TIDMCEY
RNS Number : 9601M
Centamin PLC
03 August 2017
For immediate release 3 August 2017
Centamin plc ("Centamin" or "the Company")
(LSE:CEY, TSX:CEE)
Centamin plc Results for the Second Quarter and Six Months Ended
30 June 2017
Centamin plc ("Centamin", the "Group" or "the Company") (LSE:
CEY, TSX: CEE) is pleased to announce its results for the second
quarter ended 30 June 2017.
Q2 2017 Operational Highlights (1),(2)
-- Gold production of 124,641 ounces was a 14% increase on Q1
2017 and 11% lower than Q2 2016.
-- Cash cost of production and all-in sustaining costs (AISC)
remain well controlled resulting in unit cash cost of production of
US$609 per ounce and unit AISC of US$829 per ounce sold.
-- Full year 2017 guidance maintained at 540,000 ounces, with
US$580 per ounce cash cost of production and US$790 per ounce
AISC.
-- Record quarterly throughput of 3.06 million tonnes from
Sukari process plant, an increase of 5% on Q1 2017 and of 4% on Q2
2016 performance.
-- Amun / Ptah underground operations delivered 293kt at a grade
of 8.79g/t to the ROM pad with mill feed from underground of 276kt
at 7.74g/t during the period.
-- Record open-pit material movement of 17,493 million tonnes.
Mining of the east wall cutback was completed during quarter as
planned, allowing open-pit mining to move to higher grade
sectors.
-- Continued positive results from underground exploration
drilling at Sukari at both Amun / Ptah and Cleopatra.
-- Development of the Cleopatra exploration decline, located in
the north-east of Sukari Hill, advanced 407 metres. Encouraging
initial results from diamond drilling over 5,231 metres.
Financial Highlights (1),(2)
-- Interim dividend per share of 2.5 US cents, a 25% increase on
2016 interim payment and in line with Centamin's stated policy of
returning free cash flow to shareholders.
-- EBITDA of US$66 million up 24% from Q1 2017 due to an
increase in both sales volumes and average realised gold price.
-- Strong cash flow generation with free cash flow generation of
US$50.8 million year to date.
-- Cash at bank, bullion on hand, gold sales receivable and
available-for-sale financial assets as at 30 June 2017 of US$333.6
million.
-- The Egyptian state has benefitted directly from profit share
payments to EMRA of US$41.2 million during H1 2017 (in line with
guidance for 2017) in addition to US$8.7 million in royalty
payments.
-- Quarterly basic earnings per share (after profit share) of
1.10 US cents, a decrease on Q1 2017 due to non-cash and
non-recurring items as well as higher profit share payments.
Q2 2017 Q1 2017 Q2 2016
-------------------------------- ----------- -------- -------- --------
Gold produced ounces 124,641 109,187 140,306
Gold sold ounces 120,912 115,052 141,802
Cash cost of production US$/ounce 609 734 461
AISC US$/ounce 829 887 669
Average realised gold
price US$/ounce 1,249 1,220 1,268
-------------------------------- ----------- -------- -------- --------
Revenue US$'000 151,282 140,724 180,128
EBITDA US$'000 65,958 53,058 101,605
Profit before tax US$'000 37,819 29,467 73,379
EPS (before profit share) US cents 3.18 2.56 6.297
EPS (after profit share) US cents 1.10 1.16 6.297
Cash generated from operations US$'000 77,582 58,341 96,144
Free cash flow US$'000 31,104 19,724 68,367
-------------------------------- ----------- -------- -------- --------
(1) Cash cost of production, AISC, EBITDA, free cash flow and
cash, bullion on hand, gold sales receivables and
available-for-sale financial assets are non-GAAP measures and are
defined at the end of the Financial Statements. AISC is defined by
the World Gold Council, the details of which can be found at
www.gold.org.
(2) Basic EPS, EBITDA, AISC, cash cost of production reflects a
provision against prepayments, recorded since Q4 2012, to reflect
the removal of fuel subsidies which occurred in January 2012 (see
Note 6 of the financial statements)
Andrew Pardey, CEO, commented: "Whilst the first half of 2017
was focussed largely on the cut back of the east wall in the open
pit, with correspondingly low ore grades, it has been very pleasing
to see the business generate over US$135 million in cash flow from
operations over the period. After capital and exploration
expenditure of approximately US$44.6 million and profit share
payments to our partner, EMRA, of US$41.2 million we are delighted
to be able to increase the interim dividend payment by 25% to 2.5
US Cents, comfortably exceeding the minimum target set out in our
dividend policy. Importantly, the underground mining rates and
grades and record productivity levels from both the open pit and
processing plant achieved during the first half demonstrate the
potential for future production increases from existing operations.
Longer term, positive results from drilling at Cleopatra continue
to offer encouragement for a possible significant increase in
underground production rates. With the open pit now into higher
grade sectors and operations across the mine performing well, we
look forward to a strong second half of the year and maintain our
full year guidance of 540,000 ounces at an all-in sustaining cost
of US$790 per ounce sold."
Centamin will host a conference call on Thursday 3rd August at
9.00am (London, UK time) to update investors and analysts on its
results. Participants may join the call by dialling one of the
following three numbers, approximately 10 minutes before the start
of the call.
UK Toll Free: 080 8237 0040
International Toll number: +44 20 3428 1542
Participant code: 99982894#
A recording of the call will be available four hours after the
completion of the call on:
UK Toll Free: 0808 237 0026
International Toll number: +44 20 3426 2807
Playback Code: 689928#
Via audio link at
http://www.centamin.com/media/press-releases/2017
________________________________
CHIEF EXECUTIVE OFFICER'S REPORT
Second quarter gold production from Sukari of 124,641 ounces was
a 14% increase on Q1 2017, mainly driven by a 12% increase in the
average processed grade and a 5% increase in ore processed, offset
by a 2% reduction in average recovery rates. Higher head grades
were delivered from both the open pit and underground mines, in
line with the respective mine plans. Towards the end of the
quarter, mining in the open pit moved from the low-grade east wall
cutback to higher grade areas which are expected to provide open
pit mill feed for the rest of 2017.
Mine production costs were well controlled and increased by 1%
over Q1 2017 to US$ 76.2 million despite higher mining and
processing rates. Allowing for movement in inventory charges, total
cash cost of production decreased by 5% compared to Q1 2017 and,
with higher gold production, unit cash cost of production decreased
by US$125 per ounce to US$609 per ounce produced.
Total all-in sustaining costs excluding movement in inventory
adjustments increased by US$6.2 million compared to Q1 2017 due
primarily to increased sustaining capital expenditure for the open
pit mining fleet midlife and full life rebuilds as well as
underground development. Including movement in inventory
adjustments, all-in sustaining costs decreased by US$1.9 million to
US$100.2 million. Together with a 5% increase in gold sold compared
to Q1 2017, this resulted in a US$58 per ounce decrease in AISC to
US$829 per ounce sold.
Revenues were 8% higher than the previous quarter, due to a 5%
increase in gold sales volumes and a 2% rise in realised gold
prices. The increase in revenue and decrease in production costs
after movements in inventory lead to an increase in EBITDA to
US$65.9 million which was 24% higher than in Q1 2017.
Centamin's balance sheet ended the period with US$333.6 million
of cash, bullion on hand, gold sales receivable and
available-for-sale financial assets. This marked an increase of
US$42.8 million during the quarter. Centamin remains debt-free and
committed to its policy of being 100% exposed to the gold price
through its un-hedged position.
We are pleased to report that there were no lost time injuries
in Q2 2017 compared to a lost time injury (LTI) frequency rate of
0.61 per 200,000 man hours in Q1 2017. We continue to review and
address training requirements to ensure we achieve our long term
target of zero LTIs on a consistent basis.
Processing rates were 5% higher than the prior quarter at 3.06
million tonnes, an annualised rate of above the target 11.75Mtpa
forecast rate for 2017, with the fourth secondary crusher scheduled
to come online in Q4 2017. Recoveries of 86.7% were below our
forecast average of 89.5% for the full year and the 88.8% achieved
in Q1 2017. Recovery rates were below average due to below average
head grades. The recovery is expected to increase in line with the
average plant head grade during the remainder of the year. A strong
focus on improving overall metallurgical recoveries while
processing high tonnes through the plant is continuing, with
several projects due for completion in Q3 2017.
The open pit delivered record quarterly total material movement
of 17,493kt, a 2% increase on the previous quarter, with 3,060kt of
ore, an increase of 23% on the previous quarter. This included
222kt @ 0.25g/t delivered to the dump leach pads. The average head
grade to the plant from the open pit was 0.81g/t, up 13% from Q1
2017. This was below both the reserve grade and our forecast
average grade for the full year 2017, as the open pit continued to
develop a low-grade cutback in the east wall of the pit in line
with the mine plan, however, higher grade ore was accessed in the
open pit towards the end of the quarter and is expected to continue
for the remainder of 2017.
The underground mine delivered 293kt of ore, a 16% increase on
Q1 2017, at a grade of 8.79g/t (up 18% on Q1 2017).
We maintain our full year production forecast of 540,000 ounces
at a cash cost of production of US$580 per ounce and AISC of US$790
per ounce sold. Productivity rates in the open pit, underground and
process plant achieved during Q2 2017 demonstrate the potential for
Sukari to grow production from existing operations.
As a result of the significant cash generation from Sukari,
profit share continued during the quarter, with advance
distributions to EMRA totalling US$22.5m during the period. Both
EMRA and PGM will continue to benefit from advance distributions of
profit share on a proportionate basis, in accordance with the terms
of the Concession Agreement. Profit share payments will be
reconciled in full, in consultation with EMRA, against SGM's
audited June 2017 financial statements which will be the first year
for which profit share payments have been due.
Further support for resource expansion and the long-term
sustainability of high-grade production at Sukari from the
underground mine continues to be provided by results from on-going
exploration drilling, as highlighted in the following pages of this
report. A resource and reserve update will be released during the
second half of 2017.
During August 2016 we began development of a new exploration
decline within the north-eastern Cleopatra zone of Sukari Hill. The
initial phase of development was completed during the quarter, with
the establishment of three drilling platforms. The second phase of
development has continued with production of 32,257 tonnes of
mineralised decline development ore, at an average grade of
1.56g/t. Drilling to date has been encouraging and has confirmed
and defined the geometry of the high-grade zones on the eastern
contact of the porphyry. Drill testing of the western contact of
the porphyry commenced during Q2 2017 and results remain
outstanding. As was the case with the Amun and Ptah declines, the
initial Cleopatra project is being developed with infrastructure
capable of supporting mining rates of up to 1 million tonnes per
annum from this area. Ultimate production rates will depend on
future results from the programme and further development, and
would be in addition to the current underground ore production from
the Amun and Ptah declines.
During the quarter, exploration activities in Cote d'Ivoire
focused on the Kalamon, Danoa, Gogo and Tehini1 permits which are
within the Doropo Project (where we previously announced the 0.3Moz
Indicated 1.0Moz inferred resource, see the 31 December 2016 annual
report for more information), as well as the Kona permit which is
within the ABC project. Work was focused on target generation on
the newly granted permits of Gogo and Tehini 1 and potential
resource expansion on Souwa-Nokpa-Chegue trend.
During the quarter, exploration in Burkina Faso continued to
focus on anomaly development and extension proximal to the main
resource areas within the Napelepera, Konkera, Kpere Batie and
Tonior permits and regional new target generation and prospecting
outward from the resource cluster within a 50km radius.
Developments in the two litigation actions, Diesel Fuel Oil and
Concession Agreement, are described in further detail in Note 8 to
the financial statements. In respect of the Concession Agreement
case, the Supreme Administrative Court has stayed the Concession
Agreement appeal until the Supreme Constitutional Court has ruled
on the validity of Law 32 of 2014. Law 32 restricts the capacity
for third parties to challenge contractual agreements between the
Egyptian government and an investor. This law, whilst in force and
ratified by the new parliament, is currently under review by the
Supreme Constitutional Court (SCC). During the quarter the SCC
re-referred the case to the state commissioner to prepare a
complementary report to an initial report provided by the state
commissioner in Q1 2017 which found Law 32 to be unconstitutional.
The state commissioner's report and complementary report are
advisory and non-binding on the SCC. The Company continues to
believe that it has a strong legal position and that in the event
that the SCC rules that Law 32 is invalid, the Group remains
confident that its own appeal will be successful on its merits.
No final decision has been taken by the courts regarding the
Diesel Fuel Oil case. The Egyptian State Commissioner's office
produced a report containing non-binding recommendations for the
Administrative Court in which the case is proceeding. The report's
findings were unfavourable to the Group. The Company's legal
advisers do not believe the report properly addresses the
substantive merits of the Group's case and, as such, we continue to
vigorously pursue the claim. The Group has prepared a response to
the report which will be submitted at the next hearing in the
case.
2017 Interim Dividend
The Directors declared an interim dividend of 2.5 US cents per
share on Centamin plc ordinary shares (totalling approximately
US$28.8 million). The interim dividend for the half--year period
ending 30 June 2017 will be paid on 29 September 2017 to
shareholders on the register on the Record Date of 1 September
2017.
London Stock Exchange (T+2)
EX--DIV DATE: 31 August 2017
RECORD DATE: 1 September 2017
LAST DATE FOR RECEIPT OF CURRENCY ELECTIONS: 8 September
2017
PAY DATE: 29 September 2017
Toronto Stock Exchange (T+3)
EX--DIV DATE: 30 August 2017
RECORD DATE: 1 September 2017
PAY DATE: 29 September 2017
The dates set out above are based on the directors' current
expectations and may be subject to change. If any of the dates
should change, the revised dates will be announced by press release
and will be available at www.centamin.com.
As a Jersey incorporated company, there is no requirement for
Centamin plc to make any withholding or deduction on account of
Jersey tax in respect of the dividend.
Shareholders who wish to elect to receive sterling dividends can
mandate payments directly to their UK bank or building society by
visiting the Investor Centre website at www.investorcentre.co.uk/je
or by completing the dividend mandate form which is available at
www.centamin.com and posting it back to the registrars in
accordance with the instructions set out in the form. The currency
election mandate will be applicable for shareholders with a UK bank
account. Our registrars have also arranged a global payment service
allowing payment directly to your designated account, please visit
www.investorcentre.co.uk/je or www.centamin.com for details. The
global payment service is a service provided by the registrars for
shareholders registered on the LSE and transfer charges may
apply.
