. Distribution and selling costs
2022 2021
Group $'000 $'000
Freight costs 1,934 1,800
Transportation costs 24 19
Depreciation and amortisation 5 11
Materials and other expenses 203 286
2,166 2,116
The above distribution and selling costs are those incurred at Kounrad and
Sasa in addition to the costs associated with the offtake arrangements.
9. Administrative expenses
Group 2022 2021
$'000 $'000
Employee benefit expense 11,382 10,360
Share based payments (note 28) 4,494 2,449
Consulting and other services 8,090 7,114
Auditors' remuneration (note 12) 486 430
Office-related and travel costs 1,652 922
Taxes and duties 417 178
Depreciation and amortisation 571 624
Total from continuing operations 27,092 22,077
Total from discontinued operations (note 22) 179 18
27,271 22,095
10. Other losses
Group 2022 2021
$'000 $'000
Realised losses on financial derivatives - 6,736
Other expenses - 139
- 6,875
During 2021, the Group entered into commodity price hedge contracts for a
portion of its 2021 metal production. As a result of these financial
instruments, in the prior year ended 31 December 2021, the Company recognised
$6,736,000 of realised losses. These financial instruments expired at the end
of 2021 and therefore there are were no hedging gains or losses during the
year ending 31 December 2022. The Group did not put in place any further hedge
contracts during the year.
11. Other income
Group 2022 2021
$'000 $'000
Gain on disposal of property, plant and equipment - 2
Other income 86 164
86 166
12. Auditors' remuneration
During the year, the Group obtained the following services from the Company's
Auditors and its associates:
2022 2021
$'000 $'000
Fees payable to BDO LLP the Company's Auditors for the audit of the parent
company and consolidated financial statements
243 230
Fees payable to BDO LLP the Company's Auditors and its associates for other 183 145
services:
- The audit of Company's subsidiaries
Fees payable to BDO LLP the Company's Auditors and its associates for other
services:
60 55
- Other assurance services
486 430
13. Employee benefit expense
The aggregate remuneration of staff, including Directors, was as follows:
Group 2022 2021
$'000 $'000
Wages and salaries 22,374 19,878
Social security costs and similar taxes 2,859 2,802
Staff healthcare and other benefits 3,187 2,141
Other pension costs 2,929 3,238
Share based payment expense (note 28) 4,494 2,449
Total for continuing operations 35,843 30,508
Total for discontinuing operations (note 22) 74 75
35,917 30,583
The total employee benefit expense includes an amount of $2,016,000 (2021:
$1,418,000) which has been capitalised within property, plant and equipment.
Company 2022 2021
$'000 $'000
Wages and salaries 6,779 6,091
Social security costs 1,328 1,098
Staff healthcare and other benefits 584 595
Other pension costs 108 114
Share based payments (note 28) 4,494 2,449
13,293 10,347
Key management remuneration is disclosed in the Remuneration Committee report.
14. Monthly average number of people employed
Group 2022 2021
Number Number
Operational 944 934
Management and administrative 148 133
1,092 1,067
The monthly average number of staff employed by the Company during the year
was 19 (2021: 18).
15. Finance income
Group 2022 2021
$'000 $'000
Bank interest received 515 74
515 74
16. Finance costs
Group 2022 2021
$'000 $'000
Provisions: unwinding of discount (note 32) 1,088 347
Interest on borrowings (note 31) 910 3,483
Lease interest expense and bank charges 62 90
Total for continuing operations 2,060 3,920
17. Income tax
Group 2022 2021
$'000 $'000
Current tax on profits for the year 25,142 26,610
Deferred tax credit (note 37) (4,554) (1,463)
Income tax expense 20,588 25,147
Taxation for each jurisdiction is calculated at the rates prevailing in the
respective jurisdictions.
The tax on the Group's profit before tax differs from the theoretical amount
that would arise using the weighted average tax rate applicable to profits of
the consolidated entities as follows:
2022 2021
Group $'000 $'000
Profit before income tax 54,580 109,327
Tax calculated at domestic tax rates applicable to profits in the respective 10,117 19,244
countries
Tax effects of:
Expenses not deductible for tax purposes 12,546 4,309
Deferred income tax credit (note 37) (4,554) (1,463)
Movement on unrecognised deferred tax - tax losses 2,479 3,057
Income tax expense 20,588 25,147
Corporate income tax is calculated at 19% (2021: 19%) of the assessable profit
for the year for the UK parent company, 20% for the operating subsidiaries in
Kazakhstan (2021: 20%) and 10% (2021: 10%) for the operating subsidiaries in
North Macedonia.
Expenses not deductible for tax purposes includes share-based payment charges,
transfer pricing adjustments in accordance with local tax legislation,
impairment and depreciation and amortisation charges.
Deferred tax assets have not been recognised on tax losses primarily at the
parent company as it remains uncertain whether this entity will have
sufficient taxable profits in the future to utilise these losses.
18. Earnings/(loss) per share
(a) Basic
Basic earnings/(loss) per share is calculated by dividing the profit/(loss)
attributable to owners of the Company by the weighted average number of
Ordinary Shares in issue during the year excluding Ordinary Shares purchased
by the Company and held as treasury shares (note 26).
2022 2021
$'000 $'000
Profit from continuing operations attributable to owners of the parent 33,998 84,181
Loss from discontinued operations attributable to owners of the parent (187) (4)
Profit attributable to owners of the parent 33,811 84,177
2022 2021
No. No.
Weighted average number of Ordinary Shares in issue 177,955,800 176,498,266
2022 2021
$ cents $ cents
Earnings/(loss) per share from continuing and discontinued operations
attributable to owners of the parent during the year (expressed in $ cents per
share)
From continuing operations 19.10 47.69
From discontinued operations (0.10) -
From profit for the year 19.00 47.69
(b) Diluted
The diluted earnings/(loss) per share is calculated by adjusting the weighted
average number of ordinary shares outstanding after assuming the conversion of
all outstanding granted share options.
2022 2021
No. No.
Weighted average number of Ordinary Shares in issue 177,955,800 176,498,266
Adjusted for:
- Share options 6,914,311 5,589,467
Weighted average number of Ordinary Shares for diluted earnings per share 184,870,111 182,087,733
Diluted earnings/(loss) per share 2022 2021
$ cents $ cents
From continuing operations 18.39 46.23
From discontinued operations (0.10) -
From profit for the year 18.29 46.23
(c) Adjusted basis earnings per share
To allow comparability, the Directors believe that the Adjusted EPS provides a
more appropriate representation of the underlying earnings of the Group
adjusting for the impairment of non-current assets and the corresponding
deferred tax movement arising from the impairment of mineral rights. This is
considered a one-off impairment and not expected to be recurring.
