TIDMCAML
RNS Number : 5368U
Central Asia Metals PLC
29 March 2023
29 March 2023
CENTRAL ASIA METALS PLC
('CAML' or the 'Company')
2022 Full Year Results
Central Asia Metals plc (AIM: CAML) today announces its full
year results for the 12 months ended 31 December 2022.
Financial highlights
2022 final dividend of 10 pence per share
-- 2022 full year dividend of 20 pence per share (2021: 20 pence)
-- Represents 47% of 2022 free cash flow(1) ('FCF'), (2021: 45%)
in line with stated dividend policy
-- Final dividend payable on 23 May 2023 to shareholders registered on 28 April 2023
Financial results
-- Group gross revenue ([1]) of $232.2 million (2021: $235.2 million)
o Group net revenue of $220.9 million (2021: $223.4 million)
-- Group EBITDA (1) of $131.6 million (2021: $141.5 million)
-- EBITDA margin (1) of 57% (2021: 60%)
-- Group FCF (1) of $89.7 million (2021: $103.8 million)
-- Adjusted EPS (excluding a non-cash impairment) of 48.15
cents, reported EPS of 19.10 cents (2021: 47.69 cents)
Strong balance sheet
-- Cash in the bank as at 31 December 2022 of $60.6 million(2) (2021: $59.2million)
-- Fully repaid $187.0 million corporate debt facility
-- Non-cash impairment charge for Sasa of $55.1 million
[1] See Financial Review section for definition of non-IFRS
alternative performance measures
2 The cash balance figure disclosed includes restricted cash
balance
Sustainability and operational overview
-- Zero lost time injuries ('LTIs') at Kounrad during 2022 (2021: zero)
-- Two LTIs at Sasa during 2022 (2021: four)
-- Reduction in GHG emissions of 40% against 2020 base line
-- Climate change scenario analysis undertaken in 2022
-- Record copper production of 14,254 tonnes (2021: 14,041 tonnes)
-- Zinc in concentrate production of 21,473 tonnes (2021: 22,167 tonnes)
-- Lead in concentrate production of 27,354 tonnes (2021: 27,202 tonnes)
2023 outlook
Guidance of:
-- Copper, 13,000 to 14,000 tonnes
-- Zinc in concentrate, 19,000 to 21,000 tonnes
-- Lead in concentrate, 27,000 to 29,000 tonnes
Completion of:
-- Paste Backfill and Dry Stack Tailings Plants at Sasa
-- Initial phase of Central Decline at Sasa
-- Kounrad Solar Power Plant
Nigel Robinson, Chief Executive Officer, commented:
"I am pleased to report a good set of financial results for
2022, and a year of solid performance for CAML. We ended 2022 with
a strong balance sheet, having made the final payment on our
corporate debt facility in August, with cash in the bank of $60.6
million.
"Following this strong performance, we propose a 10 pence per
share final dividend, resulting in a full year dividend of 20 pence
per share, comparable with 2021. The full year dividend represents
47% of our 2022 FCF and is in line with our stated policy of 30% to
50% of FCF.
"We have continued to focus our efforts on the five
sustainability pillars, we achieved an improvement in our lost time
injury frequency rate ('LTIFR') and a 14% increase in Group health
and safety training versus 2021. Our forthcoming 2022 annual,
sustainability and climate change reports contain more information
on our efforts in this regard, and our reporting in relation to the
recommendations of the Taskforce for Climate-Related Financial
Disclosures ('TCFD').
"We look forward to another positive year for CAML in 2023 and,
in particular, the completion of the Paste Backfill and Dry Stack
Tailings plants, and the initial phase of the Central Decline at
Sasa. This project will ensure maximum extraction of Sasa's
resources, in the safest way, with improved tailings management
until at least 2039. The construction of the Solar Power Plant at
Kounrad will also be completed this year, and that will contribute
to the reduction of our Scope 2 GHG emissions.
"We were active in terms of business development during 2022,
having appraised 40 opportunities, signed NDAs for 17 and visited
two sites. Our efforts continue into 2023 and, with our strong
balance sheet, we are in a good position to grow through
acquisition.
"On a final note, we enjoyed celebrating 10 years of copper
production at Kounrad, in April, where we have generated cumulative
gross revenue of $944.4 million and five years of ownership at Sasa
in November and look forward to seeing our operations continue to
offer local employment and facilitate socio-economic progress in
the surrounding communities."
Analyst conference call and webcast
A live conference call and webcast hosted by Nigel Robinson
(Chief Executive Officer), Gavin Ferrar (Chief Financial Officer)
and Louise Wrathall (Director of Corporate Development) will take
place at 09:30 (BST) today.
The conference call can be accessed by dialling +44 (0) 33 0551
0200 and quoting the confirmation code 'Central Asia Metals -
Results', and the webcast can be accessed using the link:
https://stream.brrmedia.co.uk/broadcast/63d28f71777efd4a8b5164c1
.
The presentation will be available on the Company's website and
there will be a replay of the call available following the
presentation at www.centralasiametals.com
Presentation via Investor Meet Company
The Company will also hold a live presentation relating to the
2022 Full Year Results via the Investor Meet Company platform on
Wednesday 29 March 2023 at 15:00 (BST). The presentation is open to
all existing and potential shareholders. Questions can be submitted
pre-event via the Investor Meet Company dashboard until 09:00 (BST)
the day before the meeting or at any time during the live
presentation. Investors can sign up to Investor Meet Company for
free and add to meet Central Asia Metals Plc via:
www.investormeetcompany.com/central-asia-metals-plc/register-investor
For further information contact:
Central Asia Metals Tel: +44 (0) 20 7898 9001
Nigel Robinson
CEO
Gavin Ferrar
CFO
Louise Wrathall louise.wrathall@centralasiametals.com
Director of Corporate Development
Emma Chetwynd Stapylton emma.chetwyndstapylton@centralasiametals.com
Investor Relations Manager
Peel Hunt (Nominated Advisor Tel: +44 (0) 20 7418 8900
and Joint Broker)
Ross Allister
David McKeown
BMO Capital Markets (Joint Tel: +44 (0) 20 7236 1010
Broker)
Thomas Rider
Pascal Lussier Duquette
BlytheRay (PR Advisors) Tel: +44 (0) 20 7138 3204
Tim Blythe
Megan Ray
Rachael Brooks
Note to editors:
Central Asia Metals, an AIM-listed UK company based in London,
owns 100% of the Kounrad SX-EW copper project in central Kazakhstan
and 100% of the Sasa zinc-lead mine in North Macedonia.
For further information, please visit www.centralasiametals.com
and follow CAML on Twitter at @CamlMetals and on LinkedIn at
Central Asia Metals Plc
CHAIRMAN'S STATEMENT
Building the Business for the Future
I am pleased with our operational and financial performance
during 2022, which demonstrated the strength of our business. We
also had a positive year in appointing two new Directors to our
Board, Dr Mike Armitage and Louise Wrathall, both of whom have
already brought their own experiences to our discussions, and in
the creation of a new Technical Committee. We have advanced our
sustainability efforts on the ground and in terms of reporting, and
I was pleased that we commenced construction of our Kounrad Solar
Power Plant towards the end of the year.