The last date for shareholder currency elections and payment
mandates to be received by the Company will be 8 September 2017.
Please note, the registrars retain mandates previously provided by
shareholders and will apply the instructions for this and future
dividends. The currency conversion rate for those electing to
receive sterling will be based on the foreign currency exchange
rates on 8 September 2017. The rate applied will be published on
the Company's website on 11 September 2017.
OPERATIONAL REVIEW
Sukari Gold Mine:
Q2 2017 Q1 2017 Q2 2016
---------------------------------- ------- ------- -------------------------
OPEN PIT MINING
Ore mined (1) ('000t) 3,060 2,478 3,425
Ore grade mined (Au g/t) 0.76 0.47 0.90
Ore grade milled (Au g/t) 0.81 0.72 0.99
Total material mined ('000t) 17,493 17,129 15,080
Strip ratio (waste/ore) 4.72 5.91 3.40
---------------------------------- ------- ------- -------------------------
UNDERGROUND MINING
Ore mined from development
('000t) 119 99 113
Ore mined from stopes ('000t) 174 153 143
Ore grade mined (Au g/t) 8.79 7.44 9.26
---------------------------------- ------- ------- -------------------------
Ore processed ('000t) 3,056 2,908 2,928
Head grade (g/t) 1.44 1.29 1.66
Gold recovery (%) 86.7 88.8 89.5
Gold produced - dump leach
(oz) 1,738 2,048 2,431
Gold produced - total (2) (oz) 124,641 109,187 140,306
Cash cost of production(3)
(4) (US$/oz) 609 734 461
Open pit mining 234 286 155
Underground mining 41 55 39
Processing 296 347 237
G&A 38 46 30
AISC(3) (4) (US$/oz) 829 887 669
---------------------------------- ------- ------- -------------------------
Gold sold (oz) 120,912 115,052 141,802
Average realised sales price
(US$/oz) 1,249 1,220 1,268
---------------------------------- ------- ------- -------------------------
(1) Ore mined includes 222kt delivered to the dump leach pad in
Q2 2017 (284kt in Q2 2016).
(2) Gold produced is gold poured and does not include
gold-in-circuit at period end.
(3) Cash cost of production exclude royalties, exploration and
corporate administration expenditure. Cash cost of production and
AISC are non-GAAP financial performance measures with no standard
meaning under GAAP. For further information and a detailed
reconciliation, please see "Non-GAAP Financial Measures" section
below.
(4) Cash cost of production and AISC reflect a provision against
prepayments to reflect the removal of fuel subsidies which occurred
in January 2012 (refer to Note 6 to the financial statements for
further details).
Health and safety - Sukari
There were no lost time injuries in Q2 2017, compared to a lost
time injury (LTI) frequency rate for Q1 2017 of 0.61, with a total
of 1,369,939 man-hours worked in Q2 2017 (1,281,666 in Q2 2016).
This represents an improvement from 0.61 LTIs in Q1 2017 and we
continue to develop the health and safety culture onsite and
address training requirements to ensure we achieve our long term
target of zero LTIs on a consistent basis.
Open pit
The open pit delivered a total material movement of 17,493kt for
the quarter, an increase of 2% on Q1 2017 and a 16% increase on the
prior year period. Improvements on fleet availability and
utilisation drove the improvement. The waste to ore strip ratio was
4.72 compared with 5.91 in the previous quarter. Mining continued
to focus on the Stage 3B and 4A areas of the open pit. Within the
quarter the 3B pit design was modified to access ore identified
from grade control definition drilling, decreasing the strip
ratio.
Ore production from the open pit was 3,060kt at 0.76g/t. The
head grade delivered to the process plant was 0.81 g/t, in line
with the mine plan. This was up 13% from Q1 2017. The run of mine
ore stockpile balance increased by 152kt to 538kt at the end of the
period.
Mining has progressed to the middle benches of stage 3B, with
higher average grades, and upper portions of stage 4 of pit
development. We continue to expect to mine higher grades from the
open pit for the balance of 2017.
Underground mine
Ore production from the underground mine was 293kt for Q2 2017,
above the forecast annualised rate of 1Mt. The ratio of
stoping-to-development ore remained constant with 59% of ore from
stoping 174kt and 41% of ore from development 119kt. Ore tonnages
from stopes increased by 14% on Q1 2017.
The average mined grade was 8.79 g/t, comprising ore from
stoping at 10.96 g/t and ore from development at 5.62 g/t.
Total development during the quarter, including the Ptah and
Horus declines (lower Amun), was 1,822 metres. The Horus and Ptah
declines continued towards accessing the lower Amun / Osiris zones
and Ptah zone respectively. Development within mineralised areas of
Amun accounted for 894 metres and took place between the 770 and
620 levels, 310 to 460 vertical meters below the underground
portal. Ptah development in mineralised porphyry totalled 607
metres on the P790 to P660 levels.
Work on the exhaust ventilation circuits for the Amun levels and
Ptah declines progressed, ensuring sufficient ventilation as the
decline continues to extend deeper into the orebody. The base of
the exhaust system is developed to 650 level on the Amun side and
675 on the Ptah side.
A total of 2,519 metres of grade control diamond drilling were
completed, aimed at short-term stope definition, drive direction
optimisation and underground resource development. Positive results
continue and support extensions of development drives and stoping
blocks. A further 7,912 metres of drilling continued to test for
extensions of the orebody at depth, below the current Amun zones
and from the Cleopatra exploration drill cuddies targeting the main
western and northern contacts and extension of the Cleopatra lodes
to the east. Results are discussed in the exploration section.
Processing
Quarterly throughput at the Sukari process plant was the highest
quarterly tonnage to date at 3,056kt. This is a 5% Increase on Q1
2017 and a 4% increase on the prior year period. Plant productivity
of 1,499 tonnes per hour (tph) was a 6% increase on Q1 2017and a 5%
increase on the prior year period.
Plant metallurgical recovery at 86.7% was 2% lower compared to
Q1 2017 at 88.8% and was 3% lower than the 89.5% achieved in the
prior year period. Recovery rates were below average due to below
average head grades. The recovery rate is expected to increase in
line with the average plant head grade during the remainder of the
year. A strong focus on improving overall metallurgical recoveries
while processing increased tonnes through the plant is continuing,
with several projects due for completion in Q3 2017. These include
the installation of VisioFroth, an automated control monitoring
system that aims to increase the floatation mass pull. Other
projects include an expansion of the elution circuit by installing
a third elution column and supporting infrastructure and reducing
the CIL tailings losses with improved carbon management and carbon
monitoring techniques.
The dump leach operation produced 1,738oz, 15% lower than Q1
2017.
Exploration
Centamin's "explore to develop" strategy is focussed on
defining, through the exploration process, the optimal path to
development for projects which can provide material returns on
shareholder capital. The Company aims to undertake systematic
exploration programmes over large-area licence packages within
geologically prospective regions; and will only operate within
stable jurisdictions offering a fiscally-attractive framework for
mining investment. Development decisions are made on the basis that
Centamin will take a self-performing, self-funding and staged
approach to project construction and operation.
Sukari
Drilling from underground remains a focus of the Sukari
exploration programme. Drilling took place from an Amun decline
drill platform on the 655, targeting Osiris block and the top of
Horus exploration drilling and resource definition. Two LM990 rigs
were drilling from drill cuddies in the Cleopatra development,
targeting high grade mineralisation on the western and northern
contacts of the porphyry. A total of 7,912m of exploration drilling
was completed for the quarter.
Selected results received during the second quarter from the
underground drilling programme in the Amun and region, which are in
addition to those previously disclosed, include the following, with
holes 804 to 808 intercepts to the west of the main Amun lode above
the interpreted Horus zone:
Hole Number From Interval Grade
(m) (m) (Au g/t)
UGRSD0804 191 2.55 151.6
------------- ------- --------- ---------
207 1 337.2
------------- ------- --------- ---------
UGRSD0805 138.3 1.7 13.7
------------- ------- --------- ---------
210.35 3.4 21.3
------------- ------- --------- ---------
UGRSD0806 125.6 1.5 13.2
------------- ------- --------- ---------
131.5 3.2 79.5
------------- ------- --------- ---------
UGRSD0808 156 1 55.3
------------- ------- --------- ---------
168 2.2 49.2
------------- ------- --------- ---------
265.2 5.8 59.9
------------- ------- --------- ---------
UGRSD1002 21 1 23.2
------------- ------- --------- ---------
UGRSD1003 48.5 2.5 7.2
------------- ------- --------- ---------
Hole Number level Interval Grade
(rl) (m) (Au g/t)
PUD7508 665 4.2. 10.7
------------- ------ --------- ---------
PUD7509 665 6.0 18.3
------------- ------ --------- ---------
UGD3461 620 5.2 27.6
------------- ------ --------- ---------
UGD3463 620 1.8 18.9
------------- ------ --------- ---------
UGD3467 650 3.7 13.2
------------- ------ --------- ---------
UGD3479 665 4.4 13.8
------------- ------ --------- ---------
UGD3485 710 4.45 10.0
------------- ------ --------- ---------
UGD3489 710 5.9 55.7
------------- ------ --------- ---------
Cleopatra Exploration Decline
The existing underground operations at Sukari have demonstrated
that the western contact zone between the main porphyry and the
surrounding metasedimentary rock units is highly prospective for
high-grade gold mineralisation. This contact has limited drilling
in the north western portion of Sukari Hill, where the porphyry is
approximately three hundred metres wide and access for surface
drill rigs is limited.
Historic high grades have been observed from limited surface
drilling along the north-eastern flank of Sukari Hill, where an
interpreted en-echelon set of three mineralised zones are named
Cleopatra, Julius and Antoine. Cleopatra outcrops as two distinct
quartz veins on the north eastern flank of Sukari Hill, whereas
Julius and Antoine do not outcrop. The zones are interpreted as
commencing on the eastern porphyry contact, dipping broadly to the
west.
This project is designed to commence development along strike
within the upper Cleopatra zone. In addition to providing
geological information, exploration drilling will be carried out
from this central drive. The project has been developed in two
phases, with 1,370 metres of development and 96,422 tonnes of mined
material movement in phase 1, which was completed during Q1 2017,
and 1,057 metres of development and 54,409 tonnes of mined material
in phase 2. US$6.6m has been spent on the initial project to date,
before any credit for ore production.
Phase 2 continued during Q2 2017 with 406.5 metres of
development and production of 29,902 tonnes of mineralised
development ore, at an average grade of 2.26g/t. During the quarter
a total of 32,257t of mineralised development ore from Cleopatra
was fed to the process plant at an average grade of 1.56g/t.
A total of 4,779m of exploration drilling was completed from
1130mRL, in addition to 452 metres of shorter exploration drill
holes utilising the MCR drill rig. Drilling to date has confirmed
and defined the geometry of the high-grade zones on the eastern
side of the porphyry.
Drill testing of the western contact of the porphyry was
commenced during Q2, drilling to target the extension of Anthony
zone near the western contact.
Selected results received during the second quarter from
Cleopatra include the following, which are internal in the porphyry
on the Cleopatra, Antoine and Julius structures:
Hole From Interval Grade
Number
(m) (m) (Au g/t) Rig
CRSD014 50 2.15 4.8 LM90
--------- ------ --------- --------- -----
CRSD029 13 2.5 5.6 LM90
--------- ------ --------- --------- -----
222 2 11.8 LM90
--------- ------ --------- --------- -----
CRSD030 244 2 5.9 LM90
--------- ------ --------- --------- -----
CRSD031 239 3 14.1 LM90
--------- ------ --------- --------- -----
245 2.05 9.5 LM90
--------- ------ --------- --------- -----
AWD012 13.35 1.85 6.2 MCR
--------- ------ --------- --------- -----
AWD018 39 2.5 7.6 MCR
--------- ------ --------- --------- -----
Other prospects
Whilst exploration remains focused on Sukari Hill, there are
seven other prospects that have been identified within the 160km(2)
Sukari tenement area which are close enough such that ore could be
trucked to the existing processing plant. No exploration drilling
was completed on these prospects during the period.
Resource and Reserve
An updated resource and reserve estimate will be completed
during the second half of 2017 and is being led by Centamin's Group
Exploration Manager.
Burkina Faso
During the quarter, exploration in Burkina Faso continued to
focus on anomaly development and extension proximal to the main
resource areas within the Napelepera, Konkera, Kpere Batie and
Tonior permits and regional new target generation and prospecting
outward from the resource cluster within a 50km radius.
Two auger rigs drilled full-time completing a total of 2,132
holes, comprising 11,698 meters, generating 2,132 samples
principally from the main Tonior and Napelepera and Granite contact
prospects.
Initial results reported from the first phase Tonior SE 400m x
50m survey defined a new strong, coherent >1.2km x 0.4km gold
anomaly with grades >20ppb to 1,349 ppb. This anomaly overlies a
very clear NW-SE strike-parallel, magnetic structure which extends
for a further 2.4 km to the northwest linking into our Tonior Main
prospects. We are currently infilling and extending our Tonior SE
phase one auger program in preparation for aircore and RC testing
in Q3.
Results are pending from the first phase auger programs over
Napelepera West, East, Dyke and Granite Contact prospects. Infill
auger drilling will target the grade structure developed in phase
1, ultimately setting up aircore and RC drill targets for Q3.
Complementing the auger drilling we have continued to develop
our Gradient Array IP (GAIP) coverage, with 358.8 line kms
completed during the quarter, extending the main Konkera resource
stratigraphy to the southeast, ultimately exploring the continuity
and structural fluid pathways along the belt volcanic corridor
linking the anomalous architecture from Konkera into Tonior SE.
Regional prospecting and mapping of artisanal mining activities
have identified a number of new development targets with rock chip
results returning gold grades between 0.6 and 8.45g/t; Tonior
(1.410 ppm), Napelepera (0.690ppm, 0.790ppm), Konkera close to the
granitoid domain (2.040ppm), River Crossing (2.700ppm) and
especially at Bantara-Galgouli (0.900ppm, 8.450ppm).