The adjusting items are shown in the table below:
2022 2021
$'000 $'000
Profit from continuing operations attributable to owners of the parent 33,998 84,181
Adjustments:
Impairment of non-current assets 55,116 -
Deferred tax movement resulting from impairment of mineral rights (3,419) -
Adjusted profit from continuing operations attributable to owners of the 85,695 -
parent
Loss from discontinued operations attributable to owners of the parent (187) (4)
Adjusted profit attributable to owners of the parent 85,508 84,177
2022 2021
$ cents $ cents
Adjusted earnings/(loss) per share from continuing and discontinued operations
attributable to owners of the parent during the year (expressed in $ cents per
share)
From adjusted continuing operations 48.15 47.69
From discontinued operations (0.10) -
From adjusted profit for the year 48.05 47.69
(d) Adjusted diluted earnings per share
Adjusted diluted earnings/(loss) per share 2022 2021
$ cents $ cents
From adjusted continuing operations 46.35 46.23
From discontinued operations (0.10) -
From adjusted profit for the year 46.25 46.23
19. Property, plant and equipment
Group Construction in Plant and Total
progress equipment $'000
$'000 $'000 Motor vehicles and ROU assets $'000
Mining Mineral
assets Land rights
$'000 $'000 $'000
Cost
At 1 January 2021 4,737 146,799 1,292 2,874 677 369,029 525,408
Additions 14,268 456 - 45 - - 14,769
Disposals (17) (24) - - (41)
Change in estimate - asset retirement obligation (note 32)
- 8,981 - - - - 8,981
Transfers (9,846) 9,843 - 3 - - -
Exchange differences (499) (5,643) (33) (38) (51) (23,259) (29,523)
At 31 December 2021 8,643 160,412 1,259 2,884 626 345,770 519,594
Additions 17,054 143 - 199 - - 17,396
Disposals - (244) - (43) - - (287)
Change in estimate - asset retirement obligation (note 32)
- 1,153 - - - - 1,153
Transfers (9,282) 9,282 - - - - -
Exchange differences (410) (6,153) (84) (96) (36) (15,809) (22,588)
At 31 December 2022 16,005 164,593 1,175 2,944 590 329,961 515,268
Accumulated depreciation and impairment
At 1 January 2021 - 50,266 401 1,532 - 55,164 107,363
Provided during the year - 12,006 112 380 - 15,374 27,872
Disposals - (19) - (8) - - (27)
Exchange differences - (471) (10) (22) - - (503)
At 31 December 2021 - 61,782 503 1,882 - 70,538 134,705
Provided during the year - 11,659 111 381 - 13,581 25,732
Impairment (note 20) - - - - - 34,195 34,195
Disposals - (144) - (42) - - (186)
Exchange differences - (1,281) (34) (60) - - (1,375)
At 31 December 2022 - 72,016 580 2,161 - 118,314 193,071
Net book value at 31 December 2021 8,643 98,630 756 1,002 626 275,232 384,889
Net book value at 31 December 2022 16,005 92,577 595 783 590 211,647 322,197
The Company had $184,000 of office equipment at net book value as at 31
December 2022 (2021: $410,000).
The increase in estimate in the asset retirement obligation of $1,153,000, in
relation to both Kounrad and Sasa, is due to a combination of adjusting the
provision recognised at the net present value of future expected costs using
latest assumptions on inflation rates and discount rates as well as updating
the provision for management's best estimate of the costs that will be
incurred based on current contractual and regulatory requirements (note 32).
During the year there were total disposals of plant, property and equipment at
cost of $287,000 (2021: $41,000) with accumulated depreciation of $186,000
(2021: $27,000). The Group received $7,000 (2021: $16,000) consideration for
these assets and therefore a loss of $94,000 was recognised (2021: gain of
$2,000).
Amounts recognised in the income statement
The income statement shows the following amounts relating to leases:
2022 2021
$'000 $'000
Depreciation charge of right-of-use assets
Office 48 171
Other 123 121
171 292
Interest expense included in finance costs 18 77
20. Intangible assets
Group Goodwill Mining licences and permits Computer Total
$'000 $'000 software and website $'000
$'000
Cost
At 1 January 2021 31,553 36,160 271 67,984
Additions - - 56 56
Exchange differences (1,681) (1,136) (3) (2,820)
At 31 December 2021 29,872 35,024 324 65,220
Additions - - 68 68
Exchange differences (1,536) (1,654) (3) (3,193)
At 31 December 2022 28,336 33,370 389 62,095
Accumulated amortisation and impairment
At 1 January 2021 - 11,082 262 11,344
Provided during the year - 1,847 17 1,864
Exchange differences - (79) 1 (78)
At 31 December 2021 - 12,850 280 13,130
Provided during the year - 1,689 23 1,712
Impairment 20,921 - - 20,921
Exchange differences - (219) (1) (220)
At 31 December 2022 20,921 14,320 302 35,543
Net book value at 31 December 2021 29,872 22,174 44 52,090
Net book value at 31 December 2022 7,415 19,050 87 26,552
The Company had nil intangible assets at net book value as at 31 December 2022
(2021: nil).
Impairment assessment
In accordance with IAS 36 "Impairment of assets" and IAS 38 "Intangible
Assets", a review for impairment of goodwill is undertaken annually or at any
time an indicator of impairment is considered to exist and in accordance with
IAS 16 "Property, plant and equipment", a review for impairment of long-lived
assets is undertaken at any time an indicator of impairment is considered to
exist. The recoverable amounts of the goodwill and property, plant and
equipment were measured based on net present value. The net present value of
all CGUs are determined by discounted cash flow techniques based on the most
recent approved financial budgets, underpinned and supported by the life of
asset plans of the respective operations.
The valuation models use a combination of internal sources and those inputs
available to a market participant, which comprise the most recent reserve and
resource estimates, relevant cost assumptions and where possible, market
forecasts of commodity price and foreign exchange rate assumptions, discount
rates.
The valuations generally remain most sensitive to price and a deterioration /
improvement in the pricing outlook may result in additional
impairments/reversals. When undertaken, an impairment review is completed for
each Cash Generating Unit (CGU).
