REG - Central Asia Metals - Interim Results for Six Months Ended 30 June 2023
13/09/2023 07:15
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RNS Number : 2354M Central Asia Metals PLC 13 September 2023
13 September 2023
Central Asia Metals plc
(the 'Group', the 'Company' or 'CAML')
Interim Results for the Six Months Ended 30 June 2023
Central Asia Metals plc (AIM: CAML) is pleased to announce its unaudited
interim results for the six months ended 30 June 2023 ('H1 2023' or 'the
period').
H1 2023 financial summary
- Sector-leading dividend yield
o H1 2023 dividend of 9 pence per share (H1 2022: 10 pence)
- Dependable financial performance
o Group gross revenue(1) of $99.3 million (H1 2022: $119.5 million) and
Group net revenue of $93.6 million (H1 2022: $113.8 million)
o Group earnings before interest, tax, depreciation, and amortisation
('EBITDA')(1) of $48.9 million (H1 2022: $74.9 million)
o EBITDA margin(1) of 49% (H1 2022: 63%)
o Group adjusted free cash flow ('adjusted FCF'(1)) of $24.1 million (H1
2022: $52.2 million)
- Strong balance sheet
o Debt free
o As at 30 June 2023, cash in the bank of $50.6 million(2) (31 December 2022:
$60.6 million)
o Creates solid platform for growth
H1 2023 operational summary
- Kounrad copper production of 6,716 tonnes (H1 2022: 6,617
tonnes) and sales of 6,315 tonnes (H1 2022: 6,406 tonnes)
- Sasa zinc in concentrate production of 9,764 tonnes (H1
2022: 10,465 tonnes) and payable zinc sales of 8,382 tonnes (H1 2022: 8,761
tonnes)
- Sasa lead in concentrate production of 13,734 tonnes (H1
2022: 13,827 tonnes) and payable lead sales of 12,416 tonnes (H1 2022: 13,608
tonnes)
- One Group Lost Time Injury ('LTI'); Group Lost Time Injury
Frequency Rate ('LTIFR') of 0.80 (H1 2022: 0.85)
- Exploration activities underway in Kazakhstan through
arrangement with geological team, Terra Exploration
- 2022 Sustainability Report and Climate Change Report
published in Q2 2023 and submission of inaugural disclosures to Carbon
Disclosure Project ('CDP') in July 2023
1 See Financial Review section for definition of non-IFRS alternative
performance measures
2 The cash balance figure disclosed includes restricted cash
2023 outlook and deliverables
- On track to meet copper production guidance of 13,000-14,000
tonnes, zinc in concentrate production of 19,000-21,000 tonnes and lead in
concentrate production of 27,000-29,000 tonnes
- Completion of Kounrad Solar Power Plant construction
- Commencement of transition to paste fill mining methods at Sasa
- Continued focus on Business Development activity
Nigel Robinson, Chief Executive Officer, commented:
"I am pleased to report a Group EBITDA of $48.9 million for the first six
months of 2023 despite a challenging economic background with metal prices
deteriorating by an average of 17% across our base metal portfolio and ongoing
inflationary cost pressures. Given our strong balance sheet with $50.6
million cash and no debt together with continued robust underlying operational
cashflows, we are confident to declare an interim dividend of 9 pence per
share.
"We continue to look for opportunities to grow the CAML business and were
pleased to begin early-stage exploration activities through our new
arrangements with Terra Exploration ('Terra') in Kazakhstan.
"During the first six months of the year, we have met our production targets
and remain on track to meet our full year guidance. This achievement has
been delivered with a strong safety performance and only one LTI in the
period.
"H1 2023 was a successful period for our investments at both sites, with the
Solar Power Plant advancing and commissioning of the Paste Backfill ('PBF')
Plant using thickened tailings now underway. The transition to paste fill
mining remains on track to commence in H2 2023. We also witnessed the
connection of the Central Decline at Sasa, which was developed both from
surface and the 910 metre level, and this is now operational. Construction of
the Dry Stack Tailings ('DST') Plant project is underway.
"We have continued to develop our approach to sustainability, and in H1 2023,
we published our fourth standalone Sustainability Report covering our 2022
activities. We also published our second Climate Change Report and have
commenced work to estimate our Scope 3 emissions with a view to reporting them
in 2024.
"As we approach the end of 2023, we are confident that we will deliver on our
production guidance for our three base metals and look forward to
transitioning to paste fill mining methods at Sasa. We will continue to
focus on maintaining our competitive cost base and look for opportunities to
grow the business."
Analyst conference call
There will be an analyst conference call and Q&A today at 09:30 (BST). The
call can be accessed by dialling
+44 (0)330 551 0200 and quoting 'Central Asia Metals' when prompted by the
operator. Additionally, the presentation can be viewed via a live webcast
using the following link https://brrmedia.news/CAML_IR23
(https://brrmedia.news/CAML_IR23) . The webcast and the Company's corporate
presentation will be available on the CAML website at
www.centralasiametals.com (http://www.centralasiametals.com) .
Investor Meet Company
The Company will also hold a live presentation relating to the 2023 Interim
Results via the Investor Meet Company platform at 16:30 (BST) today. The
presentation is open to all existing and potential shareholders. Questions can
be submitted at any time during the live presentation. Investors can sign up
to Investor Meet Company for free at:
https://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
Nigel Robinson
CEO
Gavin Ferrar
CFO
Louise Wrathall louise.wrathall@centralasiametals.com
Director of Corporate Development
Emma Chetwynd Stapylton emma.chetwyndstapylton@centralasiametals.com
Group 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
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 the Sasa zinc-lead
mine in North Macedonia.
For further information, please visit www.centralasiametals.com
(http://www.centralasiametals.com/) and follow CAML on X at @CamlMetals and on
LinkedIn at Central Asia Metals Plc.
Chief Executive Officer Review
CAML's Kounrad operation in Kazakhstan had a safe six months, with no
recordable injuries, and the Sasa zinc and lead mine in North Macedonia
recorded one LTI. While this was not a serious incident, lessons have been
learnt and the Company aims for zero harm.
The Group's strong base metal production offset by weaker base metals prices
resulted in CAML reporting gross revenue of $99.3 million for H1 2023. Whilst
Group EBITDA of $48.9 million was lower than the previous corresponding
period, 78% of that decrease was related to lower copper, zinc and lead
revenues. The $5.8 million increase in CAML's cost base half-on-half was due
in large part to higher labour costs as a result of pay rises with which we
have supported our loyal employees in current times of high in-country
inflation, and we continue to enjoy strong employee relations at both of our
operations.
As previously announced, the Group fully repaid its corporate debt in August
2022 and, as at 30 June 2023, had also fully repaid its available overdraft
facilities and reported a strong cash position of $50.6 million.
Based on the Company's strong operational performance and balance sheet, the
CAML Board is pleased to declare an interim dividend of 9 pence per ordinary
share. This represents 82% of our $24.1 million adjusted FCF. FCF has been
adjusted to more reasonably apportion H1 2023 withholding tax payments over
the full year. This dividend will be paid on 20 October 2023 to shareholders
registered on 29 September 2023.
The Company has made good progress with its projects at Sasa during H1 2023
and, in Q2 2023, the joining of the Central Decline that was developed both
from surface and the 910 metre level was achieved. This decline is
operational, with haulage of waste and ore now underway. Commissioning of the
PBF Plant using thickened tailings is currently being undertaken, and CAML
continues to expect the commencement of paste fill mining methods as well as
the operational placement of paste underground during H2 2023. The DST Plant
construction project has commenced and will extend into H1 2024. Construction
of the initial phase of the DST landform will commence in H2 2023.
Management's focus on business development has accelerated during the first
six months of 2023, with 22 opportunities reviewed, five non-disclosure
agreements ('NDAs') signed and three site visits conducted. Also, during H1
2023, the company entered into an arrangement with a team of experienced
explorers, Terra Exploration, which comprises early-stage exploration
geologists with international and significant Kazakhstan experience and a
proven track record of discovery. The team is reviewing a series of
potential target areas using historical data and its advanced database,
combined with its analytical abilities, and applications for exploration
licences in Kazakhstan have already been made.
During H1 2023, CAML published its fourth Sustainability Report and second
Climate Change Report covering its activities for the year ended 31 December
2022. Solid progress on the construction of the 4.77MW solar farm was achieved
during H1 2023. To date, 78% of the installation works are complete, with all
equipment and materials delivered. CAML remains on track for completion of
this project during H2 2023.
Looking ahead to H2 2023 and beyond, CAML welcomes the material conclusion of
its investments at both sites and continues its search for new business
development opportunities. The Company is debt free, and this strong balance
sheet coupled with its low-cost operations means that it remains well-placed
to pursue potential acquisition opportunities whilst investing in the
business, delivering returns to shareholders, and adding value for all its
stakeholders.