Fulfilling Our Purpose
Our purpose is to produce base metals, essential for modern
living, profitably in a safe and sustainable environment for all
our stakeholders and we have fulfilled this purpose during
2022.
Our solid 2022 operational performance generated for CAML EBITDA
of $131.6 million and free cash flow of $89.7 million. This has
enabled us to continue deleveraging, and in August 2022 we made the
final repayment of the debt that we borrowed in order to acquire
Sasa in 2017. We were pleased to report adjusted (to exclude a
non-cash impairment charge) EPS of 48.15 cents, above the 47.69
cents reported last year.
We celebrated two anniversaries in 2022. In April, we marked 10
years of copper production from Kounrad, during which time we have
produced over 130,000 tonnes of cathode, supported a solely Kazakh
workforce of 337 employees and 78 contractors, invested capital
totalling $81.9 million and generated $944.4 million in gross
revenue.
In November, we celebrated five years since we acquired Sasa.
Under our ownership, we have maintained a workforce that is 98%
Macedonian, generated $525.0 million in gross revenue from zinc and
lead sales and paid tax in excess of $71.0 million to the
Government of North Macedonia. We have set up charitable
foundations in both countries and continue to support the many
worthy causes in both jurisdictions, as well as promoting long-term
sustainable local development.
Sustainability
We have continued to devote much of our time and energy to
advancing our sustainability efforts during 2022. In Q2 2022, we
published our third standalone Sustainability Report. This was the
Company's second report drafted in accordance with the Global
Reporting Initiative ('GRI') Standards 'Core option'. As a result
of technical work undertaken during 2021, we were able to set
ourselves additional environmental targets on water abstraction and
mineral waste to complement the greenhouse gas ('GHG') emission
targets that we set ourselves last year. Importantly, we also set
ourselves a target to increase our female employees by 25% by the
end of 2025.
Given GRI's adjustment to the Universal Standards, we revisited
our stakeholder engagement-based materiality assessment with
assistance from consultants, Digby Wells, taking into account both
societal and economic factors. The results of this survey have
informed our updated material topics and we have reported on those
in our forthcoming 2022 Sustainability Report.
We also undertook climate change scenario analysis during the
year, which has informed our risk management and climate strategy
going forwards. In Q4 2022, we commenced construction of our
Kounrad solar power plant which is one of our key initiatives that
will help us to reduce our Scope 1 and Scope 2 emissions by 50% by
2030 from a 2020 base.
Governance
In January 2022, CAML announced the appointment of Dr Mike
Armitage to the Board as an Independent Non-Executive Director.
Mike brings a wealth of international technical experience and has
already supported management and advised the Board, both in terms
of our current operations and with our business development
activities. Mike's long career with SRK in particular has seen him
review, assist with due diligence and help to develop numerous
mineral properties globally.
Robert Cathery retired from the CAML Board at the conclusion of
our 2022 Annual General Meeting ('AGM'). I want to express my
thanks to Bob for his hard work and dedication to the CAML
business. His advice has been invaluable and, in particular in his
role as Chair of the Remuneration Committee, he has been
responsible for transforming our Long-Term Incentive Plan and
incorporating our wider sustainability targets into Executive
Director and management remuneration.
Also, at the conclusion of the 2022 AGM, Louise Wrathall, our
Director of Corporate Development, joined the CAML Board. Louise
has been a key member of the senior management team since she
joined CAML in 2015 and further enhances the skills of the Board,
emphasising the importance we place on investor relations, business
development and environmental, social and governance ('ESG')
initiatives.
During 2022, we made changes to our Board Committees as well. We
created a new Technical Committee, chaired by Roger Davey and
additionally comprising myself, Dr Mike Armitage and Nigel
Robinson. During the year, the committee has reviewed the
engineering aspects of the Kounrad solar power project and has
provided guidance and support to Sasa's Cut and Fill Project team,
which included a specific Technical Committee site visit to review
work underway.
Mike Prentis agreed to chair our Remuneration Committee and he
is now ably supported by Roger Davey and David Swan. The Nomination
Committee continues to comprise solely non-executive directors, so
now includes Dr Mike Armitage. Another key committee change was to
invite Dr Gillian Davidson to join the Audit Committee. Gillian
brings experience from other board roles as well as her expertise
in sustainability. She is particularly focused on our risk
management processes and reporting on non-financial information as
well.
Acknowledgements
I would like to thank the Board of Directors, our senior
management team and all of our employees for their dedication to
our business during 2022. Your efforts do not go unnoticed, and we
very much appreciate your hard work. I would like to extend my
thanks to our stakeholders for their support.
NICK CLARKE
NON-EXECUTIVE CHAIRMAN
28 March 2023
CHIEF EXECUTIVE OFFICER'S STATEMENT
A strong performance in the face of global pressures
2022 has been a year of strong performance for CAML. Global
inflationary pressures which were exacerbated by the conflict in
Ukraine served to highlight the underlying strength of CAML's
business and balance sheet, and we are pleased with our 2022
results and to have made the final repayment in August 2022 of the
debt that we borrowed to acquire Sasa in 2017.
2022 Financial overview
Sasa produced 21,473 tonnes of zinc in concentrate and 27,354
tonnes of lead in concentrate at a C1 zinc equivalent cash cost of
production of $0.78 per pound, reflecting in particular elevated
electricity costs incurred during H2 2022.
Our Kounrad operations continued to perform well, and we
increased our copper cathode
production guidance to 13,500 - 14,000 tonnes during H2 2022 and
ended the year reporting production in excess of that at 14,254
tonnes. Kounrad's 2022 C1 copper cash cost of production remained
very low by global standards at $0.65 per pound, despite
inflationary pressures.
Regardless of global challenges, the CAML business performed
very well, due to its inherent low-cost base and strong balance
sheet. We reported gross revenue of $232.2 million and an EBITDA of
$131.6 million at an EBITDA margin of 57% for 2022. We reported
adjusted (to exclude a non-cash impairment charge, arising
following update to reserves & resources following LOM study as
well as inflationary pressures) EPS of 48.15 cents, higher than
that reported in 2021.
In August, we made our final repayment of the $187 million debt
which we secured to acquire Sasa less than five years before. CAML
ended 2022 with cash in the bank of $60.6 million.
The Group generated 2022 free cash flow of $89.7 million,
enabling us to recommend a 10
pence per share final dividend. This equates to a full-year
dividend of 20 pence per share, which represents 47% of 2022 free
cash flow.