Kounrad project
The Kounrad project located in Kazakhstan has an associated goodwill balance
of $7,415,000 (2021: $7,948,000), the movement being solely due to foreign
exchange differences.
In accordance with IAS 36 'Impairment of assets' and IAS 38 'Intangible
Assets', a review for impairment of goodwill is undertaken annually or at any
time an indicator of impairment is considered to exist and in accordance with
IAS 16 'Property, plant and equipment', a review for impairment of long-lived
assets is undertaken at any time an indicator of impairment is considered to
exist. The discount rate applied to calculate the present value is based upon
the nominal weighted average cost of capital applicable to the cash generating
unit ('CGU'). A CGU is the smallest identifiable group of assets that
generates cash inflows that are largely independent of the cash inflows from
other assets or groups of assets. The recoverable amount of the CGU is
assessed by reference to the higher of value in use ('VIU'), being the net
present value ('NPV') of future cash flows expected to be generated by the
asset, and fair value less costs to dispose ('FVLCD'). The FVLCD is considered
to be higher than VIU and has been derived using discounted cash flow
techniques (NPV of expected future cash flows of a CGU), which incorporate
market participant assumptions.
The discount rate reflects equity risk premiums over the risk-free rate, the
impact of the remaining economic life of the CGU and the risks associated with
the relevant cash flows based on the country in which the CGU is located.
These risk adjustments are based on observed equity risk premiums, country
risk premiums and average credit default swap spreads for the period.
The Kounrad cash flows have been projected until 2034, the remaining life of
operation, and the key economic assumptions used in the review were a
five-year forecast average nominal copper price of $7,777 per tonne (2021:
$7,914 per tonne) and a long-term price of $7,436 per tonne (2021: $7,592 per
tonne) based on market consensus prices and a discount rate of 8.07% (2021:
8.07%) as well as market inflation rates. Assumptions in relation to
operational and capital expenditure are based on the latest budget approved by
the Board.
The carrying value of the net assets is not currently sensitive to any
reasonable changes in key assumptions. Management concluded and the net
present value of the asset is significantly in excess of the net book value of
assets, and therefore no impairment has been identified.
Sasa project
Prior to the current year impairment, the Sasa project located in North
Macedonia, had an associated goodwill balance of $20,921,000 (2021:
$21,924,000), the movement being solely due to foreign exchange differences.
The business combination in 2017 was accounted for at fair value under IFRS 3
and therefore recoverable value is sensitive to changes in commodity prices,
operational performance, treatment charges, future cash costs of production
and capital expenditures. In accordance with IAS 36 'Impairment of assets'
and IAS 38 'Intangible Assets', a review for impairment of goodwill is
undertaken annually or at any time an indicator of impairment is considered to
exist and in accordance with IAS 16 'Property, plant and equipment', a review
for impairment of long-lived assets is undertaken at any time an indicator of
impairment is considered to exist.
The assessment compared the recoverable amount of the Sasa Cash CGU with cash
flows projected until 2040, over the remaining life of mine and post closure
costs with its carrying value for the year ended 31 December 2022. The
recoverable amount of the CGU is assessed by reference to the higher of VIU,
being the NPV of future cash flows expected to be generated by the asset, and
FVLCD. The FVLCD has been derived using discounted cash flow techniques (NPV
of expected future cash flows of a CGU), which incorporate market participant
assumptions. Cost to dispose is based on management's best estimates of future
selling costs at the time of calculating FVLCD. Costs attributable to the
disposal of the CGU are not considered significant. The methodology used for
the fair value is a level 3 valuation.
The expected future cash flows utilised in the FVLCD model are derived from
estimates of projected future revenues based on broker consensus commodity
prices, treatment charges, future cash costs of production and capital
expenditures contained in the life of mine ('LOM') plan, and as a result FVLCD
is considered to be higher than VIU. The Group's discounted cash flow analysis
reflects probable reserves as well as indicated resources and certain inferred
resources which are considered sufficiently certain and economically viable,
and is based on detailed research, analysis and modelling. The forecast
operational and capital expenditure reflects the transition of mining method
from sub-level caving to cut and fill stoping.
At 31 December 2022, the Group has reviewed the indicators for impairment,
including forecasted commodity prices, treatment charges, discount rates,
operating and capital expenditure, and the mineral reserves and resources'
estimates. Following an analysis management have decided to recognise an
impairment charge due to the following factors:
· Completion of the life of mine study at the year end and
therefore amending the financial model inputs for updated reserves, resources
and expected 830,000 tonne long-term plant throughput capacity per annum
(reduced from 900,000 tonnes). The Resource and Reserves are both reported
using Net Smelter Return cut-off values and the Resources have decreased due
to management's assessment of those which are economically viable and capable
of future extraction.
· An increase in the discount rate to 12.52% (2021: 10.21%)
supported by a detailed WACC calculation considering both the country and
company risk premiums. These are affected by external economic conditions with
significant global inflation and an increase in risk applied to calculate the
present value of the CGU. The main factor behind the increase in discount rate
is the rise US treasury yields and a higher country risk premium given where
the Group operates.
· The key economic assumptions used in the review were a five-year
forecast average nominal zinc and lead price of $2,760 and $2,081 per tonne
respectively and a long-term price of $2,467 and $1,874 per tonne respectively
based on market consensus prices inflated at 3.1%.
· The financial model calculation also factors in cost increases
for energy and wages to reflect near-term inflationary pressures facing the
Group reflecting the current macroeconomic environment using market inflation
rates.
· Indicated and 30% of inferred resources from Golema Reka have
been added to the end of life of mine in accordance with the Resources
statement in the Competent Person Report are considered to have a sufficient
level of confidence of economic extraction.
These revised changes resulted in a reduction of Sasa's estimated recoverable
value to $257,525,0000 recognising an impairment charge of $55,116,000 through
the income statement. This has been recognised as $20,921,000 against the
total Sasa goodwill in intangible assets. The impairment charge of $34,195,000
related to property, plant and equipment has been recorded against mineral
rights as the impairment is largely due to a reduction to the ore reserves and
resources and consequential extraction profile, such that certain ore reserves
and resources are excluded from the Life of Mine and the related mineral
rights impaired accordingly. The fair value of the mineral rights was
initially determined as part of the purchase price allocation ('PPA') when
CAML acquired the Sasa mine in 2017.
Management have performed sensitivity analyses whereby certain parameters were
flexed upwards and downwards by reasonable amounts for the CGU to assess
whether this would increase the impairment charge or reduce the impairment.