Operations Review
Sasa
Production
In H1 2023, total mined and processed ore was 396,234 tonnes and 396,673
tonnes respectively. The average head grades achieved for H1 2023 were 2.90%
zinc and 3.72% lead. The average H1 2023 metallurgical recoveries were 84.9%
for zinc and 93.1% for lead. Plant availability during H1 2023 was 95%, with
throughput averaging 98 tonnes per hour.
Sasa produces a zinc concentrate and separate lead concentrate. Total H1 2023
production was 19,257 tonnes of zinc concentrate at an average grade of 50.7%
and 19,302 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 payable production for H1 2023 was 8,223
tonnes of zinc and 13,047 tonnes of lead. Sales were made to European
customers via CAML's offtake contract with Traxys. Payable base metal in
concentrate sales for the six-month period were 8,382 tonnes of zinc and
12,416 tonnes of lead.
During H1 2023, Sasa sold 167,919 ounces of payable silver to Osisko Gold
Royalties, in accordance with its streaming agreement.
Units H1 2023 H1 2022
Ore mined t 396,234 402,208
Plant feed t 396,673 404,391
Zinc grade % 2.90 3.07
Zinc recovery % 84.9 84.3
Lead grade % 3.72 3.66
Lead recovery % 93.1 93.5
Zinc concentrate t (dry) 19,257 20,959
- Grade % 50.7 49.9
- Contained zinc t 9,764 10,465
Lead concentrate t (dry) 19,302 19,507
- Grade % 71.2 70.9
- Contained lead t 13,734 13,827
Underground mining
Total ore development for the period was 2,716 metres, which contributed 26%
of overall ore tonnes mined. The overall dilution for the period was reduced
compared to H1 2022 because of more efficient mining and ore body contouring.
H1 2023 waste development was 1,307 metres, up 14% compared to H1 2022. A
greater proportion of this development was strategically focused on the
Central Decline, excavation ramps and access areas rather than exploration
development and drill platforms.
Due to the improved quality of ground support using the new mobile shotcrete
equipment, the requirement for mining development rehabilitation reduced by
25% in H1 2023 compared to H1 2022.
The availability of Sasa's Epiroc fleet of equipment during the period was 73%
for the production drills, 83% for the loaders and 79% for the trucks.
During H1 2023, a new underground bolting machine was purchased to aid
production and ground support works.
In Q2 2023, the Central Decline that was developed both from surface and the
910 metre level connected. This access route is operational, with haulage of
ore and waste now underway.
The 800 metre level has been prepared for Sasa's first paste fill mining area,
and waste development is underway. Six faces have been designed on this level
and ore development is expected within the next month. CAML is therefore on
track to begin the transition to paste fill mining at Sasa in H2 2023.
PBF Plant and Underground Reticulation
During H1 2023, the construction of the main PBF Plant facility was materially
completed. Commissioning of the PBF plant with thickened tailings is now
underway. All permits required for the new facilities have either been
received or are being processed.
In H1 2023, 2.5 kilometres of steel pipes were installed bringing the total
reticulation pipe network to more than 4.5 kilometres. Testing of the paste
fill pipeline has been successfully completed, including mechanical,
structural, and high-pressure hydrostatic tests and the line is now ready to
serve the commissioning of the PBF Plant.
Training of the underground team in the construction of the backfill
barricades was completed in H1 2023. Three trial barricades have been
constructed as part of the training. Another three barricades are now in place
to support the commissioning of the overall backfill system.
Existing voids connected to the transition to paste fill mining along with
additional voids for the storage of additional tailings have been identified
at Svinja Reka and the preparation of these areas will be a focus during H2
2023.
DST
DST comprises two separate aspects - design and construction of the landform
on which the dry tailings are stacked, and the design and construction of the
processing plant.
Construction of the DST plant is underway, with the focus being the completion
of the foundations prior to winter. The main building construction is expected
to be well advanced during H2 2023, whereas automation and electrical work
will extend into H1 2024. Equipment is largely Metso Outotec, and the
construction is being undertaken by Macedonian construction company, Aktiva,
which was also responsible for building the PBF plant. Knight Piésold
('KP') has completed the detailed design work for the DST landform, and
construction of the initial phase of the project will commence in H2 2023.
Kounrad
Production
CAML delivered copper cathode production of 6,716 tonnes from Kounrad for H1
2023.
Copper sales during H1 2023 were 6,315 tonnes, with most of the cathode sold
to CAML's offtake partner, Traxys Europe S.A. The quality of cathode produced
remains excellent at a purity level of 99.998% and continues to meet the
requirements of customers.
During Q1 2023, winter leaching was conducted at both the Eastern and Western
Dumps. Work has already commenced preparing the covered winter blocks for the
winter of 2023/24, with 33% completed by the end of H1 2023.
While the installation of the Intermediate Leaching System ('ILS'), which was
completed and commissioned in 2022, is now available to the operations team as
needed, the leaching characteristics of the ore have been very stable in H1
2023 and as such it has not been necessary to operate the new circuit.
Lining of the trench around blocks 22-32 of Dump 16 that was excavated in 2022
was completed in H1 2023.
Despite the winter of 2022/23 being much colder than previous periods, the
solution temperature discharge control system made it possible to optimise
power usage from the boiler houses of the Eastern and Western Dumps, therefore
reducing coal consumption by approximately 900 tonnes (6%) compared to the
previous winter.
Timely inspection and preparation of boiler house equipment for the
forthcoming winter season is underway. To date 75% of planned works have been
completed in the Western Dumps boiler house and 60% in the SX-EW boiler house.
In a further attempt to reduce GHG emissions, heat meters on each of the five
boilers were installed in the SX-EW boiler house to optimise efficiency. If
these are shown to be successful, the three Western Dump boiler units will be
retrofitted with similar heat meters.
Installation of the additional 180 cubic metres of Escaid storage capacity was
completed, and site can now hold a minimum of six months stock. Operationally,
Kounrad continues to be unaffected by the conflict in Ukraine and resulting
international sanctions.
Solar Power Plant
The construction of the 4.77MW Solar Power Plant, which is forecast to provide
16-18% of Kounrad's electrical power needs, is well advanced. Construction is
managed in-house with technical oversight from the project designer. To date
78% of the installation works are complete, with all equipment and materials
delivered and the planned start-up date remains H2 2023.
Sustainability
Governance update on 2023 focus areas
Good progress has been made on governance and stewardship focused
sustainability goals during the year. In H1 2023, the Company has committed to
screening new suppliers by environmental criteria alongside its current
practice of screening against social criteria. Key environmental questions,
focusing on carbon emissions and environmental compliance, were agreed with
the team and screening at both sites commenced post the period end on 1 August
2023. Further to the Company's commitment to continuing education, it plans to
increase governance training for risk-assessed members of staff. The scope of
work for the supplier audit (aimed at demonstrating year on year progress) has
been agreed across sites and will commence in Q3 2023. There have been no
human rights abuses reported at either site during the period.
H1 2023 health and safety statistics
One LTI and two Medical Treatment Injuries ('MTIs') were recorded at Sasa
during H1 2023. In all cases, employees are fully recovered and back at
work. CAML Group therefore reports one LTI and three Total Recordable Injuries
('TRIs') for the six-month period. CAML's H1 2023 LTIFR is 0.80 and the Total
Recordable Injury Frequency Rate ('TRIFR') is 2.40.
Health and safety update on 2023 focus areas
There has been significant focus in H1 2023 on the monitoring and control of
construction work for the transition to the paste fill mining methods. Sasa
appointed a dedicated Health and Safety Engineer to ensure the safe execution
of work activities during the construction and commissioning of the PBF Plant
as well as the other capital projects. Emphasis has also been placed on the
training of new employees as well as the development of work procedures and
plans for the new PBF Plant. At Kounrad, the focus has been on the development
of safety procedures, plans and risk assessments associated with the
construction of the Solar Power Plant. Employees engaged in the construction
and commissioning of the Solar Power Plant were given specific health and
safety training. Testing of the recent fireproofing treatment of steel
structures of the Solvent Extraction ('SX') workshop was undertaken confirming
that the fire protection coating complies with the expected standards.
People update on 2023 focus areas
Across both operations, CAML is once again taking part in the International
Women in Mining Mentorship Programme. Two women from each operation are being
mentored and two members of the senior management team are acting as mentors.
During Q1 2023 a salary benchmarking exercise took place in each jurisdiction,
and pay was increased across the Group accordingly. Development of CAML's
diversity and inclusion strategy is underway. To aid the process of recruiting
and attracting the next generation into the mining industry, it is important
to demonstrate innovation. Virtual Reality ('VR') content is being created by
a local Macedonian company to educate employees in the change of mining method
and this will also be used during onboarding and training activities. In Q2
2023, representatives from Sasa took a stand at a job fair in Skopje, where
students and teachers discussed subjects such as mechanical and electrical
engineering. Regular meetings with employee representatives are held
throughout the year at both operations.