A regional reconnaissance stream sediment survey was commenced
during the quarter over the Kpere permit to identify first order
anomalous catchments for subsequent soils and prospecting.
Centamin currently holds 11 exploration permits and 1
exploitation permit, totaling some 1,428 km(2). A further 14
permits, representing a further 1,472 km(2), have been applied for
and are awaiting approval.
Côte d'Ivoire
Centamin has currently nine granted permits in Côte d'Ivoire,
encompassing some 2,832 km(2) . Ten new permits covering a further
3,298 km(2) are also under application. One new permit was granted
in Q2 2017, Farako-Nafana, part of the ABC Project. At Doropo, one
permit Bouna Nord was relinquished and one new application Gogo
Nord was submitted.
During the quarter, exploration activities focused on the
Kalamon, Danoa, Gogo and Tehini1 permits (within the Doropo
Project), and on the Kona permit (within the ABC project).
Doropo Project
Exploration focussed on regional target generation on the newly
granted permits of Gogo and Tehini 1, principally through
systematic grid mapping, prospecting, soil sampling and resource
development within and expanding, the main Doropo deposits
cluster.
A total of 137 drill holes were completed for a combined total
of 14,736 metres, 13,368 m RC and 1,368 m DD core. The bulk of the
resource metres were focused on the development of the
Souwa-Nokpa-Chegue (SNC) trend. A number of new proximal resource
targets were identified in Q2 2017 which are scheduled for resource
in-fill in Q3 2017.
Shallow RC drilling at Souwa has extended the main trend by 800m
and at Nokpa by a further 300m. Step-back RC and DD drilling in H2
will consolidate this and have to potential to add significant
open-pittable resource ounces at both deposits.
A new regional splay from the SNC at Chegue South returned
intercepts in Q2 including 7m @ 34.5 g/t and 13m at 2.9 g/t. The
mineralised structure has been tested over 400m strike length and a
program to infill and extend this area is currently in
progress.
Proximal to the southeast of Chegue South, RC exploration on
strike along the main Tchouahinin structures also reported a number
of coherent, intercepts including 8m @ 10.5 g/t during Q2 2017.
Infill and extensional drilling during Q3 2017 is planned to
further test this mineralised area.
Reconnaissance aircore (AC) drilling completed 31,450 m with 960
holes being drilled, testing shallow targets and anomalies within
the Doropo Cluster to identify further prospects for resource
definition targets.
A further DD core metallurgical sampling program will be
completed in Q3 to provide fresh material for comminution and
diagnostic leach testing at AMMTEC PTY Ltd (Perth). A full suite of
geotechnical hardness test work, logging and RMR classification
will be completed on the main resource deposits in H2 2017. This
data will feed into preliminary pit optimisation studies planned
for Q1 2018.
Table of the significant RC intercepts reported from the Doropo
drilling during the quarter:
Hole ID Type From Interval Grade Comment
Prospect (m) (m) (Au g/t)
------------- ---------- ------ ----- --------- ---------- ------------
Extensional
SOUWA DPRC1284 RC 11 17 3.0 drilling
------------- ---------- ------ ----- --------- ---------- ------------
Extensional
SOUWA DPRC1285 RC 12 12 2.5 drilling
------------- ---------- ------ ----- --------- ---------- ------------
Extensional
SOUWA DPRC1286 RC 25 5 4.0 drilling
------------- ---------- ------ ----- --------- ---------- ------------
Extensional
SOUWA DPRC1289 RC 19 14 1.6 drilling
------------- ---------- ------ ----- --------- ---------- ------------
Extensional
SOUWA DPRC1294 RC 29 8 4.4 drilling
------------- ---------- ------ ----- --------- ---------- ------------
Extensional
SOUWA DPRC1294 RC 48 5 2.7 drilling
------------- ---------- ------ ----- --------- ---------- ------------
Extensional
SOUWA DPRC1295 RC 50 6 3.0 drilling
------------- ---------- ------ ----- --------- ---------- ------------
Extensional
SOUWA DPRC1336 RC 20 6 4.2 drilling
------------- ---------- ------ ----- --------- ---------- ------------
Extensional
NOKPA DPRC1300 RC 125 8 4.7 drilling
------------- ---------- ------ ----- --------- ---------- ------------
Extensional
NOKPA DPRC0691 RC 57 3 18.5 drilling
------------- ---------- ------ ----- --------- ---------- ------------
CHEGUE DPRC1317 RC 82 13 2.9 New target
------------- ---------- ------ ----- --------- ---------- ------------
CHEGUE DPRC1319 RC 121 9 1.7 New target
------------- ---------- ------ ----- --------- ---------- ------------
CHEGUE DPRC1335 RC 48 7 34.5 New target
------------- ---------- ------ ----- --------- ---------- ------------
CHEGUE DPRC0677 RC 144 11 1.9 New target
------------- ---------- ------ ----- --------- ---------- ------------
TCHOUAHININ DPRC0665 RC 13 8 10.5 New target
------------- ---------- ------ ----- --------- ---------- ------------
Table of the significant aircore intercepts reported from the
Doropo drilling during the quarter:
Hole ID Type From Interval Grade
Prospect (m) (m) (Au g/t)
------------- ---------- ------ ----- --------- ----------
TIGUILEGOUN DPAC5035 AC 0 6 4.9
------------- ---------- ------ ----- --------- ----------
TIGUILEGOUN DPAC5191 AC 12 4 20.5
------------- ---------- ------ ----- --------- ----------
TCHOUAHININ DPAC5127 AC 40 10 9.0
------------- ---------- ------ ----- --------- ----------
TCHOUAHININ DPAC5201 AC 28 10 1.1
------------- ---------- ------ ----- --------- ----------
GBOKO DPAC5035 AC 0 6 4.9
------------- ---------- ------ ----- --------- ----------
SOLO East DPAC1656 AC 26 10 1.2
------------- ---------- ------ ----- --------- ----------
Regional DPAC2019 AC 26 8 6.3
------------- ---------- ------ ----- --------- ----------
Regional DPAC2020 AC 38 10 1.6
------------- ---------- ------ ----- --------- ----------
ABC Project
A comprehensive mapping and grid rock chip sampling program was
completed across the Lolosso Prospect on the Kona permit during Q2.
Results to date demonstrate a coherent 12km x 200m anomalous trend
returning gold grades up to 8.7 g/t. The mineralisation is hosted
by fine grained volcano-sediments and felsic volcanics along a
major structural contact.
A GAIP survey is planned for Q3 to cover the whole length of the
mineralised trend, lighting up the detailed structural setting and
facilitating resource drill targeting in Q4.
FINANCIAL REVIEW
In its eighth year of production, the Sukari Gold Mine is highly
cash generative as reflected in the Group's financial results for
the quarter ended 30 June 2017:
-- Interim dividend per share of 2.5 US cents, a 25% increase on
2016 interim payment and in line with Centamin's stated policy of
returning free cash flow to shareholders.
-- EBITDA of US$66 million down 35% from Q2 2016 due to a
decrease in revenue and an increase in cost of sales.
-- Strong cash flow generation with US$31.1 million of free cash flow generated in Q1 2017
-- Cash at bank, bullion on hand, gold sales receivable and
available-for-sale financial assets as at 30 June 2017 of US$333.6
million.
-- Quarterly basic earnings per share (after profit share) of
1.10 US cents, a decrease on Q2 2016 due lower revenues, higher
cost of sales and the commencement of profit share payments.
-- The Egyptian state has benefitted directly from advance
profit share payments to EMRA of US$41.2 million during H1 2017 (in
line guidance for 2017) in addition to US$8.7 million in royalty
payments for the half year.
Revenue
Revenue from gold and silver sales for the quarter decreased by
16% to US$151.3 million (US$180.1 million in Q2 2016), with a 1%
decrease in the average realised gold sales price to US$1,249 per
ounce (US$1,268 per ounce in Q2 2016) and a 15% decrease in gold
sold to 120,912 ounces (141,802 ounces in Q2 2016).
Cost of sales
Cost of sales represents the cost of mining, processing,
refining, transport, site administration, depreciation,
amortisation and movement in production inventories. Cost of sales
is inclusive of US$11.9 million categorised as fuel pre-payments
(refer to Note 6 of the financial statements for further
information) and up 7% compared with the prior year period to
US$103.5 million, mainly as a result of a:
-- 12% increase in total mine production costs from US$67.8
million to US$76.2 million, due to a 16% increase in mined tonnes
combined with a 4% increase in processed tonnes; and
-- 1% increase in depreciation and amortisation charges from
US$28.4 million to US$28.8 million as higher production physicals,
and no reclassification of exploration & evaluation expenditure
to mine development, increased the associated amortisation
charges.
Other operating costs
Other operating costs comprises expenditure incurred for
communications, consultants, directors' fees, stock exchange
listing fees, share registry fees, employee entitlements, general
office administration expenses, the unwinding of the restoration
and rehabilitation provision, foreign exchange movements and the 3%
production royalty payable to the Egyptian government. Other
operating costs increased by 6% on the prior year period to US$10.9
million, as a result of a:
-- US$0.7 million decrease in net foreign exchange movements
from a US$0.5 million gain to a US$0.2 million loss;
-- US$0.9 million decrease in royalty paid to the government of
the Arab Republic of Egypt in line with the decrease in gold sales
revenue; and
-- US$2.1 million decrease in corporate costs.
Finance income
Finance income reported comprises interest revenue applicable on
the Company's available cash and term deposit amounts. The
movements in finance income are in line with the movements in the
Company's available cash and term deposit amounts.
Profit before tax
As a result of the factors outlined above, the group recorded a
profit before tax for the quarter ended 30 June 2017 of US$37.8
million (Q2 2016 US$73.4 million).
EMRA profit share
During the quarter ended 30 June 2017, US$22.5 million was paid
to EMRA, a charge of US$24 million is reflected in the income
statement after offsetting US$1.5 million of the US$3 million
accrual from the quarter ended 31 March 2017.
Profit share payments made to EMRA, pursuant to these provisions
of the Concession Agreement, are recognised as a variable charge in
the income statement (below profit after tax) of Centamin,
resulting in a reduction in earnings per share. The profit share
payments during the year will be reconciled against SGM's audited
June 2017 financial statements. Any variation between payments made
during the year (which are based on the Company's estimates) and
the audited financial statements, may result in a balance due and
payable to EMRA or advances to be offset against future
distributions.
Earnings per share
Earnings per share of 3.18 US cents (before profit share) has
decreased significantly when compared with 6.30 US cents per share
for Q2 2016. The decrease was driven by lower gross operating
margins. The main factors were higher production costs, mainly due
to an 11% decrease in gold production and a 12% increase in mine
production costs due to increased material movement, as well as
movement in gold in circuit, ROM pad and ore stockpile
inventories.
Earnings per share of 1.10 US cents (after profit share) has
decreased significantly when compared with 6.30 US cents per share
for Q2 2016. The decrease was driven by the factors outlined above,
but is primarily due to the effect of profit share.
Financial position
Centamin has a strong and flexible financial position with no
debt, no hedging and cash, bullion on hand, gold sales receivables
and available-for-sale financial assets of US$333.6 million at 30
June 2017, up from US$332.2 million at 30 June 2016.
30 June 2017 31 March 2017 30 June 2016
US$'000 US$'000 US$'000
Cash at Bank 296,980 265,984 281,678
Bullion on hand 17,116 12,536 15,809
Gold sales receivable 19,407 12,214 34,524
Available-for-sale-financial
assets 125 124 194
------------- -------------- -------------
333,628 290,858 332,205
------------- -------------- -------------
The majority of funds have been invested in international
rolling short-term interest money market deposits.
Current assets have decreased from Q4 2016 to Q2 2017 by
US$123.4 million or 22% to US$440 million, as a result of a:
-- US$17.7 million decrease in inventory driven by a US$12.5
million decrease in collective stores inventory value to US$89.9
million and a US$5.2 million decrease in overall mining stockpiles
and gold in circuit levels to US$28.9 million;
-- US$3.6 million decrease in gold sale receivables; and
-- decrease in net cash of US$102.9 million (net of foreign
exchange movements) driven by a US$155.4 million final dividend
payment to external shareholders and a US$41.2 million payment to
EMRA as profit share during the period.
Non-current assets have decreased from Q4 2016 to Q2 2017 by
US$10.9 million to US$1,012 million, as a result of:
-- US$28.4 million increase in expenditure for property, plant and equipment;
-- US$52.7 million charge for depreciation and amortisation;
-- US$13.3 million increase in exploration and evaluation assets
net of the US$2.6 million impairment, as a result of the drilling
programmes in Sukari Hill, Burkina Faso and Côte d'Ivoire.
Current liabilities have decreased from Q4 2016 to Q2 2017 due
to a US$6.4 million decrease in payables and accrual balances.
Non-current liabilities have increased from Q4 2016 to Q2 2017
by US$0.4 million to US$8.1 million as a result of an increase in
the rehabilitation provision.
The value of issued capital has increased from Q4 2016 to Q2
2017 by US$1.3 million due to the vesting of awards under the
employee share plans.
Share option reserves reported have decreased from Q4 2016 to Q2
2017 by US$0.2 million to US$2.8 million as a result of the
forfeiture and vesting of awards and the resultant transfer to
accumulated profits, offset by the recognition of the share-based
payments expenses for the period.
Accumulated profits decreased from Q4 2016 to Q2 2017 by
US$129.4 million as a result of:
-- US$66.3 million profit for the period attributable to the
shareholders of the Company; offset by a
-- US$155.4 million final dividend payment (decrease) in respect
of the year ended 31 December 2016; and a
-- US$40.2 million profit share charge (decrease) to EMRA in the first half of the year.
Cashflow
Net cash flows generated by operating activities comprise
receipts from gold and silver sales and interest income, offset by
operating and corporate administration costs. Cash flows have
decreased from Q2 2016 to Q2 2017 by US$18.6 million to US$77.6
million, primarily attributable to a decrease in revenue, due to a
decrease in gold sold ounces and a lower average realised
price.
Net cash flows used in investing activities comprise exploration
expenditure and capital development expenditures including the
acquisition of financial and mineral assets. Cash outflows have
decreased by US$3.8 million from Q2 2016 to Q2 2017 to US$24
million. The primary use of the funds in the second quarter was for
investment in underground development at the Sukari site in Egypt
and exploration expenditures incurred in West Africa.