The following sensitivities were applied as part of the assessment:
Parameter Sensitivity applied Increased impairment Reduced impairment
$'000 $'000
Zinc price (5%)/5% change 14,100 (13,800)
Lead price (5%)/5% change 20,400 (22,100)
Discount rate Increase to 15%/decrease to 10% 27,600 (34,100)
Treatment charges 20%/(20%) change 19,800 (19,800)
Head grade (5%)/5% change 29,500 (29,500)
Capital expenditure 10%/(10%) change 7,200 (7,200)
The Group exercises judgement in making assumptions on the inputs into the
model and are comfortable the most reliable inputs have been applied in
assessment the FVLCD and therefore the downward sensitivities outlined above
are as likely as upward sensitivities and therefore feel no further impairment
is necessary.
The Group has measured the FVLCD using various fair value measurements
obtaining inputs from market data. It has used quoted prices (level 1) inputs
for its commodity price assumptions, inflation rates, exchange rates and
discount rate. The treatment charges have been forecast over life of mine
using assumptions based on market data (level 2).
At the balance sheet date, the Board considers the base case forecasts to be
appropriate and balanced best estimates.
21. Investments
Shares in Group undertakings:
Company
31 Dec 22 $'000 31 Dec 21 $'000
At 1 January 5,107 5,491
Impairment of investment in KBV - (384)
At 31 December 5,107 5,107
Investments in Group undertakings are recorded at cost which is the fair value
of the consideration paid, less impairment.
Details of the Company holdings are included in the table below:
Subsidiary Registered office address Activity Non-controlling interest %
2022
CAML % CAML % Date of incorporation
2022 2021
CAML KZ Limited Masters House, 107 Hammersmith Road, London, W14 0QH, United Kingdom Holding Company 100 - 100 28 June 2021
CAML MK Limited Masters House, 107 Hammersmith Road, London, W14 0QH, United Kingdom Seller of zinc and lead concentrate 100 - 100 5 Sep 17
CMK Mining B.V. Prins Bernhardplein 200 Holding Company 100 - 100 30 June 2015
1097 JB Amsterdam, The Netherlands
CMK Europe SPLLC Skopje Ivo Lola Ribar no. 57-1/6, 1000 Skopje, North Macedonia Holding Company 100 - 100 10 July 2015
Copper Bay Limited Masters House, 107 Hammersmith Road, London, W14 0QH, United Kingdom Holding Company 76 24 76 29 Oct 10
Copper Bay (UK) Ltd Masters House, 107 Hammersmith Road, London, W14 0QH, United Kingdom Holding Company 76 24 76 9 Nov 11
Copper Bay Chile Limitada Ebro 2740, Oficina 603, Las Condes, Santiago, Chile Holding Company 76 24 76 12 Oct 11
Ken Shuak LLP Business Centre No. 2, 4 Mira Street, Balkhash, Kazakhstan Shuak project (exploration) 10 90 10 5 Oct 16
Kounrad Copper Company LLP Business Centre No. 2, 4 Mira Street, Balkhash, Kazakhstan Kounrad project (SX-EW plant) 100 - 100 29 Apr 08
Minera Playa Verde Limitada Ebro 2740, Oficina 603, Las Condes, Santiago, Chile Exploration - Copper 76 24 76 20 Oct 11
Rudnik SASA DOOEL Makedonska Kamenica 28 Rudarska Str, Makedonska Kamenica, 2304, North Macedonia Sasa project 100 - 100 22 June 2005
Sary Kazna LLP Business Centre No. 2, 4 Mira Street, Balkhash, Kazakhstan Kounrad project (SUC operations) 100 - 100 6 Feb 06
CAML MK
For the year ended 31 December 2022, CAML MK Limited (registered number:
10946728) has opted to take advantage of a statutory exemption from audit
under section 479A of the Companies Act 2006 relating to subsidiary companies.
The members of CAML MK Limited have not required it to obtain an audit of
their financial statements for the year ended 31 December 2022. In order to
facilitate the adoption of this exemption, Central Asia Metals plc, the parent
company of the subsidiaries concerned, undertakes to provide a guarantee under
Section 479C of the Companies Act 2006 in respect of CAML MK Limited.
CAML KZ
For the year ended 31 December 2022, CAML KZ Limited (registered number:
13479896) has opted to take advantage of a statutory exemption from audit
under section 479A of the Companies Act 2006 relating to subsidiary companies.
The members of CAML KZ Limited have not required it to obtain an audit of
their financial statements for the year ended 31 December 2022. In order to
facilitate the adoption of this exemption, Central Asia Metals plc, the parent
company of the subsidiaries concerned, undertakes to provide a guarantee under
Section 479C of the Companies Act 2006 in respect of CAML KZ Limited.
Non-controlling interest
31 Dec 22 31 Dec 21
$'000 $'000
Balance at 1 January 1,316 1,315
Loss attributable to non-controlling interests 6 1
Balance at 31 December 1,322 1,316
Non-controlling interests were held at year end by third parties in relation
to Copper Bay Limited, Copper Bay (UK) Limited, Copper Bay Chile Limitada and
Minera Playa Verde Limitada.
22. Assets held for sale
The assets and liabilities of the Copper Bay entities continue to be presented
as held for sale in the statement of financial position. The exploration
assets and property, plant and equipment held in Copper Bay were fully written
off in prior periods. The results of the Copper Bay entities for the year
ended 31 December 2022 and the comparative year ended 31 December 2021 are
shown within discontinued operations in the consolidated income statement.
Assets of disposal group classified as held for sale: 31 Dec 22 31 Dec 21 $'000
$'000
Cash and cash equivalents 63 36
Trade and other receivables 1 2
64 38
Liabilities of disposal group classified as held for sale: 31 Dec 22 $'000 31 Dec 21 $'000
Trade and other payables 44 28
44 28
During the year the following have been recognised in discontinued operations:
Loss from discontinued operations: 2022 2021
$'000 $'000
General and administrative expenses (179) (18)
Foreign exchange (loss)/gain (8) 14
Loss from discontinued operations (187) (4)
Cash flows of disposal group classified as held for sale: 2022 2021
$'000 $'000
Operating cash flows 27 (19)
Total cash flows 27 (19)
23. Trade and other receivables
Current receivables Group Company
31 Dec 22 $'000 31 Dec 21 $'000 31 Dec 22 $'000 31 Dec 21 $'000
Receivable due from subsidiary - - 744 581
Loan due from subsidiary - - 18,100 32,900
Trade receivables 2,362 1,249 - -
Prepayments and accrued income 2,991 2,545 334 422
VAT receivable 1,546 1,322 109 110
Other receivables 1,816 1,094 290 191
8,715 6,210 19,577 34,204
Non-current receivables
Loan due from subsidiary - - 268,750 269,241
Prepayments 8,221 4,308 - -
VAT receivable 3,257 3,039 - -
11,478 7,347 268,750 269,241
The carrying value of all the above receivables is a reasonable approximation
of fair value. There are no amounts past due at the end of the reporting
period that have not been impaired apart from the VAT receivable balance as
explained below. Trade and other receivables and loan due from subsidiary
are accounted for under IFRS 9 using the expected credit loss model and are
initially recognised at fair value and subsequently measured at amortised cost
less any allowance for expected credit losses.