Environmental update on 2023 focus areas
Sasa continued with its energy efficiency programme during H1 2023. The key
project was the installation of a new compressor, and two further compressors
will be installed in H2 2023. These new compressors are expected to provide
annual savings of approximately $10,000 for power usage reduction. The
construction of the 4.77 MW Solar Power Plant in Kounrad started in H1 2023
and will be completed in H2 2023. Phase 2 of the Kounrad biodiversity study
project, focussing on field studies, is scheduled to be completed by end of H2
2023, and this work will feed into the wider Group biodiversity strategy. The
finalisation of Sasa's water management strategy is advancing and on track for
completion before the end of 2023. There were no environmental incidents
reported at Sasa during H1 2023. One minor incident was reported at Kounrad
which involved a minor break in a pipeline that was immediately remediated.
Community update on 2023 focus areas
During H1 2023, the Sasa Foundation continued working alongside the local
community to promote and ensure the sustainable development of the local town,
Makedonska Kamenica. The implementation of the Phase I activities that were
identified by the 2022 Local Environmental Action Plan ('LEAP') and Local
Economic Development Plant ('LEDP') strategic documents are due to be
completed in Q3 2023. The key milestone during this phase involves the
development of a community-based tourism concept and the establishment of a
brand identity for Makedonska Kamenica, which the community itself will
create. During H1 2023, the Kounrad Foundation engaged the Eurasia Foundation
for Central Asia ('EFCA') to assist in the development of a long-term
community investment strategy. As part of this development, the EFCA
organised for representatives of the Foundation to undertake a study tour of
other foundations in Kazakhstan. Development of Kounrad's community-focused
engagement strategy was completed in H1 2023, and work on implementing that
strategy is now underway. There were no community incidents at either
operation during H1 2023.
Sustainability reporting
H1 2023 sustainability reporting update
CAML has reported in accordance with the Global Reporting Initiative ('GRI')
Standards for the period 1 January 2022 to 31 December 2022, and this is the
Company's fourth standalone Sustainability Report. It covers CAML's approach
to transparent business conduct, maintaining safe operations and healthy
working environments, and its efforts to manage any potential environmental or
social impacts. With a view to maintaining momentum in its sustainability
achievements for the future, CAML has committed to the following specific
long-term targets and will report on its performance in these key areas in
next year's Sustainability Report. Please refer to CAML's 2022 Sustainability
report for details. Additional targets will be set in future as appropriate.
Delivering value through stewardship - Zero human rights abuses
Maintaining health and safety - Zero fatalities
- LTIFR target for 2023 to be below 1.30 (the average LTIFR for the
last five years)
Focusing on our people - Maintain 99% local employment across both operations
- 20% female interviewees for each eligible role from 2023 onwards
- 25% increase in Group female employees by end 2025
Caring for the environment - Zero severe or major environmental incidents
- 50% reduction in Group Greenhouse Gas ('GHG') emissions by 2030
and net zero by 2050
- 75% reduction in surface water abstraction at Sasa by end 2026
- 70% of tailings to be stored in a more environmentally responsible
manner (paste backfill and dry stack tailings) by end 2026
- Report Scope 3 emissions in 2024
- Report to Global Industry Standard on Tailings Management (GISTM)
in 2024
Unlocking value for our communities - Zero severe or major community-related incidents
- Increase level of community support to an annualised average of
0.5% of Group gross revenue (up from 0.25%)
H1 2023 climate change reporting update
Following on from the development of its climate change strategy in 2021, CAML
has continued during H1 2023 on its path towards reporting to the Task Force
on Climate-related Financial Disclosures ('TCFD'), becoming an official TCFD
'Supporter' and publishing its second standalone Climate Change Report. This
report provides detail on CAML's scenario analysis undertaken during 2022, as
well as progress towards its long-term goals of a 50% reduction in its GHG
emissions by 2030 versus a 2020 base and achieving net zero by 2050. CAML
has committed to assessing its Scope 3 emissions which it will report on in
2024, and work on this aspect began in H1 2023. The process of developing a
Scope 3 emissions calculation will follow the stepwise process outlined in the
GHG Protocol's Corporate Value Chain (Scope 3) Accounting Reporting Standard.
Where relevant, other global or regional emissions standards or guidelines
will be incorporated or referenced. Post the period end in July 2023, CAML
made its inaugural climate change questionnaire submission to the Carbon
Disclosure Project ('CDP').
Global Industry Standard on Tailings Management ('GISTM')
CAML remains committed to reporting in accordance with GISTM for all its
storage facilities by the end of H1 2024. To ensure conformance by the due
date, a working group has been formed consisting of key members of the
Tailings Storage Facilities ('TSF') team including the Engineer of Record
('EoR'), Responsible Tailings Facility Engineer ('RTFE') and the Deputy
Account Executive ('DAE'). Responsible individuals have been appointed to
cover all 77 requirements within the 15 Principles, using local and
international consultants where appropriate, and they provide quarterly
updates. During H1 2023, the Sasa TSF team and international consultants, KP
completed and implemented the Operations, Maintenance and Surveillance Manual.
In H1 2023, the Board of Directors approved CAML's new Tailings Policy, which
has been published on the Company's website.
Business Development Review
Summary
CAML has been very active with its business development efforts during H1
2023, and, during the six-month period, 22 opportunities have been appraised.
Five NDAs were signed, and three site visits were undertaken. The
opportunities that CAML has reviewed during H1 2023 have been in line with its
business development strategy.
Business development strategy
Following internal discussions with CAML's business development team and
Board, the following broad strategy has been identified and the team's efforts
are focused on these key aspects, whilst acknowledging that business
development is and will always be opportunistic.
- Type of opportunity
o Earlier stage exploration opportunities largely in existing local
jurisdictions
o Larger, more transformational and most likely 'in production' acquisitions
to enhance scale and liquidity
o Ad hoc 'overlooked' opportunities
- Jurisdiction
o European time zone plus Kazakhstan
- Attractive commodity exposure
o The metal focus should fit in with the Company's purpose, which remains to
produce base metals essential for modern living
- Affordability
o CAML's strong balance sheet with no debt and strong cash generation from
existing operations means that the Group has considerable borrowing capacity
to enable a strong cash element to any offer
o Good liquidity and strong shareholder support for future deals
- Accretion
o Business development transactions must add value for shareholders
- Sustainability
o Acquisition opportunities must not negatively impact the Company's
sustainability position for the long term
H1 2023 activities
In line with CAML's business development strategy, during H1 2023, the company
entered into an arrangement with a team of experienced explorers, Terra
Exploration. Terra comprises early-stage exploration geologists with
international and significant Kazakhstan experience with a proven track record
of discovery.
The team is reviewing a series of potential target areas using historical data
and its advanced database combined with its analytical abilities, and
applications for exploration licences in Kazakhstan have already been made.
The budget for this work in 2023 is expected to be c.$1 million. CAML has
formed a new Company, CAML Exploration, in the Astana International Finance
Centre ('AIFC') which will be owned 80% by CAML and 20% by Terra, before
moving towards a wholly-CAML owned company with a NSR-style royalty
arrangement for Terra on longer-term meaningful exploration success.
In addition to developing its relationship with Terra, the CAML business
development team spent much of the six-month period focused on two particular
acquisition opportunities, and external consultants were engaged for both of
these projects. These opportunities were in line with CAML's business
development strategy and both processes concluded during the reporting period.
However, with due diligence aspects uncovered and valuation gaps being the
ultimate issues in both cases, the Company did not proceed further.
CAML currently has additional site visits planned and business development
projects underway, which will be progressed during H2 2023.
Financial Review
Overview
Revenue
The Group has reported lower revenues in the period due to a significant fall
in metal prices received for all three metals. In particular, the zinc price
reduced by c 28% when compared to H1 2022 but also copper and lead prices
received were lower by 9% and 6% respectively. This has resulted in a c 17%
reduction in gross revenue to $99.3 million (H1 2022: $119.5 million) for H1
2023.
Profitability - Group Profit before tax ('PBT') and EBITDA
This reduction in revenue has had a direct impact on both PBT and EBITDA.
PBT for H1 2023 was $32.9 million (H1 2022: $66.9 million) reflecting the
lower revenues, some inflationary cost pressures, higher Mineral Extraction
Tax ('MET') in Kazakhstan and a foreign exchange loss of $2.5 million
(explained below) compared to a foreign exchange gain of $7.0 million in the
comparable period of H1 2022.
Group H1 2023 EBITDA was $48.9 million (H1 2022: $74.9 million), again
reflecting the lower revenues and some inflationary cost pressures.
This has resulted in a reduced EBITDA margin of 49% (H1 2022: 63%). The
majority of the $26.0 million EBITDA reduction (78%) was a result of these
lower revenues. The balance of $5.8 million was due to increased MET and sales
and distribution costs, as well as other inflationary costs, such as a $0.6
million increase in electricity prices in North Macedonia, and a $1.7 million
increase in labour costs as CAML supported its employees through in-country
cost increases.