Market performance
During 2022, the CAML share price traded within a range of
GBP2.01 to GBP2.84, ending the year at GBP2.48, which represents a
4.2% decrease on the 31 December 2021 price of GBP2.59. CAML
outperformed the FTSE AIM All Share/Basic Resources Index, which
lost approximately 31.5% during 2022. The share price was supported
by solid base metal prices and by its low cost base. Since the
Company's IPO in September 2010, CAML's share price has
significantly outperformed the FTSE AIM All Share/Basic Resources
Index, primarily due to CAML's strong operational performance, low
production costs and consistent dividend payments.
Sustainability
We remain focused on safety and, while we were disappointed to
report two LTIs at Sasa during the year, this was an improvement on
the four we recorded during 2021. We recorded zero LTIs at Kounrad
though, and therefore our 2022 total as a Group was two, with a
LTIFR of 0.83, an improvement on our performance in 2021. As ever,
effective safety training and supervision for our employees is a
priority and is crucial to achieving an improving safety
record.
The strong financial performance we have reported underpins our
business and we place significant emphasis on ensuring that we are
sustainable for all stakeholders. To demonstrate our efforts and
achievements, in this area, we will soon be publishing our fourth
Sustainability Report, our third to GRI standards and our first to
the new GRI 'Universal Standards'. These standards are based on the
concept of 'double materiality', looking at both the impact of the
Company on society and the environment, as well as the impact of
the material topics on the value of a company. Therefore, our
updated materiality assessment considers both materiality aspects
and has informed reporting for the Company's 2022 Sustainability
Report.
In 2021, we began moving towards TCFD reporting. We shared our
climate strategy and our medium- and long-term goals that were the
result of much internal work undertaken and, in our 2021 annual and
sustainability reporting, we felt able to commit to a 50% reduction
in our Kounrad and Sasa Scope 1 and Scope 2 emissions by 2030 from
a 2020 base, and to being net zero by 2050.
To understand our strategic resilience in terms of our climate
risks and opportunities, we undertook scenario analysis work during
2022. This analysis has broadly validated our climate strategy and
has helped us to identify our risks and opportunities as well as
key workstreams for us to focus on going forwards. In 2023, we plan
to collect data to enable us to report our Scope 3 emissions
estimates in 2024 for the 2023 operating year.
Our sustainability strategy and practices continue to develop
and, having reviewed our material topics in 2022, we have also
taken the opportunity to consider and advance our approach to the
UN sustainable development goals ('SDGs'). Following the review
process, which involved mapping the underlying targets to our
activities and considering their alignment to our overall strategy
and approach, we have defined a two-tiered approach. We have
identified a total of eight SDGs (five primary and three
supporting) which are reflected in CAML's material topics.
WSP Golder delivered an Asset Retirement Obligation ('ARO') and
site closure plan report for Kounrad in 2022, which covers the
responsible closure of the leaching operations in the longer
term.
At Sasa, consultants PrimePoint were appointed to further
develop the Local Environmental Action Plan ('LEAP') and Local
Economic Development Plan ('LEDP') in conjunction with the local
Municipality. During the year, several workshops were organised
between PrimePoint, the Municipality and the Sasa Foundation to
better assess the needs of the community and to identify
sustainable development opportunities for Makedonska Kamenica and
adjacent communities.
We have committed to reporting to the Global Industry Standard
for Tailings Management ('GISTM') for all tailings storage
facilities ('TSFs') by the end of H1 2024. A working group has been
formed, comprising members of the production, tailings,
sustainability, and communications teams, overseen by the Group
Sustainability Director, to ensure all workstreams are effectively
covered.
To support employees during the current global inflationary
environment, all staff at both sites were given pay rises of at
least 15% in local currencies.
During 2022, we spent a total of $0.3 million at Sasa and
Kounrad supporting the local
communities. This is a vital aspect of what we do in the areas
close to our operations and, as a result, we enjoy good relations
with our neighbours, and we believe we have brought some real,
positive change. This year at Sasa funds were allocated for the
renovation of the local medical centre. At Kounrad, we have
financially supported a children's rehabilitation centre and
provided tuition fees for medical students from Balkhash.
Sasa
During H1 2022, significant permitting work was undertaken in
preparation for the construction phase of the Cut and Fill Project.
The Environmental and Social Impact Assessment ('ESIA') Study was
completed and submitted to the authorities. After the submission, a
Public Hearing was held with representatives from the Ministry of
Environment and Physical Planning ('MoEPP'), the local
municipality, including the Mayor of Makedonska Kamenica and
representatives from the local community. Feedback from the public
hearing was positive and Sasa achieved approval of the ESIA in
August 2022.
In H2 2022, construction of the Paste Backfill Plant began, this
is now well underway and on track for completion in H1 2023. The
Dry Stack Tailings part of the project is scheduled for
construction during H2 2023, and key long-lead time item orders
have been placed. We have made solid progress with over 1,000
metres of the Central Decline developed from both surface and
underground during the year.
Kounrad
During the year at Kounrad, leaching operations performed well,
as did the SXEW processing facilities which achieved availability
of over 99%. We continued to develop more of the Western Dumps for
future leaching operations, while focusing on maximising copper
extraction in the Eastern Dumps.
Capital expenditure remained low at $2.5 million and included
$0.1 million on the commencement of construction activities related
to the solar power plant in Q4 2022. The 4.77MW unit will be
constructed by Kounrad's engineering team and is expected to
provide between 16-18% of the site's electrical power
requirements.
Outlook
While we continue to foresee global challenges, we expect CAML
to continue to perform very well relatively.
Our production guidance for Sasa is 790,000 to 810,000 tonnes of
ore, which should lead to between 19,000 and 21,000 tonnes of zinc
in concentrate and between 27,000 and 29,000 tonnes of lead in
concentrate. Our focus at Sasa during 2023 will be finalising the
Cut and Fill Project, which will see us extract the maximum
resources in a safer, more sustainable and efficient manner. From a
permitting perspective, the Paste Backfill and Dry Stack Tailings
aspects of the Cut and Fill Project are effectively viewed in North
Macedonia as an overarching yet much improved tailings storage
solution for the long term.
At Kounrad, we expect to produce between 13,000 and 14,000
tonnes of copper. We also look forward to starting to generate our
own renewable power once we have completed construction of the
solar power plant this year.
We expect 2023 Group capital expenditure of between $28 million
and $30 million, of
which between $11 million and $13 million is expected to be
committed to sustaining capex. Total expected 2023 capex also
includes approximately $5 million related to the Kounrad solar
power plant. CAML expects Cut and Fill Project capital expenditure
in the order of $12 million in 2023.
Sasa has already generated EBITDA of $301.5 million during the
last five years under our ownership and we look forward to a long
mine life continuing to generate significant value from this asset
until at least 2039.
We were active throughout 2022 in terms of business development,
having reviewed 40 opportunities, signed NDAs for 17 of them and
conducted two site visits.
This momentum has continued into 2023 and we remain in a very
strong position from
which to grow through acquisition, building the business for the
future and producing the base metals essential for modern
living.