The loan due from subsidiary is owed by CAML MK Limited, a directly owned
subsidiary for $286,850,000 (2021: $302,141,000), which accrues interest at a
rate of 2.25% per annum (2021: 2.25%). The loan has been assessed for expected
credit loss under IFRS 9, however as the Group's strategies are aligned there
is no realistic expectation that repayment would be demanded early ahead of
the current repayment plans. The expected future cash flows arising from the
asset exceed the intercompany loan value under various scenarios considered
which are outlined in the intangible assets impairment assessment so it is
believed this loan can be repaid and the expected credit loss is
immaterial.
As at 31 December 2022, the total Group VAT receivable was $4,803,000 (2021:
$4,361,000) which included an amount of $3,399,000 (2021: $3,299,000) of VAT
owed to the Group by the Kazakhstan authorities. During the year, the
Kazakhstan authorities refunded $718,000. The Group is working closely with
its advisors to recover the remaining portion. The planned means of recovery
will be through a combination of the local sales of cathode copper to offset
VAT recoverable and by a continued dialogue with the authorities for cash
recovery and further offsets.
Non-current prepayments have increased as a result of prepaid capital
expenditure on the Sasa Cut and Fill Project.
24. Inventories
Group 31 Dec 22 31 Dec 21
$'000 $'000
Raw materials 11,917 9,208
Finished goods 1,232 1,244
13,149 10,452
The Group recognises all inventory at the lower of cost and net realisable
value and did not have any slow-moving, obsolete or defective inventory as at
31 December 2022 and therefore there were no write-offs to the income
statement during the year (2021: nil). The total inventory recognised through
the income statement was $6,527,000 (2021: $6,599,000).
25. Cash and cash equivalents and restricted cash
Group
Company
31 Dec 22 31 Dec 21 31 Dec 22 31 Dec 21
$'000 $'000 $'000 $'000
Cash at bank and on hand 60,298 55,695 35,812 40,189
Cash and cash equivalents 60,298 55,695 35,812 40,189
Restricted cash 264 3,516 - 3,284
Total cash and cash equivalent including restricted cash 60,562 59,211 35,812 43,473
The restricted cash amount of $264,000 (2021: $3,516,000) is held at bank to
cover Kounrad subsoil user licence requirements (2021: to cover corporate debt
service compliance and Kounrad subsoil user licence requirements).
The Group holds an overdraft facility in North Macedonia and these amounts are
disclosed in note 31 Borrowings.
Reconciliation to cash flow statements
The above figures reconcile to the amount of cash shown in the statement of
cash flows at the end of the financial year as follows:
Group
31 Dec 22 $'000 31 Dec 21 $'000
Cash and cash equivalents as above (excluding restricted cash) 60,298 55,695
Cash at bank and on hand in assets held for sale (note 22) 63 36
Balance per statement of cash flows 60,361 55,731
26. Share capital and premium
Ordinary Share Treasury
Number of shares premium shares
shares $'000 $'000 $'000
At 1 January 2021 176,498,266 1,765 191,537 (3,840)
Exercise of options - - 451 1,480
At 31 December 2021 176,498,266 1,765 191,988 (2,360)
Shares issued 5,600,000 56 13,440 (13,496)
Exercise of options - - 9 25
At 31 December 2022 182,098,266 1,821 205,437 (15,831)
The par value of ordinary shares is $0.01 per share and all shares are fully
paid. On 27 September 2022, the Company issued and allotted 5,600,000 ordinary
shares to the trustee of the Central Asia Metals employee benefit trust (the
"EBT"). These new ordinary shares have been issued for the purposes of
satisfying current awards granted under the Company's Employee Share Plans
together with any future awards that may be granted by the Company.
During the year there was an exercise of share options by employees and
Directors which were partly settled by selling trust shares. The proceeds of
disposal of trust and treasury shares exceeded the purchase price by $9,000
(2021: $451,000) and has been recognised in share premium. The remaining share
options exercises during the year were cash settled amounting to $1,939,000
(2021: nil) with a reduction in share option reserve of $1,263,000 (2021:
$1,931,000) to account for those now exercised.
Treasury
shares EBT shares
No. No.
At 1 January 2021 471,647 3,052,633
Disposal of trust shares - (712,601)
At 31 December 2021 471,647 2,340,032
Disposal of trust shares - (9,280)
Shares issued - 5,600,000
At 31 December 2022 471,647 7,930,752
27. Currency translation reserve
Currency translation differences arose primarily on the translation on
consolidation of the Group's Kazakhstan-based and North Macedonian-based
subsidiaries whose functional currency is the Tenge and North Macedonian Denar
respectively. In addition, currency translation differences arose on the
goodwill and fair value uplift adjustments to the carrying amounts of assets
and liabilities arising on the Kounrad Transaction and CMK Resources
acquisition which are denominated in Tenge and Denar respectively. During
2022, a non-cash currency translation loss of $29,311,000 (2021: loss of
$31,283,000) was recognised within equity.
28. Share based payments
The Company provides rewards to staff in addition to their salaries and annual
discretionary bonuses, through the granting of share options in the Company.
The Company share option scheme has an exercise price of effectively nil for
the participants.
The share options granted during 2012 until 2018 were based on the achievement
by the Group and the participant of the performance targets as determined by
the CAML Remuneration Committee that are required to be met in year one and
then options could be exercised one third annually from the end of year one.
Options granted during 2012 to 2018 had straight forward conditions attached
and were valued using a Black-Scholes model.
Share options granted in 2019 vested after three years depending on
achievement of the Group of performance target relating to the level of
absolute total shareholder return compound annual growth rate of the value of
the Company's shares over the performance period of three financial years
ending 31 December 2021.