At the operating level, Sasa's H1 2023 EBITDA was $18.2 million (H1 2022:
$35.1 million), with a margin of 41% (H1 2022: 60%) whilst Kounrad's H1 2023
EBITDA was $39.2 million (H1 2022: $48.2 million), with a margin of 72% (H1
2022: 79%).
Adjusted free cash flow
Despite the above challenges of reduced revenues and inflationary cost
pressures, CAML still managed to generate an adjusted FCF of $24.1 million (H1
2022: $52.2 million). The calculation of adjusted FCF is reported below and
includes an adjustment to allow for the timing of withholding tax payments
during the first six-month period ended 30 June 2023.
Taxation
During H1 2023, the Group paid $7.0 million (H1 2022: nil) of Kazakhstan
withholding tax on intercompany dividend distributions. The payment of 10%
withholding tax on dividends from Kazakhstan was introduced from 1 January
2023. Due to the timing of intercompany dividend distributions, the amount
of withholding tax to be paid in H2 2023 will be significantly lower at $0.5
million, therefore totalling $7.5 million for the full year ended 31 December
2023.
Debt free
The Group fully repaid the corporate debt in August 2022 and as at 30 June
2023, had nil drawn overdraft facilities (31 December 2022: $1.4 million) and
cash of $50.6 million (31 December 2022: $60.6 million).
Income statement
Revenue
CAML generated H1 2023 gross revenue of $99.3 million (H1 2022: $119.5
million), which is reported after deduction of zinc and lead treatment
charges, but before deductions including offtake buyers' fees and silver
purchases for the Sasa silver stream. Net revenue after these deductions was
$93.6 million (H1 2022: $113.8 million).
Sasa
Sasa generated H1 2023 gross revenue of $44.6 million (H1 2022: $58.4
million).
A total of 8,382 tonnes (H1 2022: 8,761 tonnes) of payable zinc in concentrate
and 12,416 tonnes (H1 2022: 13,608 tonnes) of payable lead in concentrate were
sold during H1 2023.
The zinc price received decreased by 28% to an average of $2,662 per tonne (H1
2022: $3,679 per tonne) and the lead price received decreased by 6% to an
average of $2,051 per tonne (H1 2022: $2,174 per tonne), leading to an overall
decrease in gross revenue generated from the mine.
Treatment charges during the period reduced to $7.9 million (H1 2022: $8.4
million), and the offtake buyer's fee for Sasa was $0.5 million (H1 2022: $0.6
million).
Zinc and lead concentrate sales agreements have been arranged 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
Kounrad generated H1 2023 gross revenue of $54.7 million (H1 2022: $61.2
million).
A total of 6,310 tonnes (H1 2022: 6,332 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 five tonnes (H1 2022: 74 tonnes) were sold
locally. Total Kounrad H1 2023 copper sales were therefore 6,315 tonnes (H1
2022: 6,406 tonnes).
The copper price received decreased by 9% to an average of $8,668 per tonne
(H1 2022: $9,557 per tonne) leading to an overall decrease in gross revenue
from the mine while the offtaker's fee for Kounrad increased to $1.4 million
(H1 2022: $1.3 million) due to higher transportation costs as a result of the
conflict in Ukraine.
Cost of sales
The Group cost of sales for the period was $44.6 million (H1 2022: $40.6
million). This includes depreciation and amortisation charges of $13.4 million
(H1 2022: $13.7 million). Global macro-economic conditions led to an
increase in key production costs components such as electricity and
salaries. 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 period was $30.1 million (H1 2022: $28.0
million). Compared to the prior period, Sasa faced some cost increases due to
inflationary pressures including an increase in salaries of $1.1 million and
an increase in electricity costs of $0.6 million. Sasa incurred spot
electricity prices during H1 2023 following the expiry of the largely fixed
price contract in June 2022. Actions taken by governments to increase gas
storage in the latter part of 2022 as well as a mild winter resulted in easing
of electricity prices during H1 2023 compared to H2 2022.
H1 2023 royalties decreased against H1 2022 to $1.3 million (H1 2022: $1.6
million). This tax is calculated at the rate of 2% (H1 2022: 2%) on the value
of metal recovered during the period and the decrease resulted from the
decline in production volume and metal prices.
Kounrad
Kounrad's H1 2023 cost of sales was $14.5 million (H1 2022: $12.6 million).
Mineral Extraction Tax ('MET') is a royalty charged by the Kazakhstan
authorities. From 1 January 2023, the MET rate increased to 8.55% (H1 2022:
5.7%) on the value of metal recovered during the period. MET for the period
was therefore higher at $4.9 million (H1 2022: $3.7 million). Cost of sales
also includes an increase in salaries of $0.6 million.
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 the C1 cash cost.
Sasa
Sasa's on-site operating costs were $22.3 million (H1 2022: $18.3 million).
The on-site unit cost increased to $56.2 per tonne (H1 2022: $45.5 per tonne)
due to the higher costs mentioned above and a reduction in tonnes of ore mined
in H1 2023 versus H1 2022.
Sasa's total C1 cash cost base, including realisation costs, increased to
$32.1 million (H1 2022: $28.4 million), however Sasa's C1 zinc equivalent cash
cost of production increased marginally to $0.72 per pound (H1 2022: $0.71 per
pound). The marginal $0.01 per pound increase in the C1 calculation was
primarily due to a lower proportion of pro-rata zinc costing resulting from
the zinc equivalent calculation due to the decrease in zinc revenue versus
lead in H1 2023.
Kounrad
Kounrad's H1 2023 C1 cash cost of copper production was $0.67 per pound (H1
2022: $0.63 per pound) which remains amongst the lowest in the copper
industry. The increase in C1 cash cost versus H1 2022 is due primarily to
higher costs resulting from employee pay increases.
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 H1 2023 C1 copper equivalent cash
cost was $1.56 per pound (H1 2022: $1.30 per pound). This number is calculated
based on Sasa's H1 2023 zinc and lead payable production, which equated to
5,512 copper equivalent tonnes (H1 2022: 6,468 copper equivalent tonnes) added
to Kounrad's H1 2023 copper production of 6,716 tonnes (H1 2022: 6,617
tonnes), totalling 12,228 tonnes (H1 2022: 13,085 tonnes). The C1 cash cost
increase on a copper equivalent basis is due to the higher C1 cost base at
both Sasa and Kounrad and less copper equivalent tonnes due to the lower zinc
price.
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 period was $2.11 per pound (H1 2022: $1.81 per pound). The
increase is a result of lower copper equivalent tonnes, the higher C1 cost
components at Sasa and Kounrad and higher Kounrad MET.
Administrative expenses
During the period, administrative expenses increased to $12.4 million (H1
2022: $11.2 million), largely due to an increase in payroll across the Group
and higher consultancy costs.
Foreign exchange
The Group incurred a foreign exchange loss of $2.5 million (H1 2022: gain of
$7.0 million) resulting from the retranslation of USD denominated monetary
assets held by foreign subsidiaries with a local functional currency. The
prior period gain was significant due to the weakening of the Kazakhstan Tenge
and North Macedonian Denar during the prior period.
As at 30 June 2023, the Tenge strengthened to 454.13 against the US Dollar (30
June 2022: 465.08) and the Denar strengthened to 56.35 against the US Dollar
(30 June 2022: 58.66).
Finance costs
The Group incurred lower finance costs of $0.9 million (H1 2022: $1.2 million)
resulting from the repayment of the corporate debt in August 2022 somewhat
countered by an increase in the unwinding of the discount on asset retirement
obligations.
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 period, there were capitalised additions to property, plant, and
equipment of $17.1 million (H1 2022: $8.0 million). The additions were a
combination of $1.2 million (H1 2022: $1.2 million) Kounrad sustaining capital
expenditure, $5.0 million (H1 2022: $3.3 million) Sasa sustaining capital
expenditure and $8.2 million (H1 2022: $3.5 million) in relation to the Sasa
Capital Projects and $2.7 million (H1 2022: nil) in relation to the Kounrad
Solar Power Plant.
Sasa sustaining capital expenditure includes capitalised mine development of
$1.3 million, $0.7 million on flotation equipment and $0.5 million on
underground fleet. Kounrad's sustaining capital expenditure includes $0.2
million on dripper pipes.
H1 2023 cash outflow on purchases of property, plant and equipment was lower
at $11.3 million due to prepayments made during the year ended 31 December
2022 which were subsequently capitalised during H1 2023.
Capital projects
The Group continues to invest significantly at Sasa in order to enable the
transition to paste fill mining methods and the storage of waste in a more
environmentally responsible manner. This work comprises the construction of a
PBF Plant and associated underground reticulation infrastructure, a DST Plant
and associated landform and the development of the new Central Decline.