Net cash flows generated by financing activities comprise a
US$22.5 million payment to EMRA as profit share during the
period.
Effects of exchange rate changes have decreased by US$1.9
million as a result of movements of some of the currencies used
within the operation in the quarter.
Capital Expenditure
Q2 2017 Capital Expenditure
A breakdown of capital expenditure for the Group during Q2 2017
is as follows:
US$ million
Open pit development -
Underground mine development(1) 8.0
Other sustaining capital
expenditure 8.5
Total Sustaining Capex 16.5
(1) Includes underground
exploration drilling
Cleopatra underground
mine development 1.4
Cumulative exploration expenditure for Cleopatra at Sukari is
US$6.7 million to date.
Q2 2017 Exploration Expenditure
A breakdown of exploration expenditure for the Group during Q2
2017 is as follows:
Exploration Expenditure US$ million
Burkina Faso((2) 1.5
Côte d'Ivoire 3.5
Sukari Tenement (Regional) 2.8
Total Exploration Expenditure 7.8
(2) - net of $2.55m impairment allocated against Burkina Faso,
refer note 13.
NON-GAAP FINANCIAL MEASURES
Four non-GAAP financial measures are used in this report:
1) EBITDA: "EBITDA" is a non-GAAP financial measure, which
excludes the following from profit before tax:
-- Finance costs;
-- Finance income; and
-- Depreciation and amortisation.
Management believes that EBITDA is a valuable indicator of the
Group's ability to generate liquidity by producing operating cash
flow to fund working capital needs and fund capital expenditures.
EBITDA is also frequently used by investors and analysts for
valuation purposes whereby EBITDA is multiplied by a factor or
"EBITDA multiple" that is based on an observed or inferred
relationship between EBITDA and market values to determine the
approximate total enterprise value of a company. EBITDA is intended
to provide additional information to investors and analysts and
does not have any standardised definition under IFRS and should not
be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS. EBITDA excludes the
impact of cash cost of production and income of financing
activities and taxes, and therefore is not necessarily indicative
of operating profit or cash flow from operations as determined
under IFRS. Other companies may calculate EBITDA differently. The
following table provides a reconciliation of EBITDA to profit for
the year attributable to the Company.
Reconciliation of profit before tax to EBITDA:
Quarter ended Quarter Half year Half year
30 June ended ended ended
2017(1) 30 June 30 June 30 June
2016(1) 2017(1) 2016(1)
US$'000 US$'000 US$'000 US$'000
Profit before tax 37,819 73,379 67,287 114,245
Finance income (646) (194) (996) (320)
Depreciation and
amortisation 28,785 28,420 52,727 55,166
EBITDA 65,958 101,605 119,018 169,091
-------------- --------- ---------- ----------
(1) Profit before tax, Depreciation and amortisation and EBITDA
includes a charge to reflect the removal of fuel subsidies (refer
to Note 6)
2) Cash cost of production and all-in sustaining costs per ounce
sold calculation: Cash cost of production and AISC are non-GAAP
financial measures. Cash cost of production per ounce is a measure
of the average cost of producing an ounce of gold, calculated by
dividing the operating costs in a period by the total gold
production over the same period. Operating costs represent total
operating costs less administrative expenses, royalties,
depreciation and amortisation. Management uses this measure
internally to better assess performance trends for the Company as a
whole. The Company believes that, in addition to conventional
measures prepared in accordance with GAAP, certain investors use
such non-GAAP information to evaluate the Company's performance and
ability to generate cash flow. The Company believes that these
measures provide an alternative reflection of the Group's
performance for the current period and are an alternative
indication of its expected performance in future periods. Cash cost
of production is intended to provide additional information, does
not have any standardised meaning prescribed by GAAP and should not
be considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP. This measure is not
necessarily indicative of operating profit or cash flow from
operations as determined under GAAP. Other companies may calculate
these measures differently.
During June 2013 the World Gold Council (WGC), an industry body,
published a Guidance Note on 'all in sustaining costs' metric,
which gold mining companies can use to supplement their overall
non-GAAP disclosure. AISC is an extension of the existing 'cash
cost' metric and incorporates all costs related to sustaining
production and in particular recognising the sustaining capital
expenditure associated with developing and maintaining gold mines.
In addition, this metric includes the cost associated with
developing and maintaining gold mines. In addition, this metric
includes the cost associated with corporate office structures that
support these operations, the community and rehabilitation costs
attendant with responsible mining and any exploration and
evaluation costs associated with sustaining current operations.
AISC US$/oz is arrived at by dividing the dollar value of the sum
of these cost metrics, by the ounces of gold sold (as compared to
using ounces produced which is used in the cash cost of production
calculation).
Reconciliation of cash cost of production per ounce:
Quarter ended Quarter ended Half year Half year
30 June 30 June ended ended
2017(1) 2016(1) 30 June 30 June
2017(1) 2016(1)
US$'000 US$'000 US$'000 US$'000
Mine production costs
(Note 4) 76,186 67,823 151,639 139,464
Less: Refinery and
transport (319) (403) (697) (787)
Movement in inventory 98 (2,702) 5,140 1,611
-------------- -------------- ----------- -----------
Cash cost of production 75,965 64,718 156,082 140,288
-------------- -------------- ----------- -----------
Gold Produced - Total
(oz) 124,641 140,306 233,827 265,574
Cash cost of production US$609/oz US$461/oz US$668/oz US$528/oz
per ounce
(1) Cash cost of production includes a charge to reflect the
removal of fuel subsidies (refer to Note 6).
Reconciliation of AISC per ounce sold:
Quarter Quarter Half year Half year
ended ended ended ended
30 June 30 June 30 June 30 June
2017(1) 2016(1) 2017(1) 2016(1)
US$'000 US$'000 US$'000 US$'000
Mine production costs(2)
(Note 4) 76,186 67,823 151,639 139,464
Movement in inventory (1,421) 639 5,265 3,978
Royalties 4,529 5,392 8,739 9,823
Corporate administration
costs 3,044 5,160 6,053 6,960
Rehabilitation costs 157 145 314 291
Underground development 9,448 9,126 17,804 18,295
Other sustaining
capital exp. 8,452 6,793 12,990 10,235
By-product credit (207) (263) (539) (518)
---------- ---------- ---------- ----------
AISC 100,188 94,815 202,265 188,528
---------- ---------- ---------- ----------
Gold Sold - Total
(oz) 120,912 141,802 235,964 265,470
AISC per ounce sold US$829/oz US$669/oz US$857/oz US$710/oz
(1) Mine production costs, cash cost of production, AISC, cash
cost of production per ounce, and AISC per ounce sold includes
prepayments recorded since Q4 2012 to reflect the removal of fuel
subsidies (refer to Note 6 of the financial statements for further
details).
(2) Includes refinery and transport.
3) Cash and cash equivalents, bullion on hand, gold sales
receivables and available-for-sale financial assets: This is a
non-GAAP financial measure any other companies may calculate these
measures differently.
Reconciliation to cash and cash equivalents, bullion on hand,
gold sales receivables and available-for-sale financial assets:
As at As at
30 June 30 June
2017(1) 2016(1)
Cash and cash equivalents (Note 17(a)) 296,980 281,678
Bullion on hand (valued at the period-end
spot price) 17,116 15,809
Gold sales receivable 19,407 34,524
Available-for-sale financial assets 125 194
Cash, bullion, gold sales receivables and
available-for-sale financial assets 333,628 332,205
--------- ---------
4) Free Cash Flow
This is a non-GAAP financial measure any other companies may
calculate these measures differently.
Quarter Quarter Half year Half year
ended ended ended ended
30 June 30 June 30 June 30 June
2017 2016 2017 2016
US$'000 US$'000 US$'000 US$'000
Net cash generated
from operating activities 77,582 96,144 135,572 156,501
Less:
Net cash used in
investing activities (23,965) (27,777) (43,593) (52,441)
EMRA profit share
payments (22,513) - (41,153) -
Free Cash flow 31,104 68,367 50,826 104,060
--------- --------- ---------- ----------
ENVIRONMENTAL, SOCIAL, GOVERNANCE AND COMMITTEE (ESGC)
UPDATE
Corporate governance - committee appointment: The Board and the
Nomination Committee have met and approved the appointment of Mark
Bankes (Independent Non-Executive Director) as a member of the
Remuneration Committee effective from 1 August 2017. The
Remuneration Committee now comprises the chair, Edward Haslam
(Deputy Chairman and Senior Independent Non-Executive Director) and
the members Mark Arnesen (Independent Non-Executive Director) and
Mark Bankes (Independent Non-Executive Director).
Environmental disclosure update: During the quarter Centamin
submitted its response to the Carbon Disclosure Project (CDP) with
GHG and water usage statistics. The disclosure included, among
other information, details of the current use of solar energy at
Sukari, which powers a number of isolated and remote work stations.
The HSES committee are continuing to evaluate both the commercial
viability and potential carbon reducing benefits of solar energy as
a potential option to reduce fuel consumption and emissions at
Sukari.
Share plan update: On 4 June 2017, the Company granted 3,459,000
conditional awards to thirty seven employees of the Group under the
shareholder approved Restricted Share Plan and 300,000 awards to
one employee under the Deferred Bonus Share Plan. A summary of the
Restricted Share Plan and Deferred Bonus Share Plan is set out in
note 15 of the Unaudited Interim Condensed Consolidated Financial
Statements for the quarter and half year ended 30 June 2017.
PRINCIPAL RISKS AFFECTING THE CENTAMIN GROUP
The operations of the Company are speculative due to the high
risk nature of its business which includes the acquisition,
financing, exploration, development and operation of mining
properties. These risk factors could materially affect the
Company's future operations and could cause actual events to differ
materially from those described in forward-looking statements
relating to the Company.
There have been no changes in the Company's risks and
uncertainties during the quarter and half year ended 30 June 2017
from those described in the Group's annual management discussion,
analysis and business review for the year ended 31 December 2016 on
pages 30 to 35 of the 2016 Annual Report, and the Company does not
anticipate any changes in the Company's risks and uncertainties
during the next three months to 30 September 2017. The key
principal risks relate to the following:
-- Single project dependency
-- Sukari Project joint venture risk and relationship with EMRA
-- Gold price and currency exposure
-- Jurisdictional taxation exposure
-- Political risk - Sukari
-- Political risk - West Africa
-- Reserve and resource estimations
-- Exploration development
-- Failure to achieve production estimates
-- Litigation risks
Centamin takes a number of measures to mitigate risks associated
with its underlying operational and exploration activity which are
monitored and evaluated regularly. Due to the nature of these
inherent risks, it is not possible to give absolute assurance that
mitigating actions will be wholly effective. The Company is exposed
to changes in the economic environment through its operations in
Egypt, as well as its operations in West Africa (Burkina Faso and
Côte d'Ivoire). Relationships with governments and the maintenance
of exploration permits and licence areas remain key risks and a key
focus for all exploration, development and operational
projects.
One of the Company's main objectives is to achieve a target of
zero injuries and for every employee to be safe every day. The
control environment and operating practices in place at the mining
and exploration operations helps reduce the likelihood of harm to
employees. Centamin is committed to attracting, energising,
developing and training its workforce to ensure they are highly
skilled and motivated.
Centamin recognises the value of being a socially responsible
employer and the importance of engaging with the wider community in
the areas in which it operates. By investing in the community and
engaging in projects that directly and positively impact local
people, Centamin can foster a cooperative working environment.
LEGAL ACTIONS
As detailed in Note 8 of the accompanying interim condensed
consolidated financial statements, the Group's appeal against the
30 October 2012 ruling by the Egyptian Administrative Court remains
on-going. The Supreme Administrative Court have stayed the
Concession Agreement appeal until the Supreme Constitutional Court
rules on the validity of Law 32 of 2014. Law 32 restricts the
capacity for third parties to challenge contractual agreements
between the Egyptian government and an investor. This law, whilst
in force and ratified by the new parliament, is currently under
review by the Supreme Constitutional Court (SCC). During the
quarter the SCC re-referred the case to the state commissioner to
prepare a complementary report to an initial report provided by the
state commissioner in Q1 2017 which found Law 32 to be
unconstitutional. The state commissioner's report and complementary
report are advisory and non-binding on the SCC. The Company
continues to believe that it has a strong legal position and that
in the event that the SCC rules that Law 32 is invalid, the Group
remains confident that its own appeal will be successful on its
merits.
The Group continues to benefit from the full support of the
Ministry of Petroleum and EMRA, both in the appeal and at the
operational level.
In light of the on-going dispute with the Egyptian Government
regarding the price at which diesel fuel oil (DFO) is supplied to
the mine at Sukari, it has been necessary since January 2012 to
advance funds to the fuel supplier based on the international price
for diesel. The Company has fully provided against the prepayment
of US$253 million, of which US$11.9 million was provided for in Q2
2017. Refer to Note 6 of the accompanying interim condensed
consolidated financial statements for further details on the impact
of this provision on the Group's results for Q2 2017.
In November 2012 the Group received a further demand from its
fuel supplier for the repayment of fuel subsidies received in the
period from late 2009 through to January 2012, for EGP403 million
(approximately US$22.2 million at current exchange rates). No
provision has been made in respect of the historic subsidies prior
to January 2012 as, based on legal advice that it has received to
date, the Company believes that, notwithstanding the unfavourable
State Commissioner's report, the prospects of a court finding in
its favour in relation to this matter are strong.
As disclosed previously, the Company has commenced proceedings
in the Administrative Court in Egypt in relation to these matters.
The Company remains of the view that an instant move to
international fuel prices is not a reasonable outcome and will look
to recover any funds advanced thus far at the higher rate should
the court proceedings be successfully concluded. Please refer to
Note 8 to the accompanying interim condensed consolidated financial
statements and the most recently filed Annual Information Form
(AIF) for further information.
With the exception of the relationships with EMRA and the
Egyptian government referred to above, we do not believe there are
any third party relationships which are critical to the Group's
success or which would have a material impact upon the Group's
position if the relationship broke down.