Share options granted in 2020 to 2022 vest after three years depending on a
combination of the achievement of the Group of performance target relating to
the level of absolute total shareholder return compound annual growth rate of
the value of the Company's shares over the performance period of three
financial years relative to the constituents of a selected group mining index
of companies as well as sustainability performance targets.
The fair value at grant date of the 2019 to 2022 grants are independently
determined using a Monte Carlo simulation model that takes into account the
exercise price, the term of the option, the impact of dilution (where
material), the share price at grant date and expected price volatility of the
underlying share, the expected dividend yield, the risk-free interest rate for
the term of the option, and the correlations and volatilities of the share
price.
The assessed fair value at grant date of options granted during the year ended
31 December 2022 was $3,232,000 in total which is recognised over the vesting
period commencing 22 June 2022 until 31 March 2025 and $613,000 was recognised
during the year. For the 2021 options $938,000 (2021: $435,000) was expensed
for the year ended 31 December 2022. For the 2020 options $942,000 (2021:
$980,000) was expensed for the year ended 31 December 2021. For the 2019 share
options $82,000 (2021: $290,000) was expensed for the year ended 31 December
2022. An additional dividend related share option charge of $1,242,000
(2021: $720,000) was recognised and also additional costs associated when
share options were exercised of $677,000 (2021: $24,000). The number of
shares covered by such awards is increased by up to the value of dividends
declared as if these were reinvested in Company shares at the dates of
payment. The outstanding share options included in the calculation of
diluted earnings/(loss) per share (note 18) includes these additional awards
but they are excluded from the disclosures in this note. In total, an amount
of $4,494,000 (2021: $2,449,000) has been expensed within employee benefits
expense from continuing operations for share based payment charges for the
year ended 31 December 2022.
The model inputs for options granted during the year included:
31 Dec 2022 31 Dec 2021
Vesting period 2 years 10 months 2 years 9 months
Exercise price $0.01 $0.01
Grant date: 22 June 2022 15 July 2021
Expiry date: 21 June 2032 14 July 2031
Share price at grant date $2.82 $3.27
Risk-free interest rate 2.19% 0.38%
As at 31 December 2022, 5,467,454 (2021: 4,594,192) options were outstanding.
Share options are granted to Directors and selected employees. The exercise
price of the granted options is presented in the table below for every grant.
The Company has the option but not the legal or constructive obligation to
repurchase or settle the options in cash.
Movements in the number of share options outstanding and their related
weighted average price are as follows:
2022 2021
Average exercise Options (number) Average exercise Options (number)
price in $ per price in $ per
share option share option
At 1 January 0.01 4,594,192 0.01 4,420,348
Granted 0.01 1,500,223 0.01 1,009,284
Exercised 0.01 (473,303) 0.01 (439,020)
Non-vesting 0.01 (153,658) 0.01 (396,420)
At 31 December 0.01 5,467,454 0.01 4,594,192
Non-vesting shares relates to options granted for which the performance
targets were not met. Out of the outstanding options of 5,467,454 (2021:
4,594,192), 2,096,325 options (2021: 1,741,528) were exercisable as at 31
December 2022 excluding the value of additional share options for dividends
declared on those outstanding. The related weighted average share price at
the time of exercise was $3.32 (2021: $3.49) per share. Share options
exercised by the Directors during the year are disclosed in the Remuneration
Committee Report.
Share options outstanding at the end of the year have the following expiry
date and exercise prices:
Grant - vest Option exercise 2022 2021
Expiry date price $ Options Options
of option (number) (number)
8 May 12 7 May 22 0.01 76,032 76,032
24 Jul 13 23 Jul 23 0.01 36,801 36,801
3 Jun 14 2 Jun 24 0.01 143,064 143,064
8 Oct 14 7 Oct 24 0.01 160,000 160,000
22 Apr 15 21 Apr 25 0.01 212,121 212,121
18 Apr 16 17 Apr 26 0.01 338,940 338,940
21 Apr 17 20 Apr 27 0.01 296,591 296,591
2 May 18 1 May 28 0.01 484,090 560,428
30 May 19 29 May 29 0.01 355,103 752,068
16 Dec 20 15 Dec 30 0.01 979,548 1,008,863
15 Jul 21 14 Jul 31 0.01 974,392 1,009,284
22 Jun 22 21 Jun 32 0.01 1,410,772 -
5,467,454 4,594,192
Employee Benefit Trust
The Company set up an Employee Benefit Trust ('EBT') during 2009 as a means of
incentivising certain Directors and senior management of CAML prior to the
Initial Public Offering ('IPO'). All of the shares awarded as part of the EBT
scheme vested on the successful completion of the IPO on 30 September 2010.
2,534,688 Ordinary Shares were initially issued as part of the arrangements in
December 2009 followed by a further issue of 853,258 in September 2010. The
shares were issued at the exercise price of $0.68, which was the best estimate
of the Company's valuation at the time. Details of the awards to Directors of
the Company are contained in the Remuneration Committee Report.
29. Trade and other payables
Group
Company
31 Dec 22 31 Dec 21 31 Dec 22 31 Dec 21
$'000 $'000 $'000 $'000
Trade and other payables 6,722 3,363 365 363
Accruals 6,029 4,861 5,451 4,401
Corporation tax, social security and other taxes 3,892 7,832 246 1,147
Loan due to subsidiary - - 37,409 53,400
16,643 16,056 43,471 59,311
The carrying value of all the above payables is equivalent to fair value.
The loan due to subsidiary is payable to Kounrad Copper Company LLP, an
indirectly owned subsidiary for $37,409,000 (2021: $53,400,000), which accrues
interest at a rate of 4.40% per annum and is repayable on demand.
All Group and Company trade and other payables are payable within less than
one year for both reporting periods.
30. Silver streaming commitment
The carrying amounts of the silver streaming commitment for silver delivery
are as follows:
Group
Company
31 Dec 22 31 Dec 21 31 Dec 22 $'000 31 Dec 21 $'000
$'000 $'000
Current 1,095 1,229 - -
Non-current 17,085 18,220 - -
18,180 19,449 - -
On 1 September 2016, the CMK Group entered into a Silver Purchase Agreement.
The Group acquired this agreement as part of the acquisition of the CMK Group
and inherited a silver streaming commitment related to the production of
silver during the life of the mine. The reduction in the silver streaming
commitment is recognised in the income statement within cost of sales as the
silver is delivered based on the units of production and is updated to reflect
the latest estimate of Reserves.