As mentioned above, during H1 2023, capitalised additions to property, plant
and equipment on the Capital Projects totalled $8.2 million. Capitalised
additions include $1.3 million of Central Decline costs and $3.9 million on
the PBF Plant. There was a further $0.9 million spent on underground
reticulation and $2.1 million spent on the DST Plant and associated
landform. H1 2023 cash outflow on the Capital Projects was lower at $4.4
million due to prepayments made during the year ended 31 December 2022 which
were subsequently capitalised during H1 2023.
CAML expects 2023 cash capital expenditure of between $28.0 million and $30.0
million, of which between $10.0 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 the Capital Projects capital expenditure in the order of $12.0 million
in 2023. This will be largely related to construction of the DST Plant as well
as Central Decline development.
Working capital
As of 30 June 2023, current trade and other receivables were $14.1 million (31
December 2022: $8.7 million), which includes trade receivables from the
offtake sales of $4.0 million (31 December 2022: $2.4 million) and $1.9
million in relation to prepayments and accrued income (31 December 2022: $3.0
million). Trade and other receivables also include $5.2 million (31 December
2022: $1.1 million) of overpaid Group corporate income tax which will be
offset against corporate income tax liabilities arising in the same entities
in the current and next financial year.
Non-current trade and other receivables were $6.6 million (31 December 2022:
$11.5 million). As at 30 June 2023, a total of $4.2 million (31 December
2022: $3.4 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 30 June 2023, current trade and other payables were $14.4 million (31
December 2022: $16.6 million).
Cash and borrowings
As at 30 June 2023, the Group had cash in the bank of $50.6 million (31
December 2022: $60.6 million) and no borrowings (31 December 2022: $1.4
million).
During the period, $1.4 million (H1 2022: $4.5 million) of North Macedonian
overdrafts were repaid. In addition, interest of $0.1 million was paid (H1
2022: $0.5 million).
Taxation
During H1 2023, corporate income tax paid to local governments totalled $18.5
million (H1 2022: $11.7 million). This included $11.0 million (H1 2022: $10.0
million) of Kazakhstan corporate income tax and $7.0 million of Kazakhstan
withholding tax paid on intercompany dividend distributions. $0.5 million
(H1 2022: $1.7 million) of North Macedonian corporate income tax was paid in
cash in addition to a $2.7 million (H1 2022: $1.8 million) non-cash payment
offset against VAT and corporate income tax receivable.
Adjusted free cash flow
The net cash generated from operating activities plus interest received in H1
2023 was $25.1 million (H1 2022: $56.7 million).
FCF has been adjusted for the payment of Kazakhstan withholding tax on
intercompany dividend distributions during the period. As explained above,
$7.0 million of withholding tax was paid during H1 2023. Due to the timing
of intercompany dividend distributions, the amount of withholding tax to be
paid in H2 2023 will be significantly lower at $0.5 million, therefore
totalling $7.5 million for the full year ended 31 December 2023. In order to
more reasonably apportion these cash flows over the full year, an adjustment
has been made to reflect half of the full year amount ($3.8 million) in H1
2023. Therefore, an adjustment of $3.2 million has been made to FCF,
calculated as the balance between the $7.0 million paid and the $3.8 million
half-year apportioned cash flow.
Six months ended
30-Jun-23 30-Jun-22
$'000 $'000
Net cash generated from operating activities 24,145 56,619
Interest received 962 87
Less: Purchase of sustaining property, plant, and equipment (4,247) (4,513)
Free cash flow 20,860 52,193
Adjustment for:
Kazakhstan withholding tax on intercompany dividend distributions 3,254 -
Adjusted free cash flow 24,114 52,193
Dividend
Total dividends paid to shareholders during the period of $21.7 million
comprised the final 2022 dividend of 10 pence per Ordinary Share.
The Company's dividend policy is to return to shareholders a range of between
30% and 50% of FCF, defined as net cash generated from operating activities,
plus interest received, less sustaining capital expenditure. This remains the
Company policy but due to the timing of withholding tax payments during H1
2023, as explained above, the Board has agreed to apply that policy to the
adjusted FCF.
The adjusted FCF of $24.1 million has been used as the basis of the interim
dividend for the current period and the Board has agreed an 82% payout. This
has resulted in the Board declaring an interim dividend of 9 pence per
Ordinary Share.
The interim dividend is payable on 20 October 2023 to shareholders registered
on 29 September 2023. This latest dividend will increase the amount returned
to shareholders in dividends since the 2010 IPO to $318.8 million.
Going concern
The Group sells and distributes its copper product primarily through an annual
rolling offtake arrangement with Traxys Europe S.A. 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 of 30 June 2023.
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 together 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.
Outlook
The Company remains on track to meet the 2023 production output guidance from
Sasa and Kounrad. CAML's low costs of operations provides the Company with
the ability to withstand a decline in commodity prices and inflationary cost
pressures. CAML has a strong balance sheet with $50.6 million in cash and no
debt as of 30 June 2023. This enables CAML to continue to pay some of the
highest dividends in the sector whilst actively considering various business
development opportunities.
Non-IFRS financial measures
The Group uses alternative performance measures, which are not defined by the
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:
Six months ended
30-Jun-23 30-Jun-22
$'000 $'000
Profit for the period 21,101 53,330
Plus/(less):
Income tax expense 12,065 13,537
Depreciation and amortisation 13,683 13,971
Foreign exchange loss/(gain) 2,478 (7,025)
Other income (140) (79)
Finance income (962) (87)
Finance costs 939 1,179
(Profit)/loss from discontinued operations (253) 69
EBITDA 48,911 74,895
Gross revenue
Gross revenue is presented as the total revenue received from sales of all
commodities after deducting the directly attributable treatment and refining
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 period. The Board considers gross revenue,
together with the reconciliation to net IFRS revenue to provide valuable
information on the drivers of IFRS revenue.
Six months
ended
30-Jun-23 30-Jun-22
$'000 $'000
Gross revenue 99,331 119,547
Less:
Silver stream purchases (3,859) (3,835)
Offtake buyers' fees (1,858) (1,925)
Revenue (net IFRS revenue) 93,614 113,787
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 bank overdrafts plus the cash and cash
equivalents held at the end of the period. This balance does not include the
restricted cash balance of $0.3 million (31 December 2022: $0.3 million):
30-Jun-23 31-Dec-22
$'000 $'000
Bank overdrafts - (1,390)
Cash and cash equivalents 50,355 60,298
Net cash 50,355 58,908
Free cash flow and adjusted free cash flow
FCF is a non-IFRS financial measure of the net cash generated from operating
activities, plus interested received, less sustaining capital expenditure on
property, plant and equipment and intangible assets. The definition of FCF
has been updated to include interest received. It is a key measure for the
company as the dividend policy is based on this periodic measure of
performance.
The purchase of sustaining property, plant and equipment figure in H1 2023 was
$4.2 million (H1 2022: $4.5 million) and does not include $4.4 million (H1
2022: $3.5 million) expended on the Sasa Capital Projects and $2.7 million (H1
2022: nil) expended on the Kounrad Solar Power Plant. These costs are not
considered sustaining capital expenditure as they are expansionary development
costs. These exceptional project costs are expected to continue until 2024.
As explained above, H1 2023 FCF has been adjusted to more reasonably apportion
H1 2023 withholding tax payments over the full year.
Directors' Responsibility Statement
The Directors confirm that, to the best of their knowledge, the interim
financial information has been prepared in accordance with IAS 34 "Interim
Financial Reporting" as adopted by the United Kingdom and the AIM Rules for
Companies, and that the interim results include a fair review of the
information required.
On behalf of the Board
Gavin Ferrar
Chief Financial Officer
12 September 2023
INDEPENDENT REVIEW REPORT TO CENTRAL ASIA METALS PLC
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the interim
financial report for the six months ended 30 June 2023 is not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34 and the London Stock Exchange AIM Rules for Companies.
We have been engaged by the Company to review the condensed set of financial
statements in the interim financial report for the six months ended 30 June
2023 which comprises the condensed consolidated interim statement of financial
position as at 30 June 2023, the condensed consolidated interim income
statement and condensed consolidated interim statement of comprehensive income
for the period then ended, the condensed consolidated interim statement of
changes in equity, the condensed consolidated interim statement of cash flows
and notes to the consolidated interim financial information.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in Note 1, the annual financial statements of the Group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this interim financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the Directors have
inappropriately adopted the going concern basis of accounting or that the
Directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the Group to
cease to continue as a going concern.
Responsibilities of Directors
The Directors are responsible for preparing the interim financial report in
accordance with
the London Stock Exchange AIM Rules for Companies which require that the
interim report be presented and prepared in a form consistent with that which
will be adopted in the Company's annual accounts having regard to the
accounting standards applicable to such annual accounts.