Andrew Pardey
Chief Executive Officer
Set out below are the unaudited consolidated Financial
Statements for the Group, including notes thereto, for the quarter
and six months ended 30 June 2017.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE
HALF-YEARLY FINANCIAL REPORT
We confirm that to the best of our knowledge:
(a) the condensed set of interim consolidated financial
statements for the quarter and six months ended 30 June 2017 has
been prepared in accordance with International Accounting Standard
34 'Interim Financial Reporting' as adopted by the European Union
and as issued by the International Accounting Standards Board
("IASB");
(b) the condensed set of interim consolidated financial
statements, which has been prepared in accordance with the
applicable set of accounting standards, gives a true and fair view
of the assets, liabilities, financial position and profit or loss
of the issuer, or the undertakings included in the consolidation as
a whole as required by DTR 4.2.4;
(c) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first three months and description of principal risks
and uncertainties for the remaining six months of the year);
and
(d) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
The board of directors that served during all or part of the
six-month period ended on 30 June 2017 and their respective
responsibilities can be found on pages 64 to 73 of the 2016 annual
report of Centamin plc.
By order of the Board,
Chief Executive Officer Chief Financial Officer
Andrew Pardey Ross Jerrard
3 August 2017 3 August 2017
UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE QUARTER AND HALF YEARED
30 JUNE 2017
Independent review report to Centamin plc
Report on the unaudited interim condensed consolidated financial
statements
Our conclusion
We have reviewed Centamin plc's unaudited interim condensed
consolidated financial statements (the "interim financial
statements") in the Results for the Second Quarter and Six Months
Ended 30 June 2017 of Centamin plc for the 6 month period ended 30
June 2017. Based on our review, nothing has come to our attention
that causes us to believe that the interim financial statements are
not prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the unaudited interim condensed consolidated statement of
financial position as at 30 June 2017;
-- the unaudited interim condensed consolidated statement of
comprehensive income for the six month period then ended;
-- the unaudited interim condensed consolidated statement of
cash flows for the six month period then ended;
-- the unaudited interim condensed consolidated statement of
changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Results for the
Second Quarter and Six Months Ended 30 June 2017 have been prepared
in accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Results for the Second Quarter and Six Months Ended 30 June
2017, including the interim financial statements, is the
responsibility of, and has been approved by, the directors. The
directors are responsible for preparing the Results for the Second
Quarter and Six Months Ended 30 June 2017 in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the Results for the Second Quarter and Six
Months Ended 30 June 2017 based on our review. This report,
including the conclusion, has been prepared for and only for the
company for the purpose of complying with the Disclosure Guidance
and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority and for no other purpose. We do not, in giving
this conclusion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior
consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. 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.
We have read the other information contained in the Results for
the Second Quarter and Six Months Ended 30 June 2017 and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial
statements.
Other Matter
We have not audited nor reviewed the unaudited interim condensed
consolidated statement of comprehensive income for the three months
ended 30 June 2017 and the unaudited interim condensed consolidated
statement of cash flows for the three months ended 30 June
2017.
PricewaterhouseCoopers LLP
Chartered Accountants
London
3 August 2017
a) The maintenance and integrity of the Centamin plc website is
the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the interim financial statements since
they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME FOR THE THREE MONTHSED 30 JUNE 2017
Note 30 June 30 June
2017 (Unaudited) 2016 (Unaudited)
US$'000 US$'000
Revenue 3 151,282 180,128
Cost of sales 4 (103,538) (96,855)
----------------- -----------------
Gross profit 47,744 83,273
Other income 424 -
Other operating costs 4 (10,890) (10,308)
Impairment of available-for-sale financial assets (105) 220
Finance income 4 646 194
Profit before tax 37,819 73,379
Tax (1,098) (771)
----------------- -----------------
Profit for the period after tax 36,721 72,608
----------------- -----------------
EMRA profit share 5(a) (24,013) -
----------------- -----------------
Profit for the period after EMRA profit share 12,708 72,608
----------------- -----------------
Profit for the period attributable to:
* the owners of the parent 12,708 72,608
Other comprehensive income
Items that may be reclassified subsequently to
profit or loss:
Profits/(losses) on available for sale financial
assets (net of tax) 14 1 53
----------------- -----------------
Other comprehensive income for the period 1 53
----------------- -----------------
Total comprehensive income for the period attributable
to:
- the owners of the parent 12,709 72,661
----------------- -----------------
Earnings per share before profit share:
Basic (cents per share) 11 3.177 6.297
Diluted (cents per share) 11 3.153 6.266
Earnings per share after profit share:
Basic (cents per share) 11 1.099 6.297
Diluted (cents per share) 11 1.091 6.266
The above Unaudited Interim Condensed Consolidated Statement of
Comprehensive Income should be read in conjunction with the
accompanying notes.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME FOR THE SIX MONTHSED 30 JUNE 2017
Note 30 June 30 June
2017 (Unaudited) 2016 (Unaudited)
US$'000 US$'000
Revenue 3 292,005 328,236
Cost of sales 4 (209,606) (198,555)
----------------- -----------------
Gross profit 82,399 129,681
Other income 424 -
Other operating costs 4 (16,314) (15,909)
Impairment of available-for-sale financial assets (218) 153
Finance income 4 996 320
Profit before tax 67,287 114,245
Tax (1,014) (786)
----------------- -----------------
Profit for the period after tax 66,273 113,459
----------------- -----------------
EMRA profit share 5(a) (40,153) -
----------------- -----------------
Profit for the period after EMRA profit share 26,120 113,459
----------------- -----------------
Profit for the period attributable to:
* the owners of the parent 26,120 113,459
Other comprehensive income
Items that may be reclassified subsequently to
profit or loss:
Profits/(losses) on available for sale financial
assets (net of tax) 14 (91) 74
----------------- -----------------
Other comprehensive income for the period (91) 74
----------------- -----------------
Total comprehensive income for the period attributable
to:
- the owners of the parent 26,029 113,533
----------------- -----------------
Earnings per share before profit share:
Basic (cents per share) 11 5.734 9.844
Diluted (cents per share) 11 5.694 9.799
Earnings per share after profit share:
Basic (cents per share) 11 2.260 9.844
Diluted (cents per share) 11 2.244 9.799
The above Unaudited Interim Condensed Consolidated Statement of
Comprehensive Income should be read in conjunction with the
accompanying notes.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
AS AT 30 JUNE 2017
Note 30 June 31 December
2016
2017 (Audited)
(Unaudited) US$'000
US$'000
NON-CURRENT ASSETS
Property, plant and equipment 12 844,694 868,926
Exploration and evaluation asset 13 167,199 153,918
Prepayments and other receivables 387 376
Total non-current assets 1,012,280 1,023,220
------------ -----------
CURRENT ASSETS
Inventories 18 118,840 136,562
Available-for-sale financial assets 125 130
Trade and other receivables 23,362 24,870
Prepayments 6 735 2,028
Cash and cash equivalents 17(a) 296,980 399,873
------------ -----------
Total current assets 440,042 563,463
------------ -----------
Total assets 1,452,322 1,586,683
------------ -----------
NON-CURRENT LIABILITIES
Provisions 8,105 7,697
------------ -----------
Total non-current liabilities 8,105 7,697
------------ -----------
CURRENT LIABILITIES
Trade and other payables 41,552 47,991
Provisions 6,524 6,476
------------ -----------
Total current liabilities 48,076 54,467
------------ -----------
Total liabilities 56,181 62,164
------------ -----------
Net assets 1,396,141 1,524,519
------------ -----------
EQUITY
Issued capital 9 668,744 667,472
Share option reserve 2,806 3,048
Accumulated profits 724,591 853,999
------------ -----------
Total Equity 1,396,141 1,524,519
------------ -----------
The above Unaudited Interim Condensed Consolidated Statement of
Financial Position should be read in conjunction with the
accompanying notes.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY FOR THE SIX MONTHSED 30 JUNE 2017
Share option Accumulated
Issued Capital reserve profits Total Equity
US$'000 US$'000 US$'000 US$'000
-------------- ------------ ----------- --------------
Balance as at 1 January 2017 667,472 3,048 853,999 1,524,519
Profit for the period - - 66,273 66,273
EMRA profit share - - (40,153) (40,153)
Other comprehensive income for
the period - - (91) (91)
-------------- ------------ ----------- --------------
Total comprehensive income for
the period - - 26,029 26,029
Dividend paid - shareholders - - (155,437) (155,437)
Transfer of share based payments 1,272 (1,272) - -
Recognition of share based payments - 1,030 - 1,030
Balance as at 30 June 2017 668,744 2,806 724,591 1,396,141
-------------- ------------ ----------- --------------
Share option Accumulated
Issued Capital reserve profits Total Equity
US$'000 US$'000 US$'000 US$'000
-------------- ------------ ----------- --------------
Balance as at 1 January 2016 665,590 2,469 685,273 1,353,332
Profit for the period - - 113,459 113,459
Other comprehensive income for
the period - - 74 74
-------------- ------------ ----------- --------------
Total comprehensive income for
the period - - 113,533 113,533
Dividend paid - - (22,946) (22,946)
Transfer of share based payments 1,899 (1,899) - -
Recognition of share based payments - 1,070 - 1,070
Balance as at 30 June 2016 667,489 1,640 775,860 1,444,989
-------------- ------------ ----------- --------------
The above Unaudited Interim Condensed Consolidated Statement of
Changes in Equity should be read in conjunction with the
accompanying notes.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHSED 30 JUNE 2017
Note 30 June 30 June
2017 2016
(Unaudited) (Unaudited)
US$'000 US$'000
Cash flows from operating activities
Cash generated in operating activities 17(b) 79,218 96,338
Finance income (646) (194)
Income tax refund received 108 -
Income tax paid (1,098) -
Net cash generated by operating activities 77,582 96,144
------------ ------------
Cash flows from investing activities
Acquisition of property, plant and equipment (16,850) (14,839)
Exploration and evaluation expenditure (7,761) (13,132)
Finance income 646 194
Net cash used in investing activities (23,965) (27,777)
------------ ------------
Cash flows from financing activities
Dividend paid - (22,946)
5(b)
EMRA profit share paid & 5(c) (22,513) -
Net cash provided by financing activities (22,513) (22,946)
------------ ------------
Net increase in cash and cash equivalents 31,104 45,421
Cash and cash equivalents at the beginning
of the period 265,983 234,460
Effect of foreign exchange rate changes (107) 1,797
------------ ------------
Cash and cash equivalents at the end of
the period 17(a) 296,980 281,678
------------ ------------
The above Unaudited Condensed Consolidated Statement of Cash
Flows should be read in conjunction with the accompanying
notes.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 2017
Note 30 June 30 June
2017 2016
(Unaudited) (Unaudited)
US$'000 US$'000
Cash flows from operating activities
Cash generated in operating activities 17(b) 137,558 156,821
Finance income (996) (320)
Income tax refund received 108 -
Income tax paid (1,098) -
Net cash generated by operating activities 135,572 156,501
------------ ------------
Cash flows from investing activities
Acquisition of property, plant and equipment (28,757) (26,530)
Exploration and evaluation expenditure (15,832) (26,231)
Finance income 996 320
Net cash used in investing activities (43,593) (52,441)
------------ ------------
Cash flows from financing activities
Dividend paid (155,437) (22,946)
5(b)
EMRA profit share paid & 5(c) (41,153) -
Net cash provided by financing activities (196,590) (22,946)
------------ ------------
Net (decrease)/increase in cash and cash
equivalents (104,611) 81,114
Cash and cash equivalents at the beginning
of the period 399,873 199,616
Effect of foreign exchange rate changes 1,718 948
------------ ------------
Cash and cash equivalents at the end of
the period 17(a) 296,980 281,678
------------ ------------
The above Unaudited Condensed Consolidated Statement of Cash
Flows should be read in conjunction with the accompanying
notes.
NOTE 1: ACCOUNTING POLICIES
Basis of preparation
These unaudited interim condensed consolidated financial
statements have been prepared in accordance with IAS 34 "Interim
Financial Reporting" (IAS 34) as adopted by the European Union and
as issued by the International Accounting Standards Board ("IASB")
and the requirements of the Disclosure and Transparency Rules (DTR)
of the Financial Conduct Authority (FCA) in the United Kingdom as
applicable to interim financial reporting. These unaudited interim
condensed consolidated financial statements are not affected by
seasonality.
The unaudited interim condensed consolidated financial
statements represent a 'condensed set of financial statements' as
referred to in the DTR issued by the FCA. Accordingly, they do not
include all of the information required for a full annual financial
report and are to be read in conjunction with the Group's financial
statements for the year ended 31 December 2016, which were prepared
in accordance with International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards Board
("IASB") and adopted for use by the European Union and IFRS as
issued by the IASB. The financial statements for the year ended 31
December 2016 have been filed with the Jersey Financial Services
Commission. The financial information contained in this report does
not constitute statutory accounts under the Companies (Jersey) Law
1991, as amended. The financial information for the year ended 31
December 2016 is based on the statutory accounts for the year ended
31 December 2016. Readers are referred to the auditor's report to
the Group financial statements as at 31 December 2016 (available at
www.centamin.com).
The accounting policies applied in these interim financial
statements are consistent with those used in the annual
consolidated financial statements for the year ended 31 December
2016 except for the adoption of a number of amendments issued by
the IASB and endorsed by the EU which apply for the first time in
2017. The new pronouncements do not have a significant impact on
the accounting policies, methods of computation or presentation
applied by the Group and therefore the prior period consolidated
financial statements have not been restated. The Group has not
early adopted any amendments, standards or interpretations that
have been issued but are not yet effective.
The preparation of these interim condensed consolidated
financial statements requires the use of certain significant
accounting estimates and judgment by management in applying the
Group's accounting policies. There have been no changes to the
areas involving significant judgement and estimates that have been
set out in Note 4 of the Group's annual audited consolidated
financial statements for the year ended 31 December 2016.
Going concern
These financial statements for the period ended 30 June 2017
have been prepared on a going concern basis, which contemplate the
realisation of assets and liquidation of liabilities during the
normal course of operations.