31. Borrowings
Group
Company
31 Dec 22 31 Dec 21 31 Dec 22 31 Dec 21
$'000 $'000 $'000 $'000
Secured: Current
Bank loans - 23,406 - 23,406
Unsecured: Current
Bank overdraft 1,390 9,572 - -
Total current 1,390 32,978 - 23,406
The carrying value of loans approximates fair value:
Carrying amount Fair value
31 Dec 22 $'000 31 Dec 21 $'000 31 Dec 22 $'000 31 Dec 21 $'000
Traxys Europe S.A. - 23,406 - 23,406
Bank overdrafts 1,390 9,572 1,390 9,572
1,390 32,978 1,390 32,978
The movement on borrowings can be summarised as follows:
Group
Company
31 Dec 22 31 Dec 21 31 Dec 22 31 Dec 21
$'000 $'000 $'000 $'000
Balance at 1 January 32,978 80,412 23,406 70,720
Repayment of corporate borrowings (23,820) (48,400) (23,820) (48,400)
Repayments of overdraft (7,531) - - -
Drawdown of overdraft - 644 - -
Finance charge interest 496 2,398 374 2,162
Finance charge unwinding of directly attributable fees 414 1,086 414 1,086
Interest paid (511) (2,398) (374) (2,162)
Foreign exchange (636) (764) - -
Balance at 31 December 1,390 32,978 - 23,406
During the year, $23,820,000 (2021: $48,400,000) of the principal amount of
corporate debt was repaid as well as $7,531,000 repayment of overdrafts (2021:
nil) with total interest paid of $511,000 (2021: $2,398,000).
The Group held one corporate debt package with Traxys with a variable interest
rate which was repaid in full in August 2022. Security was provided over the
shares in CAML Kazakhstan BV, certain bank accounts and the Kounrad offtake
agreement as well as over the Sasa offtake agreement. The debt was subject to
financial covenants which included the monitoring of gearing and leverage
ratios, and these were all complied with.
The overdraft is held with a North Macedonian bank and is denominated in Euro
payable at 1.98% above the National Bank of North Macedonia reference rate.
As at 31 December 2022, the Group measured the fair value using techniques for
which all inputs which have a significant effect on the recorded fair value
are observable, either directly or indirectly (Level 2).
The different levels have been defined as follows:
• Quoted prices (unadjusted) in active markets for identical
assets or liabilities (Level 1).
• Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices) (Level 2).
• Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level 3).
32. Provisions for other liabilities and charges
Group
Asset Employee retirement Other
retirement obligation benefits employee
$'000 $'000 benefits Legal claims Total
$'000 $'000 $'000
At 1 January 2021 9,196 239 235 16 9,686
Change in estimate 8,981 48 56 6 9,091
Settlements of provision - (23) (12) (20) (55)
Unwinding of discount (note 16) 347 - - - 347
Exchange rate difference (64) (19) (20) - (103)
At 31 December 2021 18,460 245 259 2 18,966
Change in estimate 1,153 40 62 - 1,255
Settlements of provision - (23) (11) - (34)
Unwinding of discount (note 16) 1,088 - - - 1,088
Exchange rate difference (158) (18) (22) - (198)
At 31 December 2022 20,543 244 288 2 21,077
Non-current 20,265 204 273 2 20,744
Current 278 40 15 - 333
At 31 December 2022 20,543 244 288 2 21,077
a) Asset retirement obligation
The Group provides for the asset retirement obligation associated with the
mining activities at Kounrad, estimated to be required in 2034. During the
year, the Group engaged an external expert consultant to prepare a conceptual
closure plan and asset retirement obligation for the leaching and Kounrad
operation and associated infrastructure. The expected current cash flows were
projected over the useful life of the mining site and inflated using an
inflation rate of 5.85% (2021: 3.77%) and discounted to 2022 terms using a
nominal pre-tax risk free discount rate of 7.43% (2021: 8.07%). The cost of
the related assets are depreciated over the useful life of the assets and are
included in property, plant and equipment. The increase in estimate in
relation to the asset retirement obligation is primarily due to additional
estimated costs and management has built in an additional cost contingency of
10%, the selection of such a contingency requires judgement.
During 2021, Sasa engaged an external expert consultant to prepare an updated
conceptual closure plan. The expected current cash flows were projected over
the useful life of the mining site and inflated using an inflation rate of
3.53% (2021: 2.0%) and discounted to 2022 terms using a discount rate of 9.17%
(2021: 5.50%). The cost of the related assets are depreciated over the useful
life of the assets and are included in property, plant and equipment. During
the year, the cost estimate has been amended by management to build in an
additional cost contingency of 10%, the selection of such a contingency
requires judgement.
b) Employee retirement benefits
All employers in North Macedonia are obliged to pay employees minimum
severance pay on retirement equal to two months of the average monthly salary
applicable in the country at the time of retirement. The retirement benefit
obligation is stated at the present value of expected future payments to
employees with respect to employment retirement pay. The present value of
expected future payments to employees is determined by an independent
authorised actuary in accordance with the prevailing rules of actuarial
mathematics.
c) Other employee benefits
The Group is also obliged to pay jubilee anniversary awards in North Macedonia
for each ten years of continuous service of the employee. Provisions for
termination and retirement obligations are recognised in accordance with
actuary calculations. Basic 2022 actuary assumptions are used as follows:
Discount rate: 5%
Expected rate of salary increase: 4.7%
d) Legal claims
The Group is party to certain legal claims and the recognised provision
reflects management's best estimate of the most likely outcome. The Group
reviews outstanding legal cases following developments in the legal
proceedings and at each reporting date, in order to assess the need for
provisions and disclosures in its financial statements. Among the factors
considered in making decisions on provisions are the nature of litigation,
claim or assessment, the legal process and potential level of damages in the
jurisdiction in which the litigation, claim or assessment has been brought,
the progress of the case (including the progress after the date of the
financial statements but before those statements are issued), the opinions or
views of legal advisers, experience on similar cases and any decision of the
Group's management as to how it will respond to the litigation, claim or
assessment.