In preparing the interim financial report, the Directors are responsible for
assessing the Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the Company or
to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the interim report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statement in the
interim financial report. Our conclusion, including our Conclusions Relating
to Going Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the rules of the London
Stock Exchange AIM Rules for Companies for no other purpose. No person is
entitled to rely on this report unless such a person is a person entitled to
rely upon this report by virtue of and for the purpose of our terms of
engagement or has been expressly authorised to do so by our prior written
consent. Save as above, we do not accept responsibility for this report to
any other person or for any other purpose and we hereby expressly disclaim any
and all such liability.
Ryan Ferguson
For and on behalf of BDO LLP
Chartered Accountants
London
12 September 2023
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT (unaudited)
for the six months period ended 30 June 2023
Six months
ended
30-Jun-23 30-Jun-22
Note $'000 $'000
Continuing operations
Revenue 93,614 113,787
Presented as:
Gross revenue 1 99,331 119,547
Less:
Silver stream purchases (3,859) (3,835)
Offtake buyers' fees (1,858) (1,925)
Revenue 93,614 113,787
Cost of sales (44,566) (40,621)
Distribution and selling costs (1,447) (1,026)
Gross profit 47,601 72,140
Administrative expenses (12,373) (11,216)
Other income 140 79
Foreign exchange (loss)/gain (2,478) 7,025
Operating profit 32,890 68,028
Finance income 962 87
Finance costs (939) (1,179)
Profit before income tax 32,913 66,936
Income tax 6 (12,065) (13,537)
Profit for the period from continuing operations 20,848 53,399
Discontinued operations
Profit/(loss) for the period from discontinued operations 253 (69)
Profit for the period 21,101 53,330
Profit attributable to:
Non-controlling interests 90 5
Owners of the parent 21,011 53,325
Profit for the period 21,101 53,330
Earnings/(loss) per share from continuing and discontinued operations
attributable to owners of the parent during the period (expressed in cents per
share) $ $
cents cents
Basic earnings/(loss) per share
From continuing operations 7 11.41 30.25
From discontinued operations 0.14 (0.04)
From profit for the period 11.55 30.21
Diluted earnings/(loss) per share
From continuing operations 7 10.93 29.15
From discontinued operations 0.13 (0.04)
From profit for the period 11.06 29.11
1 Gross revenue is a non-IFRS financial measure which is used by management,
alongside the comparable GAAP measures, in evaluating the business
performance. Themeasures are not intended as a substitute for GAAP measures
and may not be comparable to similarly reported measures by other companies.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME (unaudited)
for the six months period ended 30 June 2023
Six months ended
30-Jun-23 30-Jun-22
$'000 $'000
Profit for the 21,101 53,330
period
Other comprehensive income/(expense):
Items that may be reclassified subsequently to profit or loss:
Currency translation differences 9,236 (34,543)
Other comprehensive income/(expense) for the period, net of tax 9,236 (34,543)
Total comprehensive income for the period 30,337 18,787
Attributable to:
- Non-controlling interests 90 5
- Owners of the parents 30,247 18,782
Total comprehensive income for the period 30,337 18,787
Total comprehensive income attributable to equity shareholders arises from:
- Continuing operations 30,084 18,758
- Discontinued operations 253 29
30,337 18,787
CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION (unaudited)
as at 30 June 2023
Unaudited Audited
30-Jun-23 31-Dec-22
Note $'000 $'000
Assets
Non-current assets
Property, plant and equipment 8 335,161 322,197
Intangible assets 9 26,237 26,552
Deferred income tax asset 13 4,006 328
Other non-current receivables 11 6,550 11,478
371,954 360,555
Current assets
Inventories 10 15,410 13,149
Trade and other receivables 11 14,124 8,715
Restricted cash 269 264
Cash and cash equivalents 50,355 60,298
80,158 82,426
Assets of the disposal group classified as held for sale 67 64
80,225 82,490
Total assets 452,179 443,045
Equity attributable to owners of the parent
Ordinary shares 1,821 1,821
Share premium 205,725 205,437
Treasury shares (15,413) (15,831)
Currency translation reserve (124,856) (134,092)
Retained earnings 312,266 312,107
379,543 369,442
Non-controlling interests (1,232) (1,322)
Total equity 378,311 368,120
Liabilities
Non-current liabilities
Silver streaming commitment 16,598 17,085
Deferred income tax liability 13 17,136 17,286
Lease liability 143 10
Provision for other liabilities and charges 14 24,098 20,744
57,975 55,125
Current liabilities
Borrowings 15 - 1,390
Silver streaming commitment 1,022 1,095
Trade and other payables 12 14,443 16,643
Lease liability 149 295
Provisions for other liabilities and charges 14 260 333
15,874 19,756
Liabilities of disposal group classified as held for sale 19 44
15,893 19,800
Total liabilities 73,868 74,925
Total equity and liabilities 452,179 443,045
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY (unaudited)
for the six months period ended 30 June 2023
Currency translation reserve Non-controlling interest
Ordinary shares Share premium Treasury shares Retained earnings Total
Total equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance as at 1 January 2023 1,821 205,437 (15,831) (134,092) 312,107 369,442 (1,322) 368,120
Profit for the period - - - - 21,011 21,011 90 21,101
Other comprehensive income- currency translation differences - - - 9,236 - 9,236 - 9,236
Total comprehensive income - - - 9,236 21,011 30,247 90 30,337
Transactions with owners
Share based payments - - - - -
2,213 2,213 2,213
Exercise of options - 288 418 - (1,351) (645) - (645)
Dividends - - - - (21,714) (21,714) - (21,714)
Total transactions with owners, recognised directly in equity - 288 418 - (20,852) (20,146) - (20,146)
Balance as at 30 June 2023 1,821 205,725 (15,413) (124,856) 312,266 379,543 (1,232) 378,311
Currency translation reserve Non-controlling interest
Ordinary shares Share premium Treasury shares Retained earnings Total
Total equity
Attributable to owners of the parent $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance as at 1 January 2022 1,765 191,988 (2,360) (104,781) 323,951 410,563 (1,316) 409,247
Profit for the period - - - - 53,325 53,325 5 53,330
Other comprehensive expense- currency translation differences - - - (34,543) - (34,543) - (34,543)
Total comprehensive income/(expense) - - - (34,543) 53,325 18,782 5 18,787
Transactions with owners
Share based payments - - - - 1,741 1,741 - 1,741
Exercise of options - 9 24 - (1,263) (1,230) - (1,230)
Dividends - - - - (27,819) (27,819) - (27,819)
Total transactions with owners, recognised directly in equity - 9 24 - (27,341) (27,308) - (27,308)
Balance as at 30 June 2022 1,765 191,997 (2,336) (139,324) 349,935 402,037 (1,311) 400,726
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS (unaudited)
for the six months period ended 30 June 2023
Six months ended
30-Jun-23 30-Jun-22
Note $'000 $'000
Cash flows from operating activities
Cash generated from operations 16 42,676 68,830
Interest paid (53) (477)
Corporate income tax paid (18,478) (11,734)
Net cash flow generated from operating activities 24,145 56,619
Cash flows from investing activities
Purchases of property, plant, and equipment (11,340) (8,008)
Purchase of intangible assets (28) -
Proceeds from sale of property, plant, and equipment 27 17
Interest received 962 87
Increase in restricted cash - (3,155)
Net cash used in investing activities (10,379) (11,059)
Cash flows from financing activities
Repayment of overdraft 15 (1,403) (4,473)
Repayment of borrowings - (16,000)
Dividend paid to owners of the parent (21,714) (27,819)
Cash settlement of share options (641) (1,908)
Receipt on exercise of share options 4 6
Net cash used in financing activity (23,754) (50,194)
Effect of foreign exchange gain/(losses) on cash and cash equivalents
43 (34)
Net decrease in cash and cash equivalents (9,945) (4,668)
Cash and cash equivalents at 1 January 60,361 55,731
Cash and cash equivalents at 30 June 50,416 51,063
Cash and cash equivalents at 30 June 2023 includes cash at bank on hand
included in assets held for sale of $61,000 (30 June 2022: $53,000). The
consolidated statement of cash flows does not include the restricted cash
balance of $269,000 (30 June 2022: $6,671,000).
Corporate income tax paid includes $7,027,000 (30 June 2022: nil) of
Kazakhstan withholding tax paid on intercompany dividend distributions.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION
For the six months period ended 30 June 2023
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 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.
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.
The condensed consolidated interim financial information incorporates the
results of Central Asia Metals plc and its subsidiary undertakings as at 30
June 2023 and was approved by the Directors for issue on 13 September 2023.
The condensed consolidated financial information is unaudited and does not
constitute statutory accounts as defined in Section 434 of the Companies Act
2006. The information for the year ended 31 December 2022 included in this
report was derived from the statutory accounts for that year, which were
prepared in accordance with International Financial Reporting Standards
(IFRSs) issued by the International Accounting Standards Board (IASB) and
interpretations issued by the International Financial Reporting
Interpretations Committee (IFRIC) of the IASB, as adopted by the UK up to 31
December 2022, a copy of which has been delivered to the Registrar of
Companies. The report of the auditors on those accounts was unqualified, did
not contain an emphasis of matter paragraph and did not contain a statement
under 498(2) 498(3) of the Companies Act 2006.