NIGEL ROBINSON
CHIEF EXECUTIVE OFFICER
28 March 2023
SUSTAINABILITY SUMMARY
Overview
Producing base metals, which are essential for modern living,
profitably in a safe and sustainable environment drives CAML's
strategy and business model. In turn, our sustainability strategy
is built upon the five pillars shown on page 27. This means
protecting the longevity of our operations and working towards an
enduring net positive outcome after the end of asset life by
upholding strong ethical practices throughout the Company and our
supply chain, prioritising the safety, health and development of
our people, conducting business in an environmentally responsible
manner and positively contributing to our communities and
countries of operation.
CAML's Board has accountability for risk management, including
those relating to the Company's impacts on the economy, environment
and people. Our Sustainability Committee has overall responsibility
for overseeing these impacts and its report can be found on page
79.
In our third year of reporting in line with Global Reporting
Initiative ('GRI') standards, we have worked to further improve and
develop disclosure. We have continued to engage with stakeholders
in 2022 and conducted a comprehensive materiality process.
CAML's sustainability strategy and practices continue to
develop, and we have advanced our approach to contributing to the
Sustainable Development Goals ('SDGs') in 2022. We recognise that
all 17 SDGs are important and that many of them are interconnected,
however for the purposes of our sustainability activities, we
believe that it is helpful to prioritise and have therefore
identified these primary and supporting SDGs.
Delivering value through stewardship
At CAML, we set high standards that are crucial for the
effective running of our operations and the long-term
sustainability of our business. With a robust framework to promote
ethical behaviour and strong corporate governance, we believe we
can contribute to a responsible and stable value chain and business
environment.
Leading from the top, the Board is responsible for setting the
appropriate culture to drive good governance and ethical behaviour
throughout the Company. We believe that a robust approach to human
rights is vital to fulfilling our corporate responsibilities, not
only in respect of our employees but for the workers along our
supply chains and within the communities in which we operate.
Maintaining health and safety
Safety has been identified both by the Company and our
stakeholders as one of our key material issues and is at the heart
of everything we do. Our goal of achieving zero harm in the
workplace for all employees, contractors and visitors, is laid out
in the Company's Sustainability Policy and we have a clear safety
improvement target for the Group.
With fully integrated and robust health and safety management
systems at both sites, we aim to ensure the wellbeing of all
personnel. We strive to implement world-class health and safety
practices across our operations. It is important that both
management and personnel are aware of their responsibilities and
accountability, and that they feel empowered to prioritise health
and safety in the workplace.
Wherever possible, we look to eliminate occupational health
risks and believe that a strong workforce, supported by the
appropriate programmes to monitor and promote health, is paramount
in achieving high levels of productivity.
Focusing on our people
We recognise core labour and human rights principles and
acknowledge workers' freedom of association and the right for our
employees to bargain collectively within prescribed laws,
communicating issues to management through designated employee
representatives.
We believe that by encouraging employee development, we can also
foster satisfaction and fulfilment amongst our employees. This
involves a targeted approach to training facilitated by
comprehensive needs analysis. Succession planning is a key focus
for the Group in order to develop our leaders of tomorrow.
CAML attaches importance on diversity, specifically when
considering the breadth of thought, approach and opinion that can
be fostered by a diverse group. By embracing diversity and
fostering inclusion, we believe we can unlock the power of all
talent and work collaboratively and effectively. Site-level
diversity focus groups have been put in place to identify areas for
improvement and we have implemented long-term targets to improve
levels of gender diversity in the Group. We do not tolerate
discrimination in any form and have mechanisms in place to raise
any issues.
Caring for the environment
CAML has robust and comprehensive environmental management
systems which aim to substantially reduce (if not avoid) the risk
of any potential negative environmental impacts from our
operations.
We are mindful of our duty to manage and minimise waste
responsibly and are firmly committed to environmental and socially
responsible tailings and dump leach management, with safety at the
centre of our approach.
We employ water management strategies and aim to minimise
freshwater or makeup usage wherever possible. Biodiversity,
rehabilitation and closure programmes are in place across our
assets to avoid or mitigate any adverse effects of our
operations.
Tackling climate change is one of the most important challenges
of our time and we believe that every government, community,
company and individual has a vital role to play in reducing carbon
emissions and safeguarding the future of the planet. We recognise
the growing importance of understanding and addressing the impact
of climate change on the environment and its potential impact on
the business. As such, we have adopted the Taskforce on Climate-
Related Financial Disclosures ('TCFD') framework.
In line with TCFD recommendations, we conducted a scenario
planning exercise in 2022 to increase our understanding of
transition risks that may affect our operations as well as
extending our physical risk analysis to our supply chain. In 2023
we will implement key recommended actions and will begin to
estimate our Scope 3 emissions in advance of reporting them in
2024.
Unlocking value for our communities
CAML aims to provide demonstrable benefits to stakeholders in
our local communities and host countries. By contributing to the
economic security of local workers, the provision of employment
opportunities is one of the primary ways the Company can provide a
positive impact and CAML therefore prioritises local hiring.
The Company is committed to providing philanthropic support,
fostering sustainable development, facilitating socioeconomic
progress (specifically in the field of community training and
education) and helping the youth and most vulnerable members of the
community in line with our human rights commitments.
Our economically robust business that underpins our ability to
generate profits and dividends for our shareholders also ensures
that our successes are shared with other important stakeholders.
This aligns with international priorities such as the UN SDGs, in
particular SDG 8 Decent Work and Economic Growth. We strongly
believe that by creating shared value we are ensuring the long term
sustainability of our operations and acting as a good corporate
citizen. CAML is proud of the value that it brings to its host
countries, with taxes of $293.6 million paid to the Governments of
North Macedonia and Kazakhstan during our ownership.
SASA
North Macedonia
In 2022, Sasa mined 806,069 tonnes of ore and processed 806,653
tonnes of ore. The average head grades for the year were 3.15% zinc
and 3.63% lead and the average 2022 metallurgical recoveries were
84.6% for zinc and 93.4% for lead.
Sasa produces a zinc concentrate and a separate lead
concentrate. Total production for 2022 was 42,824 tonnes of zinc
concentrate at an average grade of 50.1% and 38,439 tonnes of lead
concentrate at an average grade of 71.2%.
Sasa typically receives from smelters approximately 84% of the
value of its zinc in concentrate and approximately 95% of the value
of its lead in concentrate. Accordingly, total 2022 payable sales
were 17,862 tonnes of zinc in concentrate and 25,689 tonnes of lead
in concentrate.
During 2022, Sasa sold 316,757 ounces of payable silver to
Osisko Gold Royalties in accordance with its streaming
agreement.