33. Cash generated from operations(
)
(Group) Note 2022 2021
$'000 $'000
54,393 109,323
Profit before income tax including discontinued operations
Adjustments for:
Depreciation and amortisation 27,285 29,572
Silver stream commitment (1,971) (1,369)
Loss/(gain) on disposal of property, plant and equipment 19 94 (2)
Foreign exchange gain (6,829) (1,214)
Share based payments 28 4,494 2,449
Impairment of non-current assets 19,20 55,116 -
Finance income 15 (515) (74)
Finance costs 16 2,060 3,920
Changes in working capital:
Increase in inventories (2,538) (2,622)
Increase in trade and other receivables (10,503) (6,216)
Increase in trade and other payables 1,513 2,843
Provisions for other liabilities and charges (34) (55)
Cash generated from operations 122,565 136,555
The increase in trade and other receivables of $10,503,000 (2021: $6,216,000)
includes a movement in the Sasa VAT receivable balance of $4,472,000 (2021:
$3,468,000) which is offset against corporate income tax payable during the
year.
34. Commitments
Significant expenditure contracted for at the end of the reporting period but
not recognised as liabilities is as follows:
Group 31 Dec 22 $'000 31 Dec 21 $'000
Property, plant and equipment 6,159 8,241
Other 170 396
6,329 8,637
35. Dividend per share
In line with the Company dividend policy, during the year the Company paid
$48,210,000 (2021: $38,847,000) which consisted of a 2022 interim dividend of
10 pence per share and 2021 final dividend of 12 pence per share (2021: 2021
interim dividend of 8 pence per share and 2020 final dividend of 8 pence per
share).
36. Related party transactions
Key management remuneration
Key management remuneration comprises the Directors' remuneration, including
Non-Executive Directors and is as follows:
2022 2022 2022 2022 Employers NI
Basic salary/ fees Annual 2022 Benefits in kind $'000 2022 2021
$'000 bonus Pension $'000 Total Total
$'000 $'000 $'000 $'000
Executive Directors:
Nigel Robinson 509 403 - 12 126 1,050 1,061
Gavin Ferrar 416 330 - - 211 957 1,011
Louise Wrathall(1) 165 138 - 4 42 349 -
Non-Executive Directors:
Nick Clarke 217 - - - 29 246 273
Mike Armitage(2) 93 - - - 13 106 -
Roger Davey 98 - - - 12 110 116
Dr Gillian Davidson 99 - - - 14 113 125
Mike Prentis(3) 101 - - - 14 115 91
David Swan 99 - - - 13 112 124
Nurlan Zhakupov 93 - - - - 93 51
Robert Cathery(4) 44 - - - 5 49 124
Nigel Hurst-Brown(5) - - - - - - 91
1,934 871 - 16 479 3,300 3,067
i. Appointed on 26 May 2022
ii. Appointed on 10 January 2022
iii. Appointed 31 March 2021
iv. Resigned on 26 May 2022
v. Resigned on 31 July 2021
During the year Gavin Ferrar exercised 226,612 shares for a total share option
gain of $719,000, see the Directors' option awards table in the Remuneration
Committee Report.
Kounrad Foundation
The Kounrad Foundation, a charitable foundation through which Kounrad donates
to the community, was advanced $300,000 (2021: $214,000). This is a related
party by virtue of common Directors.
Sasa Foundation
The Sasa Foundation, a charitable foundation through which Sasa donates to the
community, was advanced $220,000 (2021: $320,000). This is a related party by
virtue of common Directors.
37. Deferred income tax asset and liability
Group
The movements in the Group's deferred tax assets and liabilities are as
follows:
Currency translation Credit to income At 31 December
At 1 January differences $'000 statement 2022 $'000
2022 $'000
$'000
Other temporary differences (349) 23 - (326)
Deferred tax liability on fair value adjustment on Kounrad Transaction (5,069) 338 274 (4,457)
Deferred tax liability on fair value adjustment on CMK acquisition (17,459) 1,004 4,280 (12,175)
Deferred tax liability, net (22,877) 1,365 4,554 (16,958)
Reflected in the statement of financial position as: 31 Dec 22 31 Dec 21
$'000 $'000
Deferred tax asset 328 352
Deferred tax liability (17,286) (23,229)
Currency translation Credit to income
At 1 January differences $'000 statement At 31 December
2021 $'000 2021 $'000
$'000
Other temporary differences (553) 11 193 (349)
Deferred tax liability on fair value adjustment on Kounrad Transaction (5,501) 136 296 (5,069)
Deferred tax liability on fair value adjustment on CMK acquisition (19,909) 1,476 974 (17,459)
Deferred tax liability, net (25,963) 1,623 1,463 (22,877)
A taxable temporary difference arose as a result of the Kounrad Transaction
and CMK Resources Limited acquisition, where the carrying amount of the assets
acquired were increased to fair value at the date of acquisition but the tax
base remained at cost. The deferred tax liability arising from these taxable
temporary differences has been reduced by $4,554,000 during the year (2021:
$1,270,000) to reflect the tax consequences of impairing and depreciating the
recognised fair values of the assets during the year.
31 Dec 2022 31 Dec 2021
$'000 $'000
Deferred tax liability due within 12 months (1,135) (1,463)
Deferred tax liability due after 12 months (19,570) (21,766)
Deferred tax liability (20,705) (23,229)
All deferred tax assets are due after 12 months.
Where the realisation of deferred tax assets is dependent on future profits,
the Group recognises losses carried forward and other deferred tax assets only
to the extent that the realisation of the related tax benefit through future
taxable profits is probable.
The Group did not recognise other potential deferred tax assets arising from
losses of $13,917,000 (2021: $18,471,000) as there is insufficient evidence of
future taxable profits within the entities concerned. Unrecognised losses can
be carried forward indefinitely.
At 31 December 2022, the Group had other deferred tax assets of $1,271,000
(2021: $1,440,000) in respect of share-based payments and other temporary
differences which had not been recognised because of insufficient evidence of
future taxable profits within the entities concerned.
There are no significant unrecognised temporary differences associated with
undistributed profits of subsidiaries at 31 December 2022 and 2021,
respectively.
Company
At 31 December 2022 and 2021 respectively, the Company had no recognised
deferred tax assets or liabilities.
At 31 December 2022, the Company had not recognised potential deferred tax
assets arising from losses of $12,911,000 (2021: $11,445,000) as there is
insufficient evidence of future taxable profits. The losses can be carried
forward indefinitely.
At 31 December 2022, the Company had other deferred tax assets of $1,271,000
(2021: $1,440,000) in respect of share-based payments and other temporary
differences which had not been recognised because of insufficient evidence of
future taxable profits.
38. Events after the reporting period
There were no events after the reporting period.
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. END FR NKFBKFBKDANBRecent news on Central Asia Metals
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