This condensed consolidated interim financial information has been reviewed,
not audited.
2. Basis of preparation
The condensed consolidated interim financial information for the six months to
30 June 2023 has been prepared in accordance with IAS 34 'Interim financial
reporting' and also in accordance with the measurement and recognition
principles of UK adopted international accounting standards.
Principal risks and uncertainties
In preparing the condensed consolidated interim financial information
management is required to consider the principal risks and uncertainties
facing the Group.
In management's opinion, the principal risks and uncertainties facing the
Group are unchanged since the preparation of the consolidated financial
statements for the year ended 31 December 2022. Those risks and uncertainties,
together with management's response to them are described in the Principal
Risks and Uncertainties section of the 2022 Annual Report and Accounts.
3. Accounting policies
The accounting policies, methods of computation and presentation used in the
preparation of the condensed consolidated interim financial information are
the same as those used in the Group's audited financial statements for the
year ended 31 December 2022.
Going concern
The Group sells and distributes its copper product primarily through an annual
rolling offtake arrangement with Traxys Europe S.A. 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 and no outstanding borrowings as
at 30 June 2023.
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 together
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.
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, two months or three months,
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.
Taxation
Taxation for each jurisdiction is calculated at the estimated average annual
effective income tax rate in the respective jurisdictions. This is the case
for the corporation tax on taxable profits and also on distributions made
subjected to withholding tax. These rates are applied to the pre-tax income of
the six-month period.
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 half-yearly reporting period commencing 1 January 2023, however there is no effect on the current reporting period as they are either not relevant to the Group's activities or require accounting which is consistent with Group's current accounting policies:
· IFRS 17 Insurance Contracts;
· Disclosure of Accounting Policies (Amendments to IAS 1
Presentation of Financial Statements and IFRS Practice Statement 2);
· Definition of Accounting Estimates (Amendments to IAS 8
Accounting policies, Changes in Accounting Estimates and Errors);
· International Tax Reform - Pillar Two Model Rules (Amendment to
IAS 12 Income Taxes)
The impact of the amendments to IAS 12 Income taxes which relate to deferred
tax related to Assets and Liabilities arising from a Single Transaction are
currently being analysed and the impact, if any, on the financial statements
will be recognised in the annual financial statements.
4. Critical accounting judgements and estimates
The preparation of condensed consolidated interim financial information
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 preparing this condensed consolidated interim financial information, the
significant accounting estimates and judgements made by management in applying
the Group's accounting policies were the same as those that applied to the
consolidated financial statements for the year ended 31 December 2022.
Refer to note 9 and note 14 for critical judgements and estimates related to
the impairment test for the Sasa mining assets.
5. Segmental information
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 segment results for the six months ended 30 June 2023 are as follows:
Unaudited
Kounrad Sasa Unallocated Total
$'000 $'000 $'000 $'000
Gross revenue
54,693 44,638 - 99,331
Silver stream purchases - (3,859) - (3,859)
Offtake buyers' fees (1,388) (470) - (1,858)
Revenue 53,305 40,309 - 93,614
EBITDA 39,242 18,162 (8,493) 48,911
Depreciation and amortisation (1,877) (11,681) (125) (13,683)
Foreign exchange loss (1,836) (624) (18) (2,478)
Other income 140 - - 140
Finance income 9 - 953 962
Finance costs (238) (698) (3) (939)
Profit/(loss) before income tax 35,440 5,159 (7,686) 32,913
Income tax (12,065)
Profit for the period after taxation from continuing operations
20,848
Profit from discontinued operations 253
Profit for the period 21,101
Depreciation and amortisation includes depreciation and amortisation on the
fair value uplift on acquisition of Sasa and Kounrad of $7,409,000.
The segment results for the six months ended 30 June 2022 are as follows:
Unaudited
Kounrad Sasa Unallocated Total
$'000 $'000 $'000 $'000
Gross revenue
61,178 58,369 - 119,547
Silver stream purchases - (3,835) - (3,835)
Offtake buyers' fees (1,314) (611) - (1,925)
Revenue 59,864 53,923 - 113,787
EBITDA 48,188 35,050 (8,343) 74,895
Depreciation and amortisation (1,871) (11,976) (124) (13,971)
Foreign exchange gain 4,293 2,577 155 7,025
Other income 79 - - 79
Finance income 10 - 77 87
Finance costs (91) (581) (507) (1,179)
Profit/(loss) before income tax 50,608 25,070 (8,742) 66,936
Income tax (13,537)
Profit for the period after taxation from continuing operations 53,399
Loss from discontinued operations (69)
Profit for the period 53,330
Depreciation and amortisation includes depreciation and amortisation on the
fair value uplift on acquisition of Sasa and Kounrad of $7,694,000.
A reconciliation between profit for the period and EBITDA is presented in the
Financial Review section.
Group segmental assets and liabilities as at the 30 June 2023 are as
follows:
Segmental Assets Non-current Asset additions Segmental Liabilities
30-Jun-23 31-Dec-22 30-Jun-23 30-Jun-22 30-Jun-23 31-Dec-22
$'000 $'000 $'000 $'000 $'000 $'000
Kounrad 78,746 82,258 3,992 1,189 (16,840) (13,928)
Sasa 330,007 324,197 13,167 6,806 (54,180) (54,718)
Assets held for sale 67 64 - - (19) (44)
Unallocated including corporate 43,359 36,526 11 13 (2,829) (6,235)
Total 452,179 443,045 17,170 8,008 (73,868) (74,925)
6. Income tax
Six months ended
30-Jun-23 30-Jun-22
$'000 $'000
Current tax on profits for the period 9,148 15,131
Withholding tax on intercompany dividend distributions 7,027 -
IAS 34 deferred tax adjustment (note 13) (3,596) -
Deferred tax adjustment (note 13) (514) (1,594)
Income tax expense 12,065 13,537
Taxation for each jurisdiction is calculated at the estimated average annual
effective income tax rate in the respective jurisdictions, in accordance with
IAS 34. This is the case for the corporation tax on taxable profits and also
on distributions made subjected to withholding tax. These rates are applied to
the pre-tax income of the six-month period. The payment of 10% withholding tax
on intercompany dividends from Kazakhstan was introduced from 1 January 2023.
Deferred tax assets have not been recognised on tax losses primarily at the
parent company and Copper Bay subsidiaries as it remains uncertain whether
these entities will have sufficient taxable profits in the future to utilise
these losses.
7. Earnings 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 period excluding ordinary shares purchased
by the Company and held as treasury shares.
Six months ended
30-Jun-23 30-Jun-22
$'000 $'000
Profit from continuing operations attributable to owners of the parent 20,758 53,394
Profit/(loss) from discontinued operations attributable to owners of the
parent
253 (69)
Total 21,011 53,325
Weighted average number of ordinary shares in issue 176,498,266
181,904,941
Earnings per share from continuing and discontinued operations attributable to $ cents $ cents
owners of the parent during the period (expressed in $ cents per share)
From continuing operations 11.41 30.25
From discontinued operations 0.14 (0.04)
From profit for the period 11.55 30.21
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.
Six months ended
30-Jun-23 30-Jun-22
Weighted average number of ordinary shares in issue 181,904,941 176,498,266
Adjusted for:
- Share Options 7,998,873 6,697,437
Weighted average number of ordinary shares for diluted earnings per share 189,903,814 183,195,703
Diluted earnings per share $ cents $ cents
From continuing operations 10.93 29.15
From discontinued operations 0.13 (0.04)
From profit for the period 11.06 29.11
8. Property, plant, and equipment
Motor vehicles and right of use assets
Construction Plant and equipment Mining assets Mineral
in progress Land rights Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2023 16,005 164,593 1,175 2,944 590 329,961 515,268
Additions 16,574 69 - 499 - - 17,142
Disposals (63) (518) - (53) - - (634)
Change in estimate - asset retirement obligation
- 2,230 - - - - 2,230
Transfers (8,677) 8,471 - 206 - - -
Exchange differences 424 2,116 22 32 14 4,833 7,441
At 30 June 2023 24,263 176,961 1,197 3,628 604 334,794 541,447
Accumulated depreciation
At 1 January 2023 - 72,016 580 2,161 - 118,314 193,071
Provided during the period
- 6,038 72 556 - 6,524 13,190
Disposals - (329) - (33) - - (362)
Exchange differences - 360 10 17 - - 387
At 30 June 2023 - 78,085 662 2,701 - 124,838 206,286
Net book value at 1 January 2023
16,005 92,577 595 783 590 211,647 322,197
Net book value at 30 June 2023
24,263 98,876 535 927 604 209,956 335,161
The increase in estimate in relation to the asset retirement obligation of
$2,230,000 is due to 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 14).