As discussed in Note 8, during 2012 the operation of the mine
was affected by two legal actions. The first of these followed from
a decision taken by Egyptian General Petroleum Corporation ("EGPC")
to charge international, not local (subsidised) prices for the
supply of DFO, and the second arose as a result of a judgment of
the Administrative Court in relation to, amongst other matters, the
Company's 160km(2) exploitation lease. In relation to the first
decision, the Company remains confident that in the event that it
is required to continue to pay international prices, the mine at
Sukari will remain commercially viable. Similarly, the Company
remains confident that the appeal it has lodged in relation to the
decision of the Administrative Court will ultimately be successful,
although final resolution of it may take some time. On 20 March
2013 the Supreme Administrative Court upheld the Company's
application to suspend the decision until the merits of the
Company's appeal were considered and ruled on, thus providing
assurance that normal operations will be able to continue during
this process.
In the unlikely event that the Group is unsuccessful in either
or both of its legal actions, and that the operating activities are
restricted to a reduced area, it is the director's belief that the
Group will be able to continue as going concern.
NOTE 1: ACCOUNTING POLICIES (CONTINUED)
The directors have a reasonable expectation that the Group will
have adequate resources to continue in operational existence for
the foreseeable future. Thus they continue to adopt the going
concern basis of accounting in preparing these interim condensed
consolidated financial statements.
NOTE 2: SEGMENT REPORTING
The Group is engaged in the business of exploration for and
mining of metals only, which represents a single operating segment.
The Board is the Group's chief operating decision maker within the
meaning of IFRS 8.
Non-current assets other than financial instruments by country,
is as follows:
30 June 31 December
2017
(Unaudited) 2016
US$'000 (Audited)
US$'000
Egypt 878,985 899,852
Burkina Faso 108,965 105,432
Côte d'Ivoire 24,284 17,870
Australia 4 3
Jersey 41 63
--------- ---------
1,012,279 1,023,220
--------- ---------
NOTE 3: REVENUE
An analysis of the Group's revenue for the period, from
continuing operations, is as follows:
Three Months Three Months Six Months Six Months
Ended 30 Ended 30 Ended 30 Ended 30
June 2017 June 2016 June 2017 June 2016
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
US$'000 US$'000 US$'000 US$'000
Gold sales 151,075 179,865 291,466 327,717
Silver sales 207 263 539 519
151,282 180,128 292,005 328,236
------------ ------------ ------------ ------------
NOTE 4: PROFIT BEFORE TAX
Profit for the period has been arrived at after
crediting/(charging) the following gains/(losses) and expenses:
Three Months Three Months Six Months Six Months
Ended 30 Ended 30 Ended 30 Ended 30
June 2017 June 2016 June 2017 June 2016
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
US$'000 US$'000 US$'000 US$'000
Finance income
Interest received 646 194 996 320
------------ ------------ ------------ ------------
Expenses
Cost of sales
Mine production costs (76,186) (67,823) (151,639) (139,464)
Movement in inventory 1,421 (639) (5,265) (3,978)
Depreciation and amortisation (28,773) (28,393) (52,702) (55,113)
--------- -------- --------- ---------
(103,538) (96,855) (209,606) (198,555)
--------- -------- --------- ---------
NOTE 4: PROFIT BEFORE TAX (CONTINUED)
Three Months Three Months Six Months Six Months
Ended 30 Ended 30 Ended 30 Ended 30
June 2017 June 2016 June 2017 June 2016
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
US$'000 US$'000 US$'000 US$'000
Other operating costs
Fixed royalty - attributable
to the Egyptian government (4,529) (5,392) (8,739) (9,823)
Corporate costs (3,044) (5,160) (6,053) (6,960)
Other expenses (380) (53) (415) (99)
Foreign exchange gain, net (217) 469 1,782 1,317
Provision for restoration
and rehabilitation - unwinding
of discount (157) (145) (314) (291)
Depreciation (13) (27) (25) (53)
Write-off of exploration
and evaluation asset (2,550) - (2,550) -
(10,890) (10,308) (16,314) (15,909)
------------ ------------ ------------- -------------
Impairment of available
for sale financial assets (105) 220 (218) 153
------------ ------------ ------------- -------------
NOTE 5: EMRA PROFIT SHARE
EMRA is entitled to a share of 50% of SGM's net production
surplus which can be defined as 'revenue less payment of the fixed
royalty to Arab Republic of Egypt ("ARE") and recoverable costs'.
However, in accordance with the terms of the Concession Agreement,
in the first and second years in which there is a profit share, PGM
will be entitled to an additional 10% of net production surplus and
an additional 5% in the third and fourth years.
Payments made to EMRA pursuant to the provisions of the
Concession Agreement are recognised as a variable charge in the
income statement (below profit after tax) of Centamin, which leads
to a reduction in the earnings per share. The profit share payments
during the year will be reconciled against SGM's audited June 2017
financial statements.
Certain terms of the Concession Agreement and amounts in the
cost recovery model may also vary depending on interpretation and
management and the Board make various judgments and estimates that
can affect the amounts recognized in the financial statements. Any
variation between payments made during the year (which are based on
the Company's estimates) and the audited financial statements, may
result in a balance due and payable to EMRA or advances to be
offset against future distributions.
NOTE 5: EMRA PROFIT SHARE (CONTINUED)
a) Income statement and Balance sheet impact
Three Months Three Months Six Months Six Months
Ended 30 Ended 30 Ended 30 Ended 30
June 2017 June 2016 June 2017 June 2016
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
US$'000 US$'000 US$'000 US$'000
Income statement
EMRA profit share (24,013) - (40,153) -
------------ ------------ ------------ ------------
Balance sheet
EMRA opening profit share
accrual 1,500 4,000
EMRA accrual /(release) 1,500 - (1,000) -
------------ ------------ ------------ ------------
EMRA closing profit share
accrual 3,000 - 3,000 -
------------ ------------ ------------ ------------
Any variation between payments made during the year (which are
based on the Company's estimates) and the audited financial
statements, may result in a balance due and payable to EMRA or
advances to be offset against future distributions. This will be
reflected as an accrual or prepayment in each reporting period.
b) Cash flow statement impact
Three Months Three Months Six Months Six Months
Ended 30 Ended 30 Ended 30 Ended 30
June 2017 June 2016 June 2017 June 2016
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
US$'000 US$'000 US$'000 US$'000
Cash flows
EMRA cash payments during the
period 22,513 - 41,153 -
Offset by:
EMRA accrual /(release) 1,500 - (1,000) -
------------ ------------ --------------
EMRA profit share 24,013 - 40,153 -
------------ ------------ --------------
EMRA and PGM benefit from advance distributions of profit share
which are made on a weekly/fortnightly basis and proportionately in
accordance with the terms of the Concession Agreement. Future
distributions will take into account ongoing cash flows, historic
costs that are still to be recovered and any future capital
expenditure. The profit share payments during the period will be
reconciled against SGM's audited June 2017 financial
statements.
Centamin elected to make advance payments against future profit
share from 2013 onwards and the value of the payments amounted to
US$28.75 million. These payments were recovered by PGM during the
2016 financial year by way of net off against EMRA's entitlement to
profit share during that period.
NOTE 5: EMRA PROFIT SHARE (CONTINUED)
c) SGM cash flow statement extract
In order to reconcile the cash payments made during the period,
the SGM cash flow statement is tabled below:
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
30 June 30 June 30 June 30 June
2017 2016 2017 2016
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
US$'000 US$'000 US$'000 US$'000
Cash flows
Net cash generated by operating
activities 82,026 98,478 140,749 157,044
Net cash used in investing activities (21,994) (27,731) (40,367) (52,262)
Cash available for profit share 60,033 70,747 100,383 104,782
------------ ------------ ------------ ------------
60% Profit share to Pharaoh
Gold Mines NL 33,770 - 61,730 -
40% Profit Share to EMRA 22,513 - 41,153 -
EMRA accrual /(release) (1,500) - 1,000 -
Subsequent to period end, further profit share advance
distributions totalling US$10.0m have been made to EMRA.
NOTE 6: PREPAYMENTS
30 June 31 December
2017
(Unaudited) 2016
US$'000 (Audited)
US$'000
Non-current Prepayments
Prepayments 296 295
--- ---
Current Prepayments
Prepayments 761 1,151
Fuel prepayments (26) 877
---- -----
735 2,028
---- -----
The cumulative fuel prepayment recognised and provision charged
as at 30 June 2017 is as follows:
Movement in fuel prepayments
Balance at the beginning of the period 877 3,169
Fuel prepayment recognised 21,854 23,014
Less: Provision charged to :
Mine production costs (22,436) (22,844)
Property, plant and equipment (8) (2,269)
Inventories (313) (193)
-------- --------
(22,757) (25,306)
Balance at the end of the period (26) 877
-------- --------
NOTE 6: PREPAYMENTS (CONTINUED)
Diesel fuel oil ("DFO") dispute
As more fully described in note 8 below, the group is currently
involved in court action concerning the price at which it is
supplied with DFO. Since January 2012, the group has had to pay for
DFO at the international price rather than the subsidised price
which it believes it is entitled to. It is seeking recovery of the
funds advanced since 2012 through court action. However, management
recognises the practical difficulties associated with reclaiming
funds from the government and for this reason has fully provided
against the prepayment of US$253 million to 30 June 2017 of which
US$19.5 million was provided during 2017.
In order to allow a better understanding of the financial
information presented within the consolidated financial statements,
and specifically the group's underlying business performance, the
effect of the Diesel Fuel Oil dispute is shown below.
Three months ended Three months ended 30
30 June 2017 June 2016
Before Before
adjustment Adjustment Total adjustment Adjustment Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Expenses
Cost of sales
Mine production costs (62,185) (14,001) (76,186) (64,598) (3,225) (67,823)
Movement in inventory (679) 2,100 1,421 798 (1,437) (639)
Depreciation and amortisation (28,773) - (28,773) (28,393) - (28,393)
----------- ---------- --------- ----------- ---------- --------
(91,637) (11,901) (103,538) (92,193) (4,662) (96,855)
----------- ---------- --------- ----------- ---------- --------
This has resulted in a net charge of US$11.9 million in the
profit and loss for the current quarter.The effect on earnings per
share is shown below:
Three months ended 30 Three months ended 30
June 2017 June 2016
Before Before
adjustment Adjustment Total adjustment Adjustment Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Earnings per share
before profit share:
Basic (cents per share) 4.206 (1.029) 3.177 6.701 (0.404) 6.297
----------- ---------- ------- ----------- ---------- -------
Diluted (cents per
share) 4.175 (1.022) 3.153 6.668 (0.402) 6.266
----------- ---------- ------- ----------- ---------- -------
Earnings per share
after profit share:
Basic (cents per share) 2.129 (1.030) 1.099 6.701 (0.404) 6.297
----- ------- ----- ----- ------- -----
Diluted (cents per
share) 2.113 (1.022) 1.091 6.668 (0.402) 6.266
----- ------- ----- ----- ------- -----
NOTE 6: PREPAYMENTS (CONTINUED)
Six months ended 30 Six months ended 30 June
June 2017 2016
Before Before
adjustment Adjustment Total adjustment Adjustment Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Expenses
Cost of sales
Mine production costs (129,203) (22,436) (151,639) (130,306) (9,158) (139,464)
Movement in inventory (8,167) 2,902 (5,265) (2,033) (1,945) (3,978)
Depreciation and amortisation (52,702) - (52,702) (55,113) - (55,113)
----------- ---------- --------- ----------- ---------- ---------
(190,072) (19,534) (209,606) (187,452) (11,103) (198,555)
----------- ---------- --------- ----------- ---------- ---------
This has resulted in a net charge of US$19.5 million in the
profit and loss for the half year.
The effect on earnings per share is shown below:
Six months ended 30 Six months ended 30 June
June 2017 2016
Before Before
adjustment Adjustment Total adjustment Adjustment Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Earnings per share
before profit share:
Basic (cents per share) 7.425 (1.691) 5.734 10.807 (0.963) 9.844
----------- ---------- ------- ----------- ---------- -------
Diluted (cents per
share) 7.372 (1.633) 5.694 10.758 (0.959) 9.799
----------- ---------- ------- ----------- ---------- -------
Earnings per share
after profit share:
Basic (cents per share) 3.950 (1.690) 2.260 10.807 (0.963) 9.844
----- ------- ----- ------ -------- -----
Diluted (cents per
share) 3.922 (1.678) 2.244 10.758 (0.959) 9.799
----- ------- ----- ------ -------- -----
NOTE 7: COMMITMENTS
The following is a summary of the Company's outstanding
commitments as at 30 June 2017:
Payments due Total < 1 year 1 to 5 >5 years
US$'000 US$'000 years US$'000
US$'000
Operating Lease Commitments(1) 76 61 15 -
--------- --------- --------- ---------
Total commitments 76 61 15 -
--------- --------- --------- ---------
(1) Operating lease commitments are limited to office premises
in Jersey.
NOTE 8: CONTINGENT LIABILITIES AND CONTINGENT ASSETS
Contingent Liabilities
Fuel Supply
As set out in note 6 above, in January 2012, the Group received
a letter from Chevron to the effect that Chevron would only be able
to supply DFO (Diesel Fuel Oil) to the mine at Sukari at
international prices rather than at local subsidised prices. It is
understood that the reason that this letter was issued was that
Chevron had received a letter instructing it to do so from the
EGPC. It is further understood that EGPC itself issued this
instruction because it had received legal advice from the Legal
Advice Department of the Council of State (an internal government
advisory department) that companies operating in the gold mining
sector in Egypt were not entitled to such subsidies. In November
2012, the Group received a further demand from Chevron for the
repayment of fuel subsidies received during the period from late
2009 through to January 2012, for EGP403 million (approximately
US$23.0 million at current exchange rates).
The Group has taken detailed legal advice on this matter (and,
in particular, on the opinion given by the Legal Advice Department
of the Council of State) and in June 2012 lodged an appeal against
EGPC's decision in the Administrative Courts. Again, the Group
believes that its grounds for appeal are strong and that there is a
good prospect of success. However, as a practical matter, and in
order to ensure the continuation of supply whilst the matter is
resolved, the Group has since January 2012 advanced funds to its
fuel supplier, based on the international price for fuel.