Sasa Production Statistics
Units 2022 2021 2020
Ore mined t 806,069 818,609 826,421
--------- -------- -------- --------
Plant feed t 806,653 830,709 820,215
--------- -------- -------- --------
Zinc grade % 3.15 3.14 3.37
--------- -------- -------- --------
Zinc recovery % 84.6 84.9 86.1
--------- -------- -------- --------
Lead grade % 3.63 3.52 3.85
--------- -------- -------- --------
Lead recovery % 93.4 93.1 94.3
--------- -------- -------- --------
Zinc concentrate t (dry) 42,824 44,383 47,583
--------- -------- -------- --------
- Grade % 50.1 49.9 50.0
--------- -------- -------- --------
- Contained zinc t 21,473 22,167 23,815
--------- -------- -------- --------
Lead concentrate t (dry) 38,439 37,893 41,289
--------- -------- -------- --------
- Grade % 71.2 71.8 72.0
--------- -------- -------- --------
- Contained lead t 27,354 27,202 29,742
--------- -------- -------- --------
Health and Safety
At Sasa, there were two LTIs, two medical treatment injuries
('MTIs') and one restricted
work case ('RWC') during the year.
Mining
A total of 806,069 tonnes of ore were mined using the sub-level
caving method during the year from the 990 metre and 910 metre
working areas. The ore from the underground operations is hoisted
via the Golema Reka shaft to surface (c.73%) and the remainder is
trucked to surface via the existing XIVb decline using a fleet of
20 tonne Epiroc trucks.
The average combined grade of the ore mined was 6.78% zinc and
lead, approximately 2% higher than 2021.
Ore development in the two working areas totalled 3,114 metres,
which was approximately 14% more than last year and involved
accessing additional sub-levels below the 910 metre level during H2
2022. Waste development for the year totalled 2,378 metres,
approximately 9% above last year for approximately 92,000 tonnes of
waste, generated from internal ramp access and crosscuts to the ore
body, raise development and the development of the Central Decline.
The mine produced a total of 898,069 tonnes of ore and waste during
the year, approximately 1% more than last year.
Maintenance
A computerised maintenance management system for surface and
underground equipment is in the process of being commissioned.
Underground communications were improved with the introduction of
underground Wifi, which will be completed by
the end of H1 2023.
During the year, certain equipment was purchased to increase
efficiency:
-- An Epiroc Bolting Drill Rig Boltec S for the safe and efficient installation of roof bolts.
-- Two Paus utility units fitted with interchangeable platforms
and hydraulic hammers for rock scaling.
-- A Putzmeister SPM 4210 wet shotcrete unit and mixer to enable
in-cycle support, replacing the handheld shotcrete units previously
used underground.
-- A Manitou MHT-X790 Mining for installation of underground reticulation system.
-- A Paus Bus (Minca).
-- A CAT rock crusher.
Processing
Sasa processed 806,653 tonnes of ore during the year, a fall of
approximately 3% versus
2021, and the plant had an overall availability of 95% - an
improvement of 2% on 2021.
In addition to the planned maintenance works completed during
the year, automated oil lubrication systems and flow meters were
installed and commissioned on all of the mills. In November 2022,
the reconfiguration of the tertiary crusher and feed arrangements
were completed and commissioned. The tailings storage facility
systems at Sasa ran to a high standard and without incident during
the year, managed by a designated tailings management team. Knight
Piésold audited the TSFs in H2 2022 and CAML appointed an
experienced Independent Technical Reviewer, who also reviewed the
management of Sasa's TSFs. Sasa is currently actioning the
recommendations from both reports and working to conformance with
GISTM in H1 2024.
During the year, construction of the TSF4 waste rock toe
continued with the placement of 37,000 m3 of waste rock from the
Sasa underground mine. A new bridge transporting tailings to TSF4
from the processing plant was constructed over the Soborski Dol
River. A seismic monitoring system and piezometer sensors were
installed as part of an overall drive to automate TSF monitoring
systems and commissioning is underway.
The rehabilitation of the TSF3.2 facility continued throughout
the year with the placement of waste rock from the Sasa underground
mine.
Drilling
A total of 6,670 metres of exploitation drilling was completed
during the year on the two working areas, the 910 metre and 990
metre levels, to provide additional information on the
grade and thickness of the three orebodies on the
sub-levels.
A total of 5,760 metres of exploration drilling was completed
below the 830+14 metre level to improve the geological
understanding of the mineralisation at depth.
A total of 2,950 metres of exploration drilling in three holes
was completed from surface to test the geology at depth below the
700 metre level. One hole intersected three zones of mineralisation
down to at least the 580 metre level proving the extension of the
mineralisation at depth to the south-west and adding to the
Inferred Mineral Resources. The second and third hole proved the
limits of the north-western extents of the mineralisation.
There was no exploration drilling completed at Kozja Reka or
Golema Reka during the year.
A comprehensive dewatering programme was also completed during
the year with over 250 metres of drainage holes drilled.
2023 Production Guidance
At Sasa, 2023 will be a year of transition from the current
sub-level caving mining method to a paste fill mining approach.
Therefore, CAML maintains its ore mined guidance year on year of
790,000 to 810,000 tonnes. The Company expects some adjustment in
the split of its metal products this year, and therefore provides
production guidance of 19,000 to 21,000 tonnes of zinc in
concentrate and 27,000 to 29,000 tonnes of lead in concentrate.
CUT AND FILL PROJECT
The transition to using paste fill at Sasa will create a safer
and sustainable underground mining operation for the long term. The
Cut and Fill Project comprises the construction of a Paste Backfill
Plant and associated reticulation, development of a new Central
Decline and the Dry Stack Tailings Plant and associated
landform.
Paste Backfill Plant
Following the ESIA approval for the Paste Backfill Plant in Q3
2022, a contract was signed with local construction company,
Activa, and excavation and civil works began shortly after. The
construction of the steel structure began during Q4 2022 with 95%
of the structural elements now complete.
Also, during Q4 2022, internal works started with the
installation of the continuous mixer. All equipment for the Paste
Backfill Plant has been ordered and any outstanding items are due
for delivery in H1 2023, and the overall project remains on
track.
The underground reticulation required to transport the paste
backfill material to the voids underground consists of two phases
and connects the surface Paste Backfill Plant with the working
areas on 910 and 990 metre levels, via the XIVb and the Central
Decline accesses.
In Q3 2022, a designated and trained team commenced the
underground installation of 2,109 metres of pipes and associated
infrastructure (including 457 metres in the Central Decline). This
project was completed during Q4 2022.
The construction of the services culvert from the processing
plant to the Paste Backfill Plant
started during Q3 2022. Concrete and steel works have been
completed, including the bridge over the Kozja Reka River, all
necessary equipment, pipes and valves were delivered to site in Q4
2022 for this aspect of the project, and the installation of the
pipes and electrical cable are on track to be completed during H1
2023.
Central Decline
The development of the Central Decline continues to progress
well, with 1,051 metres developed during 2022, and 1,554 metres in
total, and is on schedule to complete phase 1 to connect surface
with the 910 metre production level by the end of H1 2023.
The Central Decline is fully serviced with power, stage pumping
and cuddies mined at c. 200 metre intervals. In Q4 2022, a surface
75kW fan was installed and commissioned, producing up to 24m3 per
second for ventilation.
Dry Stack Tailings Plant
Following an ongoing review of the dry stack tailings plant and
landform conducted by Knight Piésold, as well as local experts,
Geing and Atrium and local academic Professors, a number of
enhancements have been included in the Dry Stack Tailings project.