9. Intangible assets
( )
Mining Computer software and website
licences and permits
Goodwill Total
$'000 $'000 $'000 $'000
Cost
At 1 January 28,336 33,370 389 62,095
2023
Additions - - 28 28
Exchange differences ( ) 139 457 - 596
At 30 June 28,475 33,827 417 62,719
2023
Accumulated amortisation and impairment
At 1 January 20,921 14,320 302 35,543
2023
Provided during the - 856 20 876
period
Exchange differences ( ) - 63 - 63
At 30 June 20,921 15,239 322 36,482
2023
Net book value at 1 January 2023 7,415 19,050 87 26,552
Net book value at 30 June 2023 7,554 18,588 95 26,237
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. When undertaken, an impairment review is completed for each Cash
Generating Unit (CGU):
Kounrad project
The Kounrad project has an associated goodwill balance of $7,554,000 (31
December 2022: $7,415,000). The movement being due solely to foreign exchange
differences.
While assessing the project for impairment the key economic assumptions used
in the review were a five-year forecast average nominal copper price of $8,723
per tonne (31 December 2022: $7,777 per tonne) and a long-term price of $8,042
per tonne (31 December 2022: $7,436 per tonne) and a discount rate of 8.07%
(31 December 2022: 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 that 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
The associated goodwill balance of the Sasa project was impaired by
$20,921,000 to nil during the year ended 31 December 2022.
The business combination in 2017 was accounted for at fair value under IFRS 3
and therefore
recoverable value was sensitive to changes in commodity prices, operational
performance,
treatment charges, future cash costs of production and capital expenditures.
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.
At 30 June 2023, the Group has tested for impairment/reversal of impairment,
using a present value calculation sensitive to assumptions in respect of
future commodity prices, treatment charges, discount rates, operating and
capital expenditure, foreign exchange rates and the mineral reserves and
resources estimates.
The key changes in economic assumptions used in the review were:
1) A discount rate of 11.72% (31 December 2022: 12.52%) supported by a
detailed WACC calculation applied to calculate the present value of the CGU.
This discount rate has reduced since year end due to judgements applied to the
country risk premium as the sale of lead and zinc is a global market and
therefore not fully exposed to North Macedonian risk and favourable changes to
the equity risk premium because of market conditions.
2) The five-year forecast average nominal zinc and lead price of
$2,867 (31 December 2022: $2,760) and $2,016 (2022: $2,081) per tonne
respectively and a long-term real price of $2,600 (31 December 2022: $2,467)
and $2,116 (31 December 2022: $1,874) per tonne respectively based on market
consensus prices which have marginally improved since year-end inflated at 3%.
At the balance sheet date, the impairment test concluded that an impairment or
reversal of the prior year impairment is not necessary as there have been no
significant indicators of a possible reversal identified due to commodity
price risk and judgements applied in the discount rate. Management performed
sensitivity analyses whereby certain parameters were flexed downwards by
reasonable amounts for the CGU to assess whether the recoverable value for the
CGU would result in an impairment charge. The following sensitivities when
applied in isolation would result in a breakeven position:
Discount rate increased to 13.4%
Zinc price reduced by 9%
Lead price reduced by 6%
Operating expenditure increased by 8%
Capital expenditure increased by 36%
At the balance sheet date, the Board considers the base case forecasts to be
appropriate and balanced best estimates.
10. Inventories
30-Jun-23 $'000 31-Dec-22
$'000
Raw materials 13,013 11,917
Finished goods 2,397 1,232
15,410 13,149
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
30 June 2023 and therefore there were no write-offs to the income statement
during the period (H1 2022: nil). The total inventory recognised through the
Income Statement was $3,391,565 (H1 2022: $3,551,000).
11. Trade and other receivables
30-Jun-23 31-Dec-22
Current receivables $'000 $'000
Trade receivables 4,006 2,362
Prepayments and accrued income 1,863 2,991
VAT receivable 1,909 1,546
Other receivables 6,346 1,816
14,124 8,715
Non-current receivables
Prepayments 2,549 8,221
VAT receivable 4,001 3,257
6,550 11,478
Other receivables includes $5,236,000 (31 December 2022: $1,095,000) of
overpaid Group corporate income tax which will be offset against corporate
income tax liabilities arising in the same entities in the current and next
financial year.
As of 30 June 2023, the total Group VAT receivable was $5,910,000 (31 December
2022: $4,803,000) which included an amount of $4,190,000 (31 December 2022:
$3,399,000) of VAT owed to the Group by the Kazakhstan authorities. The Group
is working closely with its advisors to recover the remaining portion. The
planned means of recovery will be through a combination of local sales of
copper cathode to offset VAT liabilities and by a continued dialogue with the
authorities for cash recovery and further offsets.
12. Trade and other payables
30-Jun-23 31-Dec-22
Current payables $'000 $'000
Trade and other payables 6,779 6,722
Accruals 3,879 6,029
Corporation tax, social security and other taxes 3,785 3,892
14,443 16,643
13. Deferred income tax asset and liability
The movements in the Group's deferred tax asset and liabilities are as
follows:
Currency Credit to income
translation statement
At 1-Jan-23 differences $'000 At 30-Jun-23
$'000 $'000 $'000
Other temporary differences (326) 81 3,596 3,351
Deferred tax liability on fair value adjustment on Kounrad transaction
(4,457) (85) 139 (4,403)
Deferred tax liability on fair value adjustment on CMK acquisition
(12,175) (278) 375 (12,078)
Deferred tax liability, net (16,958) (282) 4,110 (13,130)
Reflected in the statement of financial position as:
Deferred tax asset 328 4,006
Deferred tax liability (17,286) (17,136)
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 $514,000 during the period to
reflect the tax consequences of depreciating the recognised fair values of the
assets during the period.
The deferred tax adjustment of $3,596,000 relates to the IAS 34 adjustment of
the effective tax rate on withholding tax as explained in note 6.
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.
14. Provisions for other liabilities and charges
Employee retirement benefits
Asset retirement obligation Legal claims
Other employee benefits Total
$'000 $'000 $'000 $'000 $'000
At 1 January 2023 20,543 244 288 2 21,077
Change in estimate 2,230 - - - 2,230
Settlements of provision - (12) - - (13)
Unwinding of discount 882 - - - 882
Exchange rate differences 170 4 7 - 182
At 30 June 2023 23,825 236 295 2 24,358
Non-current 23,608 209 279 2 24,098
Current 217 27 16 - 260
At 30 June 2023 23,825 236 295 2 24,358
The Group provides for the asset retirement obligation associated with the
mining activities at Sasa and Kounrad. The increase in estimate in relation to
the asset retirement obligation of $2,230,000 is primarily due to additional
estimated costs at Sasa surrounding the lining of the tailings facilities
following discussions with Regulators as well as an update to the discount
rate to 10.15% (31 December 2022: 9.17%) and inflation rate to 3.34% (31
December 2022: 3.53%) using latest assumptions.
15. Borrowings
30-Jun-23 31-Dec-22
$'000 $'000
Unsecured: Current
Bank overdraft - 1,390
Total current - 1,390
The carrying value of loans approximates fair value:
30-Jun-23 31-Dec-22
$'000 $'000
Bank overdrafts - 1,390
- 1,390
The movement on the borrowings can be summarised as follows:
$'000
Balance at 1 January 2023 1,390
Repayment of overdrafts (1,403)
Finance charge interest 30
Interest paid (30)
Foreign exchange 13
Balance at 30 June 2023 -
16. Cash generated from operations
Six months ended
30-Jun-23 30-Jun-22
$'000 $'000
Profit before income tax including discontinued operations 33,166 66,867
Adjustments for:
Depreciation and amortisation 13,683 13,971
Silver stream commitment (560) (660)
Loss/(profit) on disposal of property, plant, and equipment 47 (5)
Foreign exchange loss/(gain) 2,478 (7,025)
Share based payments 2,213 2,418
Finance income (962) (87)
Finance costs 939 1,179
Changes in working capital:
Increase in inventories (2,154) (1,652)
Increase in trade and other receivables (5,167) (2,540)
Decrease in trade and other payables (995) (3,627)
Provisions for other liabilities and charges (12) (9)
Cash generated from operations 42,676 68,830
The increase in trade and other receivables includes a movement in the Sasa
VAT receivable balance of $2,717,000 which is offset against corporate income
tax payable during the period.
17. Dividend per share
An interim dividend of 9 pence per ordinary share (H1 2022: 10 pence) was
declared by the CAML Board on the 13 September 2023.
18. Related party disclosure
The Kounrad Foundation, a charitable foundation through which Kounrad donates
to the community, was advanced nil (H1 2022: nil) as donations are expected
during H2 2023. This is a related party by virtue of common directors.
The Sasa Foundation, a charitable foundation through which Sasa donates to the
community, was advanced $110,000 (H1 2022: $96,000) with further donations
expected during H2 2023. This is a related party by virtue of common
directors.
19. Subsequent events
There were no events after the reporting period.
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