As at the date of this document, no decision had been taken by
the courts regarding this matter. The Group has received an
unfavourable State Commissioner's report in the case, however, the
report is non-binding and the Group's legal advisors remain of the
view that the Group has a strong case. The Group remains of the
view that an instant move to international fuel prices is not a
reasonable outcome and will look to recover funds advanced thus far
should the court action be successfully concluded. However,
management recognises the practical difficulties associated with
reclaiming funds from the government and for this reason has fully
provided against the prepayment of US$253 million. Refer to Note 6
of these financial statements for further details on the impact of
this provision on the Group's results for Q2 2017.
No provision has been made in respect of the historic subsidies
prior to January 2012 as, based on legal advice, the Company
believes that, notwithstanding the unfavourable State
Commissioner's report, the prospects of a court finding in its
favour in relation to this matter remain very strong.
Supreme Administrative Court Appeal
On 30 October 2012, the Administrative Court in Egypt handed
down a judgment in relation to a claim brought by, amongst others,
an independent member of a previous parliament, in which he argued
for the nullification of the agreement that confers on the Group
rights to operate in Egypt. This agreement, the Concession
Agreement, was entered into between the Arab Republic of Egypt, the
Egyptian Mineral Resources Authority and Centamin's wholly--owned
subsidiary Pharaoh Gold Mines, and was approved by the People's
Assembly as Law 222 of 1994.
NOTE 8: CONTINGENT LIABILITIES AND CONTINGENT ASSETS
(CONTINUED)
In summary that judgment states that, although the Concession
Agreement itself remains valid and in force, insufficient evidence
had been submitted to Court in order to demonstrate that the
160km(2) exploitation lease between PGM and EMRA had received
approval from the relevant Minister as required by the terms of the
Concession Agreement. Accordingly, the Court found that the
exploitation lease in respect of the area of 160km(2) was not valid
although it stated that there was in existence such a lease in
respect of an area of 3km(2) . Centamin, however, is in possession
of the executed original lease documentation which clearly shows
that the 160km(2) exploitation lease was approved by the Minister
of Petroleum and Mineral Resources. It appears that an executed
original document was not supplied to the Court in the first
instance.
Upon notification of the judgment the Group took various steps
to protect its ability to continue to operate the mine at Sukari.
These included lodging a formal appeal before the Supreme
Administrative Court on 26 November 2012. In addition, in
conjunction with the formal appeal the Group applied to the Supreme
Administrative Court to suspend the initial decision until such
time as the court was able to consider and rule on the merits of
the appeal. On 20 March 2013 the Court upheld this application thus
suspending the initial decision and providing assurance that normal
operations would be able to continue whilst the appeal process was
under way.
EMRA lodged its own appeal in relation to this matter on 27
November 2012, the day after the Company's appeal was lodged,
supporting the Group's view in this matter. Furthermore, in late
December 2012, the Minister of Petroleum lodged a supporting appeal
and shortly thereafter publicly indicated that, in his view, the
terms of the Concession Agreement were fair and that the
exploitation lease was valid. The Minister of Petroleum also
expressed support for the investment and expertise that Centamin
brings to the country. The Company believes this demonstrates the
government's commitment to the Group's investment at Sukari and the
government's desire to stimulate further investment in the Egyptian
mining industry.
The Supreme Administrative Court has stayed the Concession
Agreement appeal until the Supreme Constitutional Court has ruled
on the validity of Law 32 of 2014. Law 32 of 2014 restricts the
capacity for third parties to challenge contractual agreements
between the Egyptian government and an investor. This law, whilst
in force and ratified by the new parliament, is currently under
review by the Supreme Constitutional Court (SCC). During the
quarter the SCC re-referred the case to the state commissioner to
prepare a complementary report to an initial report provided by the
state commissioner in Q1 2017 which found Law 32 to be
unconstitutional. The state commissioner's report and complementary
report are advisory and non-binding on the SCC. The Company
continues to believe that it has a strong legal position and that
in the event that the SCC rules that Law 32 is invalid, the Group
remains confident that its own appeal will be successful on the
merits.
The Company does not yet know when the appeal will conclude,
although it is aware of the potential for the process in Egypt to
be lengthy. The Company has taken extensive legal advice on the
merits of its appeal from a number of leading Egyptian law firms
who have confirmed that the proper steps were followed with regard
to the grant of the 160km(2) lease. It therefore remains of the
view that the appeal is based on strong legal grounds and will
ultimately be successful. In the event that the appellate court
fails to be persuaded of the merits of the case put forward by the
Group, the operations at Sukari may be adversely effected to the
extent that the Group's operation exceeds the exploitation lease
area of 3km(2) referred to in the original court decision.
The Company remains confident that normal operations at Sukari
will be maintained whilst the appeal case is heard.
Contingent Assets
There were no contingent assets at period-end (30 June 2017:
nil, 31 December 2016: nil).
NOTE 9: ISSUED CAPITAL
Fully Paid Ordinary Six Months Ended Year Ended
Shares
30 June 2017 31 December 2016
(Unaudited) (Audited)
Number US$'000 Number US$'000
Balance at beginning of
the period 1,152,107,984 667,472 1,152,107,984 665,590
Issue of shares (1) - - - (17)
Transfer from share options
reserve - 1,272 - 1,899
Balance at end of the
period 1,152,107,984 668,744 1,152,107,984 667,472
------------- ------- -------------- --------
(1) Fully paid ordinary shares carry one vote per share and
carry the right to dividends.
NOTE 10: RELATED PARTY TRANSACTIONS
The related party transactions for the three months ended 30
June 2017 are summarised below:
- Salaries, superannuation contributions, bonuses, LTI's,
consulting and directors' fees paid to Directors during the three
months ended 30 June 2017 amounted to US$613,504 (30 June 2016:
US$599,896).
- Mr J El-Raghy is a director and shareholder of El-Raghy
Kriewaldt Pty Ltd ("ELK"), which provides office premises to the
Company in Australia. All dealings with ELK are in the ordinary
course of business and on normal terms and conditions. Rent paid to
ELK during the three months ended 30 June 2017 amounted to
US$11,524 (30 June 2016: US$12,842).
The related party transactions for the six months ended 30 June
2017 are summarised below:
- Salaries, superannuation contributions, bonuses, LTI's,
consulting and directors' fees paid to Directors during the six
months ended 30 June 2017 amounted to US$1,202,270 (30 June 2016:
US$1,207,943).
- Mr J El-Raghy is a director and shareholder of El-Raghy
Kriewaldt Pty Ltd ("ELK"), which provides office premises to the
Company in Australia. All dealings with ELK are in the ordinary
course of business and on normal terms and conditions. Rent paid to
ELK during the six months ended 30 June 2017 amounted to US$23,231
(30 June 2016: US$25,492).
NOTE 11: EARNINGS PER SHARE
Basic earnings per share are calculated using the weighted
average number of shares outstanding. Diluted earnings per share
are calculated using the treasury stock method. In order to
determine diluted earnings per share, the treasury stock method
assumes that any proceeds from the exercise of dilutive stock
options and warrants would be used to repurchase common shares at
the average market price during the period, with the incremental
number of shares being included in the denominator of the diluted
earnings per share calculation. The diluted earnings per share
calculation exclude any potential conversion of options and
warrants that would increase earnings per share.
Three Months Six Months Six Months
Three Months Ended 30 Ended 30 Ended 30
Ended 30 June June 2016 June 2017 June 2016
2017 (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cents Per Cents Per Cents Per Cents Per
Share Share Share Share
Basic EPS (before profit
share) 3.177 6.297 5.734 9.844
Diluted EPS (before profit
share) 3.153 6.266 5.694 9.799
-------------------- --------------- --------------- ---------------
Basic EPS (after profit
share) 1.099 6.297 2.260 9.844
Diluted EPS (after profit
share) 1.091 6.266 2.244 9.799
-------------------- --------------- --------------- ---------------
NOTE 11: EARNINGS PER SHARE (CONTINUED)
Basic earnings per share
The earnings and weighted average number of ordinary shares used
in the calculation of basic earnings per share are as follows:
Three Months Three Months Six Months Six Months
Ended 30 June Ended 30 Ended 30 Ended 30
2017 (Unaudited) June 2016 June 2017 June 2016
US$'000 (Unaudited) (Unaudited) (Unaudited)
US$'000 US$'000 US$'000
Earnings used in the
calculation of basic
EPS(1) 36,721 72,608 66,273 113,459
-------------------- --------------- --------------- ---------------
Earnings used in the
calculation of basic
EPS(2) 12,708 72,608 26,120 113,459
-------------------- --------------- --------------- ---------------
(1) Before profit share
(2) After profit share
Three Months Three Months Six Months Six Months
Ended 30 June Ended 30 Ended 30 Ended 30
2017 (Unaudited) June 2016 June 2017 June 2016
(Unaudited) (Unaudited) (Unaudited)
No. No. No. No.
Weighted average number
of ordinary shares for
the purpose of basic
EPS 1,155,885,124 1,153,125,676 1,155,712,512 1,152,616,830
-------------------- --------------- --------------- ---------------
Diluted earnings per share
Three Months Three Months Six Months Six Months
Ended 30 June Ended 30 June Ended 30 Ended 30
2017 (Unaudited) 2016 (Unaudited) June 2017 June 2016
US$'000 US$'000 (Unaudited) (Unaudited)
US$'000 US$'000
The earnings and weighted
average number of ordinary
shares used in the calculation
of diluted earnings
per share are as follows:
Earnings used in the
calculation of diluted
EPS(1) 36,721 72,608 66,273 113,459
-------------------- -------------------- --------------- ---------------
Earnings used in the
calculation of diluted
EPS(2) 12,708 72,608 26,120 113,459
-------------------- -------------------- --------------- ---------------
(1) Before profit share
(2) After profit share
Three Months Three Months Six Months Six Months
Ended 30 June Ended 30 June Ended 30 Ended 30
2017 (Unaudited) 2016 (Unaudited) June 2017 June 2016
(Unaudited) (Unaudited)
No. No. No. No.
Weighted average number
of ordinary shares for
the purpose of diluted
EPS 1,164,694,791 1,158,817,070 1,163,988,146 1,157,905,024
-------------------- -------------------- --------------- ---------------
Weighted average number
of ordinary shares for
the purpose of basic
EPS 1,155,885,124 1,153,125,676 1,155,712,512 1,152,616,830
Shares deemed to be
issued for no consideration
in respect of employee
options 8,809,667 5,691,394 8,275,634 5,288,194
------------- ------------- ------------- -------------
Weighted average number
of ordinary shares used
in the calculation of
diluted EPS 1,164,694,791 1,158,817,070 1,163,988,146 1,157,905,024
------------- ------------- ------------- -------------
NOTE 12: PROPERTY, PLANT AND EQUIPMENT
Six Months Ended
30 June 2017 Office Land Plant Mining Mine Development Capital
(Unaudited) equipment and buildings and equipment equipment properties WIP Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Cost
Balance at 31
December 2016 6,052 2,019 584,113 249,491 365,902 75,775 1,283,352
Additions 380 - 3,170 7,519 3,965 13,724 28,758
Disposals - - (316) - - - (316)
Balance at 30
June 2017 6,432 2,019 586,967 257,010 369,867 89,499 1,311,794
----------- --------------- --------------- ----------- ----------------- -------- ---------
Accumulated
depreciation
Balance at 31
December 2016 (5,400) (412) (127,913) (129,610) (151,091) - (414,426)
Depreciation and
amortisation (253) (68) (14,759) (16,308) (21,338) - (52,726)
Depreciation and
amortisation on
disposals - - 52 - - - 52
Balance at 30
June 2017 (5,653) (480) (142,620) (145,918) (172,429) - (467,100)
----------- --------------- --------------- ----------- ----------------- -------- ---------
Year Ended 31
December 2016
(Audited)
Cost
Balance at 31
December 2015 5,535 1,194 582,854 241,316 316,304 32,469 1,179,672
Additions 547 825 1,474 8,733 2,075 43,306 56,960
Disposals (30) - (215) (558) - - (803)
Transfers - - - - 47,523 - 47,523
-------- ------ ---------- ---------- ---------- ------- ---------
Balance at 31
December 2016 6,052 2,019 584,113 249,491 365,902 75,775 1,283,352
-------- ------ ---------- ---------- ---------- ------- ---------
Accumulated depreciation
Balance at 31
December 2015 (4,867) (293) (98,504) (100,826) (103,715) - (308,205)
Depreciation and
amortisation (558) (119) (29,496) (29,424) (47,376) - (106,973)
Disposals 25 - 87 640 - - 752
-------- ------ ---------- ---------- ---------- ------- ---------
Balance at 31
December 2016 (5,400) (412) (127,913) (129,610) (151,091) - (414,426)
-------- ------ ---------- ---------- ---------- ------- ---------
Net book value
As at 31 December
2016 652 1,607 456,200 119,881 214,811 75,775 868,926
-------- ------ ---------- ---------- ---------- ------- ---------
As at 30 June
2017 779 1,539 444,611 110,828 197,438 89,499 844,694
-------- ------ ---------- ---------- ---------- ------- ---------
NOTE 13: EXPLORATION AND EVALUATION ASSETS
Six Months
Ended Year Ended
30 June 31 December
2017 2016
(Unaudited) (Audited)
US$'000 US$'000
Balance at the beginning of the period 153,918 152,077
Expenditure for the period 15,831 49,487
Transfer to Property Plant & Equipment - (47,524)
Impairment of exploration and evaluation asset (2,550) (122)
------------ ------------
Balance at the end of the period 167,199 153,918
------------ ------------
The exploration and evaluation asset relates to the drilling,
geological exploration and sampling of potential ore reserves and
can be attributed to Egypt (US$36.5m) Burkina Faso (US$106.5m) and
Côte d'Ivoire (US$24.3m).
The group's accounting policy for exploration and evaluation
expenditure results in exploration and evaluation expenditure being
capitalised for those projects where such expenditure is considered
likely to be recoverable through future extraction activity or sale
or where the exploration activities have not reached a stage which
permits a reasonable assessment of the existence of reserves.
This policy requires management to make certain estimates and
assumptions as to future events and circumstances, in particular
whether the group will proceed with development based on existence
of reserves or whether an economically viable extraction operation
can be established. Such estimates and assumptions may change from
period to period as new information becomes available. If,
subsequent to the exploration and evaluation expenditure being
capitalised, a judgment is made that recovery of the expenditure is
unlikely or the project is to be abandoned, the relevant
capitalised amount will be written off to the income statement.