The review will be completed in H1 2023, and construction is
scheduled to start in H2 2023 and be completed during that period.
Orders for longlead items such as the Metso-Outotec filter press
have been placed.
Tailings Management
A key benefit to the Cut and Fill Project is the improved
storage of tailings. Currently, all tailings generated from Sasa's
processing plant are stored in TSF4. During the life of the mine,
tailings will be stored in the following three locations:
-- Backfill: 34% of the flotation tailings will be used to produce paste backfill
-- Dry Stack Tailings: Sasa aims to introduce dry stack storage
technology for 35% of the flotation tailings
-- TSF4: Approximately 31% of tailings will be stored in the
existing storage facility using the existing methodology.
-- Investigation is underway to identify additional voids to
store tailings as paste backfill underground to allow for any
extensions to Sasa's life of mine.
SASA MINERAL RESOURCES, ORE RESERVES AND LIFE OF MINE
('LOM')
During Q4 2021, CAML bolstered its technical team, in particular
with the recruitment of a
new Group Geologist and Group Technical Services Director.
During 2022, the technical services team revisited Sasa's Mineral
Resource Estimate ('MRE') for its Svinja Reka deposit, as well as
its Ore Reserves.
The updated work took into account recent additional drilling at
depth and was completed using new modelling software as well as
incorporating the net smelter return ('NSR') cut-off method for
polymetallic orebodies instead of the cut-off grade method
previously applied. Sasa's MRE and Ore Reserves are shown in the
following tables.
Total Svinja Reka Mineral Resources have decreased to 12.3Mt at
4.2% Pb and 2.9% Zn compared to 13.5Mt at 4.6% Pb and 3.0% Zn
reported as of 31 December 2021. This is due to 2022 mining
depletion and an adjustment of approximately 0.5Mt due to
geological reinterpretation based on the results of the recent
exploration drilling.
The Svinja Reka Ore Reserve has decreased to 8.8Mt at 3.9% Pb
and 2.6% Zn from 9.5Mt at 4.1% Pb and 2.8% Zn reported as of 31
December 2021. The most material factors in this adjustment are
related to 2022 mining depletion, resource model changes, the
inclusion of some deeper Indicated Resources not previously
included and mine design changes, including the use of Long Hole
Stoping with paste fill as an additional mining method. The
introduction of Long Hole Stoping will support a reduced minimum
mining width and reduced dilution as well as enable an increased
sub-level height, reducing development requirements and improving
overall mine productivities.
Following review of the Mineral Resources and Ore Reserves,
detailed mine planning work was undertaken and CAML now plans for a
maximum production from Svinja Reka of 830,000 tonnes per year,
reduced from the 900,000 tonnes per year previously anticipated for
the longer term. As a result, Sasa's expected LoM has increased to
2039 from 2037.
Approximately 10,600 metres of exploration drilling is planned
at Sasa for 2023, which will focus on underground drilling of the
Kozja Reka deposit from the Central Decline to explore for down dip
extensions of the previously mined mineralisation. In addition,
surface drilling into the Golema Reka deposit is planned, as well
as down dip exploration and infill drilling at Svinja Reka.
Mineral resource estimate for Svinja Reka and Golema Reka
Sasa's technical services team has updated the Mineral Resource
Estimate ('MRE') for the Svinja Reka deposit as of 31 December
2022. The Golema Reka MRE was updated on 1 January 2020.
Classification Deposit Grades Contained metal
Mt Pb (%) Zn (%) Ag(g/t) Pb (kt) Zn (kt) Ag(koz)
-------- --------- --------- --------- -------- -------- ---------
Indicated Mineral Svinja
Resources Reka 10.3 4.5 3.0 31.6 459 306 10,499
------------ -------- --------- --------- --------- -------- -------- ---------
Golema
Reka 1.3 3.8 1.6 13.0 48 20 528
-------------------------------- -------- --------- --------- --------- -------- -------- ---------
Total
Indicated 11.6 4.4 2.8 29.5 509 327 11,042
-------------------------------- -------- --------- --------- --------- -------- -------- ---------
Inferred Mineral Svinja
Resources Reka 2.0 2.9 2.4 21.6 56 47 1,354
------------ -------- --------- --------- --------- -------- -------- ---------
Golema
Reka 6.3 3.5 1.4 12.0 217 86 2,444
-------------------------------- -------- --------- --------- --------- -------- -------- ---------
Total
Inferred 8.3 3.4 1.6 14.3 273 133 3,798
-------------------------------- -------- --------- --------- --------- -------- -------- ---------
Total Indicated and
Inferred Resources 19.9 4.0 2.3 23.2 782 460 14,840
-------- --------- ------ -------- -------- -------- -----------
Notes
-- Mineral Resources have an effective date of 31 December 2022.
-- The Competent Person for the declaration of Mineral Resources
is Graham Greenway, BSc.Honours (Geology), PGeo. Graham Greenway,
CAML's Group Geologist, is a Practising Registrant of the
Professional Geoscientists of Ontario and has over 34 years'
experience in the exploration, definition and mining of precious
and base metal Mineral Resources, and has sufficient experience
relevant to the style of mineralisation and type of deposit under
consideration, and to the type of activity which he is undertaking
to qualify as a 'Competent Person' as defined by JORC and as
required by the June 2009 Edition of the AIM Note for Mining and
Oil & Gas Companies. He has reviewed, and consents to, the
inclusion in the Annual Report of the matters based on their
information in the form and context in which it appears and
confirms that this information is accurate and not false or
misleading.
-- Mineral Resources are reported inclusive of Ore Reserves.
-- The Svinja Reka Mineral Resource is reported based on a NSR
cut-off of $46/t for Sub-Level Caving and $53/t for Cut and Fill
and Long Hole Stoping and are based on metal price assumptions of
$2,755/t for zinc, $2,290/t for lead and $22/oz for silver.
-- The Golem Reka Mineral Resource is reported above a cut-off
grade of 2% combined lead and zinc.
-- Mineral Resources are reported as undiluted. No mining
recovery has been applied in the Statement.
-- Tonnages are reported in metric units, grades in percent (%)
or grams per tonne (g/t), and the contained metal in metric units
or ounces. Tonnages, grades, and contained metal totals are rounded
appropriately.
-- Rounding may result in apparent summation differences between
tonnes, grade and contained metal content.
Svinja Reka Ore Reserve Statement
The following Ore Reserve Statement has been prepared by Sasa's
technical services team based on a Life of Mine ('LoM') plan that
includes a transition from the Sub-Level Caving mining method to
Cut and Fill as well as Long Hole Stoping with paste backfill. The
Ore Reserve Statement considers the updated Indicated Resources
constrained within a practical and economic mine design only. NSR
cut-off values and design modifying factors for each mining method
were applied as follows:
-- Sub-Level Caving,
o NSR Cut-Off Value = $46/t
o Planned Dilution 25%
o Mining Recovery 85%
-- Cut and Fill
o NSR Cut-Off Value = $53/t
o Planned Dilution 5%
o Mining Recovery 98%
-- Long Hole Stoping
o NSR Cut-Off Value = $53/t
o Planned Dilution 17.4%
o Mining Recovery 90%
-- Ore Development
o NSR Cut-Off Value = $37/t
o Planned Dilution 5%
o Mining Recovery 98%
Grades Contained metal
Svinja Reka Mt Pb (%) Zn (%) Ag(g/t) Pb (kt) Zn (kt) Ag(koz)
------- ------- -------- -------- -------- --------
Probable 8.8 3.9 2.6 27.0 346 232 7,662
---- ------- ------- -------- -------- -------- --------
Total 8.8 3.9 2.6 27.0 346 232 7,662
---- ------- ------- -------- -------- -------- --------
Notes
-- Ore Reserves have an effective date of 31 December 2022.
-- The Competent Person who has reviewed the Ore Reserves is
Scott Yelland, C. Eng, FIMMM, MSc, who is a full-time employee and
Chief Operating Officer of CAML. He is a mining engineer with over
38 years' experience in the mining and metals industry, including
operational experience in underground zinc and lead mines, and as
such qualifies as a Competent Person as defined in the JORC Code
(2012).
-- The Ore Reserve is reported using a NSR cut-off of $46/t for
Sub-Level Caving, $53/t for Cut and Fill and Long Hole Stoping and
$37/t for Ore Development drives that are required to establish
stope access and are based on metal price assumptions of $2,395/t
for zinc, $1,992/t for lead and $19.3/oz for silver.
-- Rounding may result in apparent summation differences between
tonnes, grade and contained metal content.
-- The Mineral Resources and Ore Reserves are reported in
accordance with the guidelines of the 2012 Edition of the
Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves (the 'JORC Code').
KOUNRAD
Kazakhstan
The Kounrad team was proud to exceed its production target
during 2022. Most importantly, this copper was produced safely and,
to 31 December 2022, there have been 1,689 days since the last LTI
at Kounrad.
2022 Cathode Production
The SX-EW plant produced a record 14,254 tonnes of copper
cathode during 2022, a slight increase from the previous year of
14,041 tonnes. The total Kounrad copper production since operations
commenced in April 2012 is now 138,395 tonnes, equating to 55% of
the forecast life of operation extractable tonnage. During 2022,
copper was leached from the Eastern and Western Dumps, with both
areas performing well.
Health and Safety
There were no LTIs, RWCs or MTIs at Kounrad during 2022. There
have now been 1,689 days since the last LTI at Kounrad.
Leaching Operations
Both the Eastern and Western Dumps were simultaneously leached
during 2022, with the production split being 18% and 82%
respectively.
In the Eastern Dumps, the team focused on irrigating previously
leached blocks in order to maximise the recovery of copper from the
resource. This technique was implemented on various blocks that had
been allowed to rest for periods of, in some cases, almost two
years. During this rest period, bacterial and chemical activity
continued to degrade and solubilise copper mineralisation,
especially the more leach resistant species such as chalcopyrite.
In addition, with the purchase of a new bulldozer, the summer
period was spent pushing and levelling side walls along Dump 7.
This new area of exposed material will be leached during 2023.
Adopting these approaches resulted in the typical pregnant leach
solution ('PLS') grade pick-up averaging about 0.7 grammes per
litre ('gpl'), similar to that achieved in 2021. This was somewhat
better than anticipated due to leaching the fresher, side slope
material and resulted in extracted copper of around 2,625 tonnes
from this area.
This takes the total quantity of copper recovered from the
Eastern Dumps, since operations commenced, to over 82,000 tonnes,
slightly higher than the quantity forecast at the time of the CAML
Initial Public Offering ('IPO') in 2010. Typically, the daily
average area under irrigation at the Eastern Dumps during the year
was 18.5 hectares, noting that winter leaching is restricted to an
area of around 12 hectares.
The project to relocate approximately 180,000 cubic metres of
material, containing approximately 2,000 tonnes of copper close to
the Kazakhmys railway line, was completed by the end of April 2022
using a local contractor. A cut-back leaving a 30-metre distance to
the railway line from the dump toe has now been completed, through
which a lined trench extension of 876 metres has been installed.
This newly exposed area of fresh, previously unleached material is
scheduled for irrigation during 2023, although depending upon
overall outputs this might be deferred until 2024.
The continued successful and economic generation of copper from
the Eastern Dumps is anticipated to continue into 2025.
Kounrad Copper Production
At the Western Dumps, the focus of irrigation remained on parts
of Dumps 16, 21, 22 and 1A, from which 11,629 tonnes of copper were
recovered, contributing approximately 82% of the total Kounrad
copper production. The average daily area under irrigation on the
Western Dumps increased to 38.2 hectares (37.5 hectares in 2021) of
both new and previously leached material. The volume of raffinate
pumped around the site averaged 1,228 cubic metres per hour
('m3/hr'). As in previous summer periods, a proportion of the
off-flow solutions from the Eastern Dumps were recycled across to
the Western Dumps with the aim of maintaining broadly stable PLS
grades to the solvent extraction ('SX') plant.
The second phase of the Intermediate Leaching System ('ILS') was
completed in mid-July and at the beginning of August was
commissioned and put into test operation. All aspects of the
engineering design parameters were validated, and the test was
operated with a flow rate of 340m3/hr for six weeks until
mid-September, when it was stopped to commence winter leaching
switch-over preparations. Whilst the test run was quite short
indications of additional pick-up from leaching old blocks appeared
positive, with a typical gain of around 0.7 grams per litre ('gpl')
achieved during this trial period. However, the very positive
leaching performance of the dumps, which continues to generate the
required copper transfer to the SX-EW facility, confirms that the
ILS circuit will probably not be required as an integral component
of the circuit until 2025 or so. During the intervening period we
are undertaking additional column tests, replicating the ILS
system, in order to better advance our understanding of optimum
parameters for when it is utilised more permanently. The first such
samples have been collected, prepared, and loaded to columns with
testing scheduled to start in January 2023.
Application rates of solution to the dumps were maintained at a
level of 2.32 litres per square metre per hour ('l/m2/hr')
throughout the year, slightly higher than in 2021.
During the course of the year, 820 metres of the extended
interceptor trench around Dump 21 were lined with HDPE and are
ready for operations in 2023. Additionally, the extension of the
trench encircling Dump 16 by 890 metres, between blocks 22 and 32
was fully excavated but the HDPE lining will only be installed as
leaching of the relevant side blocks commences.
Our two dozers continued with their work of significant
levelling and shaping earthworks, primarily on the Western Dumps.
At the Eastern Dumps, dozer work was relatively limited to the
preparation of unleached side slope and road access areas.
The new winter measurement and control systems, which were
designed and prepared in late 2021, operated extremely well during
the winter period through to March 2022. They allowed excellent
control of dripper end temperatures and resulted in an optimised
consumption of coal by the three Western Dump area boilers, with a
saving of around c.15% compared to the previous winter.