NOTE 14: AVAILABLE-FOR-SALE FINANCIAL ASSETS
The unrealised gains/(losses) on available-for-sale investments
recognised in other comprehensive income were as follows:
Three Months Three Months Six Months Three Months
Ended Ended Ended Ended
30 June 30 June 30 June
2017 2016 2017 30 June 2016
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
US$'000 US$'000 US$'000 US$'000
Profit / (Loss) on fair
value of investment - other
comprehensive income 1 53 (91) 74
------------ ------------ ------------ -------------
The available for sale financial asset at period-end relates to
a 5.33% (2016: 5.33%) equity interest in Nyota Minerals Limited
("NYO"), a listed public company, as well as a 0.29% (2016: 0.53%)
equity interest in KEFI Minerals plc ("KEFI").
NOTE 15: SHARE BASED PAYMENTS
Restricted Share Plan
The Company's shareholder approved restricted share plan (RSP)
allows the Company the right to grant Awards (as defined below) to
employees of the Group. Awards may take the form of either
conditional share awards, where shares are transferred
conditionally upon the satisfaction of performance conditions; or
share options, which may take the form of nil cost options or have
a nominal exercise price, the exercise of which is again subject to
satisfaction of applicable performance conditions.
To date the Company has granted the following conditional awards
to employees of the Group.
June 2015 Awards
Of the 5,145,000 awards granted on 4 June 2015 under the RSP,
3,015,000 awards remain granted to eligible participants (15 in
total) and apply the following performance criteria:
- 20% of the Award shall be assessed by reference to a target total shareholder return.
- 50% of the Award shall be assessed by reference to absolute growth in earnings per share.
- 30% of the Award shall be assessed by reference to compound growth in gold production.
June 2016 Awards
Of the 4,999,000 awards granted on 4 June 2016 under the RSP,
4,254,000 awards remain granted to eligible
participants (28 in total) applying the following performance
criteria:
- 20% of the award shall be assessed by reference to a target total shareholder return.
- 30% of the award shall be assessed by reference to mineral reserve replacement and growth.
- 20% of the award shall be assessed by reference to compound growth in EBIDTA.
- 30% of the award shall be assessed by reference to compound growth in gold production.
June 2017 Awards
Of the 3,459,000 awards granted on 4 June 2017 under the RSP,
3,459,000 awards remain granted to eligible
participants (37 in total) applying the following performance
criteria:
- 20% of the award shall be assessed by reference to a target total shareholder return.
- 30% of the award shall be assessed by reference to mineral reserve replacement and growth.
- 20% of the award shall be assessed by reference to compound growth in EBIDTA.
- 30% of the award shall be assessed by reference to compound growth in gold production.
Conditional share awards and options together constitute
"Awards" under the Plan and those in receipt of Awards are "Award
Holders".
A detailed summary of the scheme rules is set out in the 2016
AGM proxy materials which are available at www.centamin.com. In
brief, Awards will vest following the passing of three years from
the date of the Award and vesting will be subject to satisfaction
of Performance Conditions. The above measures are assessed by
reference to current market practice and the Remuneration Committee
will have regard to market practice when establishing the precise
Performance Conditions for future Awards.
Where the performance conditions have been met, in the case of
Conditional Awards, 50% of the total shares under the Award will be
issued or transferred to the Award Holders on or as soon as
possible following the specified Vesting Date, with the remaining
50% being issued or transferred on the second anniversary of the
Vesting Date.
NOTE 15: SHARE BASED PAYMENTS (CONTINUED)
Restricted Share Plan awards granted during the period:
RSP 2017
--------------------------------------------------- ------------
Grant Date 4 June 2017
--------------------------------------------------- ------------
Number of instruments 3,459,000
--------------------------------------------------- ------------
TSR: Fair value at grant date GBP (1) 1.16
--------------------------------------------------- ------------
TSR: Fair value at grant date US$ (1) 1.49
--------------------------------------------------- ------------
Reserve: Fair value at grant date GBP (1) 1.54
--------------------------------------------------- ------------
Reserve: Fair value at grant date US$ (1) 1.97
--------------------------------------------------- ------------
EBITDA: Fair value at grant date GBP (1) 1.54
--------------------------------------------------- ------------
EBITDA: Fair value at grant date US$ (1) 1.97
--------------------------------------------------- ------------
Gold Production: Fair value at grant date GBP (1) 1.54
--------------------------------------------------- ------------
Gold Production: Fair value at grant date US$ (1) 1.97
--------------------------------------------------- ------------
Vesting period (years) 3
--------------------------------------------------- ------------
Expected volatility 45.68%
--------------------------------------------------- ------------
Expected dividend yield (%) 3.6%
--------------------------------------------------- ------------
(1) The vesting of 20% the awards granted under this plan are
dependent on a TSR performance condition. As relative TSR is
defined as a market condition under IFRS 2 "Share--based Payment",
this requires that the valuation model used takes into account the
anticipated performance outcome. We have therefore applied a Monte
Carlo simulation model. The simulation model takes into account the
probability of performance based on the expected volatility of
Centamin and the peer group companies and the expected correlation
of returns between the companies in the comparator group.
The remaining 80% of the awards are subject to Reserve, EBITDA
and gold production performance conditions. As these are classified
as nonmarket conditions under IFRS 2 they do not need to be taken
into account when determining the fair value. These grants have
been valued using a Black--Scholes model.
The fair value calculated was then converted at the closing
GBP:US$ foreign exchange rate on that day.
Deferred Bonus Share Plan
Deferred Bonus Share Plan awards granted during the period:
DBSP 2017
------------------------------------------------ ------------
Grant date 4 June 2017
------------------------------------------------ ------------
Number of instruments 300,000
------------------------------------------------ ------------
Share price / Fair value at grant date Tranche
1 GBP (2) 1.66
------------------------------------------------ ------------
Share price / Fair value at grant date Tranche
1 US$ (2) 2.13
------------------------------------------------ ------------
Share price / Fair value at grant date Tranche
2 GBP (2) 1.61
------------------------------------------------ ------------
Share price / Fair value at grant date Tranche
2 US$ (2) 2.06
------------------------------------------------ ------------
Share price / Fair value at grant date Tranche
3 GBP (2) 1.55
------------------------------------------------ ------------
Share price / Fair value at grant date Tranche
3 US$ (2) 1.97
------------------------------------------------ ------------
Vesting period Tranche 1 (years) (3) 1
------------------------------------------------ ------------
Vesting period Tranche 2 (years) (3) 2
------------------------------------------------ ------------
Vesting period Tranche 3 (years) (3) 3
------------------------------------------------ ------------
Expected dividend yield Tranche 1 (%) 3.67%
------------------------------------------------ ------------
Expected dividend yield Tranche 2 (%) 3.40%
------------------------------------------------ ------------
Expected dividend yield Tranche 3 (%) 3.73%
------------------------------------------------ ------------
(2) The fair value of the shares awarded under the DBSP were
calculated by using the closing share price on grant date,
converted at the closing GBP:US$ foreign exchange rate on that day.
No other factors were taken into account in determining the fair
value of the shares awarded under the DBSP.
(3) Variable vesting dependent on one to three years of
continuous employment.
NOTE 16: FINANCIAL INSTRUMENTS' FAIR VALUE DISCLOSURES
The Group has no financial instruments with fair values that are
determined by reference to significant unobservable inputs, i.e.
those that would be classified as level 3 in the fair value
hierarchy, nor have there been any transfers of assets or
liabilities between levels of the fair value hierarchy.
The Group's interest in Nyota Minerals Limited and KEFI Minerals
plc is classified as an available for sale financial asset. The
Group carries its interest in Nyota Minerals Limited and KEFI
Minerals plc at fair value, and measures its interest using Level 1
unadjusted quoted prices.
The directors consider that the carrying amounts of financial
assets and financial liabilities carried at amortised cost
approximate their fair value.
NOTE 17: NOTES TO THE STATEMENTS OF CASH FLOWS
(a) Reconciliation of cash and cash equivalents
For the purpose of the statements of cash flows, cash and cash
equivalents includes cash on hand and at bank and deposits.
As at As at
30 June 2017 30 June 2016
(Unaudited) (Unaudited)
US$'000 US$'000
Cash and cash equivalents 296,980 281,678
------------- -------------
(b) Reconciliation of profit for the period to cash flows from
operating activities
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
30 June
2017 30 June 2016 30 June 2017 30 June 2016
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
US$'000 US$'000 US$'000 US$'000
Profit before tax 37,819 73,379 67,287 114,245
Add/(less) non-cash items:
Depreciation / amortisation
of property, plant and equipment 28,785 28,420 52,727 55,166
Exploration - write off 2,550 37 2,550 122
Increase/(decrease) in provisions 278 (3,350) 433 (2,946)
Foreign exchange rate (gain)/
loss, net 106 (138) (1,717) (947)
Impairment of available-for-sale
financial assets - (220) (91) (153)
Loss on disposal of property,
plant and equipment 263 - 263 -
Share based payment expense/(income) 644 1,408 1,030 1,069
Changes in working capital
during the period :
Decrease/(Increase) in trade
and other receivables (9,153) (10,379) 1,507 (14,001)
Decrease in inventories 3,332 4,093 17,722 13,102
(Increase) in prepayments 2,903 3,335 1,293 2,429
(Increase) in trade and other
payables 11,691 (247) (5,444) (11,263)
Cash flows generated from
operating activities 79,218 96,338 137,558 156,821
------------ ------------- ------------- -------------
(c) Non-cash financing and investing activities
There have been no non-cash financing and investing activities
during the current or comparative period quarter.
NOTE 18: INVENTORIES
Six Months Year Ended
Ended
30 June 2017 31 December
2016
(Unaudited) (Audited)
US$'000 US$'000
Mining stockpiles and ore in circuit 28,952 34,217
Stores inventory 89,888 102,345
------------- ------------
118,840 136,562
------------- ------------
NOTE 19: SUBSEQUENT EVENTS
Subsequent to the period end a further distribution of profit
share of US$10.0m was made to EMRA. Further details are set out in
Note 5 of these financial statements.
The Directors declared an interim dividend of 2.5 US cents per
share on Centamin plc ordinary shares (totalling approximately
US$28.8 million). The interim dividend for the half year period
ending 30 June 2017 will be paid on 29 September 2017 to
shareholders on the register on the Record Date of 1 September
2017.
Other than the above, there has not arisen in the interval
between the end of the financial period and the date of this report
any item, transaction or event of a material and unusual nature
likely in the opinion of the Directors of the Company to affect
significantly the operations of the company, the results of those
operations, or the state of affairs of the Company in subsequent
financial period.
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This document contains "forward-looking information" which may
include, but is not limited to, statements with respect to the
future financial or operating performance of Centamin plc
("Centamin" or the "Company"), its subsidiaries (together the
"group"), affiliated companies, its projects, the future price of
gold, the estimation of mineral reserves and mineral resources, the
realization of mineral reserve and resource estimates, the timing
and amount of estimated future production, revenues, margins, costs
of production, estimates of initial capital, sustaining capital,
operating and exploration expenditures, costs and timing of the
development of new deposits, costs and timing of future
exploration, requirements for additional capital, foreign exchange
risks, governmental regulation of mining operations and exploration
operations, timing and receipt of approvals, consents and permits
under applicable mineral legislation, environmental risks, title
disputes or claims, limitations of insurance coverage and
regulatory matters. Often, but not always, forward-looking
statements can be identified by the use of words such as "plans",
"expects", "is expected", "budget", "scheduled", "estimates",
"forecasts", "intends", "targets", "aims", "anticipates" or
"believes" or variations (including negative variations) of such
words and phrases, or may be identified by statements to the effect
that certain actions, events or results "may", "could", "would",
"should", "might" or "will" be taken, occur or be achieved.
Forward-looking statements involve known and unknown risks,
uncertainties and a variety of material factors, many of which are
beyond the Company's control which may cause the actual results,
performance or achievements of Centamin, its subsidiaries and
affiliated companies to be materially different from any future
results, performance or achievements expressed or implied by the
forward-looking statements. Readers are cautioned that
forward-looking statements may not be appropriate for other
purposes than outlined in this document. Such factors include,
among others, future price of gold; general business, economic,
competitive, political and social uncertainties; the actual results
of current exploration and development activities; conclusions of
economic evaluations and studies; fluctuations in the value of the
US dollar relative to the local currencies in the jurisdictions of
the Company's key projects; changes in project parameters as plans
continue to be refined; possible variations of ore grade or
projected recovery rates; accidents, labour disputes or slow-downs
and other risks of the mining industry; climatic conditions;
political instability, insurrection or war, civil unrest or armed
assault; labour force availability and turnover; delays in
obtaining financing or governmental approvals or in the completion
of exploration and development activities; as well as those factors
referred to in the section entitled "Principal risks affecting the
Centamin Group" section of the Management Discussion & Analysis
filed on SEDAR. The reader is also cautioned that the foregoing
list of factors is not exhausted of the factors that may affect the
Company's forward-looking statements.
Although the Company has attempted to identify important factors
that could cause actual actions, events or results to differ
materially from those described in forward-looking statements,
there may be other factors that cause actions, events or results to
differ from those anticipated, estimated or intended.
Forward-looking statements contained herein are made as of the date
of this document and, except as required by applicable law, the
Company disclaims any obligation to update any forward-looking
statements, whether as a result of new information, future events
or results or otherwise. There can be no assurance that
forward-looking statements will prove to be accurate, as actual
results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements.
QUALIFIED PERSON AND QUALITY CONTROL
Please refer to the technical report entitled "Mineral Resource
and Reserve Estimate for the Sukari Gold Project, Egypt" effective
on 30 June 2015 and issued on 23 October 2015 and filed on SEDAR at
www.sedar.com, for further discussion of the extent to which the
estimate of mineral resources/reserves may be materially affected
by any known environmental, permitting, legal, title, taxation,
socio-political, or other relevant issues as well as details of the
qualified persons and quality control.
Information of a scientific or technical nature in this document
have been prepared by qualified persons, as defined under the
Canadian NI 43-101.
LEI: 213800PDI9G7OUKLPV84
Company No: 109180
-------------------------------------------End of
Announcement------------------------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DLLFBDVFLBBZ
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