SX-EW Plant
The SX-EW plant continued to operate efficiently during 2022 and
the overall operational availability throughout the year was 99.3%.
This was 0.1% below that of 2021, primarily due to a planned
increase in maintenance schedules to reflect the needs of the
process equipment which has been in almost permanent operation for
10 years.
With the average Western Dumps copper grade of around 0.1% and
largely fully leached Eastern Dump materials, the average PLS grade
for the year was 2.25gpl, approximately 0.1gpl lower than in 2021.
Solution flow rates through the SX averaged 1,018m3/hr, with summer
rates averaging approximately 1,150m3/hr. During the year, each of
the four extract settler units were taken off-line to facilitate
inspection and any necessary repairs and, after 10 years of
operation, their condition was found to be excellent.
At the start of Q2 2022, 960 anodes were renewed in the EW2
building, these being the first replacements in that plating unit
for seven years. As a consequence, both EW sections are fitted with
excellent quality anodes and no replacement orders are expected to
be made until around 2024. In respect of cathodes a local factory
has been identified that can refurbish them, without the
requirement to send them to either Chile or Germany. This has
obvious cost benefits in terms of shipment and other savings, and
of course means that turnaround of the plates is faster and
therefore more flexible.
During the year, increased focus on reagent consumptions and
controls, particularly imported organic reagents, was made by the
operations team with success. Additionally, due to supply chain
disruptions, it was decided to increase on-site storage of the
Escaid reagent and, by December, an additional two tanks with
storage capacity of 180m3 were installed and filled.
The focus for the operations team has been on continued safe,
efficient plant operations and the tight control of all operating
costs. The management changes introduced in Q3 2021 are now fully
embedded and working extremely well under the guidance and control
of the site based Technical Director.
Copper Sales
Throughout the year, the quality of CAML's copper cathode
product has once again been maintained at high levels both
chemically and visually and there have been no negative quality
claims. Regular in-house and independent metallurgical analyses
have consistently reported 2022 copper purity of around 99.998%.
The Company continues to sell the majority of copper production
through its off take arrangements with Traxys.
2022 Production Guidance
The 2023 guidance for Kounrad's copper cathode production is
between 13,000 and 14,000 tonnes.
Solar Power Project
Following detailed engineering works by TGS, a Kazakh
engineering firm specialising in renewable energy installations,
the CAML Board approved the construction of a 4.77MW solar panel
facility in 2022.
The facility has an estimated capital cost of up to $5 million
and is forecast to generate approximately 9.2 million kWh per year
or around 16 to 18% of annual power consumption. This is expected
to reduce Kounrad's Scope 1 and 2 GHG emissions by c.10% versus
2020.
Upon receipt of all necessary regulatory approvals, the
levelling earthworks on the 10-hectare site were undertaken during
Q4 2022 and were fully completed by year end. Additionally, by late
December the orders were placed for the two long-lead components of
the project, which are 8,850 solar panels and 24 DC-AC
inverters.
The project will be undertaken by our inhouse engineering and
procurement teams, supported by TGS especially during the
commissioning phase. Provided there are no issues with supply chain
delivery, the forecast completion and commissioning date is
scheduled for H2 2023.
FINANCIAL REVIEW
Strong Balance Sheet
CAML reports a 2022 Group EBITDA of $131.6 million. This result
was achieved despite global inflationary pressures resulting in
some cost increases which were mitigated by weaker operating
currencies. CAML has now completely repaid the $187.0 million debt
which was secured to acquire Sasa. These repayments have been made
while we remained consistently among the sector leading dividend
payers, delivered value for all our stakeholders, and invested in
our operations.
2022 MARKET OVERVIEW
Kazakhstan
According to the National Bank of Kazakhstan, where CAML
produces its copper, Kazakhstan's 2022 GDP expanded by 3.2%, and
official inflation was 20.3%.
Copper
During 2022 copper prices have been hit by two significant macro
headwinds: China's Zero Covid policy and the US's monetary policy
tightening. While China's Zero Covid policy has resulted in a
marked slowdown in domestic economic growth and weaker end-user
consumption in China, the normalisation of the US monetary policy
tightening has led to a firmer dollar, tighter financial conditions
and weaker economic growth globally, which has also undermined
copper consumption and prices. Copper prices rebounded in December
2022 as a result of China's reopening plans, weakening dollar and
low visible copper inventories.
During the year the increase in demand of 3.0% has slightly
lagged behind the increase in supply of refined copper production
of 3.5%. The International Copper Study Group ('ICSG') indicated a
2022 global refined copper deficit of 376,000 tonnes.
North Macedonia
According to the National Bank of North Macedonia, North
Macedonia's 2022 GDP is expected to have expanded by 2.1%, with
inflation of 14.2%.
Zinc
The zinc price in 2022 remained robust but volatile, averaging
$3,486 per tonne. The factors affecting the zinc (and lead) markets
and balances were largely macroeconomic. The rise in energy costs
due to the conflict in Ukraine interrupted trade patterns and hit
the energy-intensive metal refining industry in Europe. The
proportion of energy costs in smelting is estimated to have risen
from 55% pre-pandemic to 72% in 2022, hence smelters' closure.
In 2022 zinc mine production remained similar to 2021 at
approximately 13 million tonnes, but zinc smelting saw a 4% drop.
This is equivalent to 500,000 tonnes of metal and approximately
c.50% of the drop was at European smelters. The zinc concentrate
market moved from a deficit in the first half with a tight spot
market, to becoming relatively weak in Q4 2022 as concentrate
supply exceeded demand.
The 2022 Benchmark treatment charges ('TCs') increased from $159
to $230 per dry metric tonne ('dmt'), while spot concentrate TCs
reached $260-300/dmt by year end.
Zinc demand, in contrast, flattened during the first half 2022
and further weakened in the second half. The main reasons were
China (representing c.50% of global zinc demand) maintaining its
Zero Covid policy until late in the year and fears of a recession
in Europe, the region most affected by the conflict in Ukraine.
Smelter cutbacks meant that global metal inventories fell,
particularly on the LME. Metal premiums charged by smelters reached
historical highs in Q4 2022, which enabled some smelter capacity to
reopen, but not enough to dampen the strong metal price.
The global refined zinc market recorded a further sizable
monthly deficit in December 2022, bringing the overall deficit last
year to 306,100 tonnes, according to initial estimates from the
International Lead & Zinc Study Group (ILZSG), broadly aligned
with the 291,000-tonne deficit implied by our supply-demand
model.
Lead
The global refined lead market recorded a further modest monthly
deficit totaling 6,100 tonnes in December, according to initial
estimates from the International Lead & Zinc Study Group
(ILZSG). Global lead production was less affected by energy price
rises and demand continued to grow (+1.3% vs 2021). The overall
lead market is driven by the availability of scrap, which comprises
c.65% of the global market. This continued to be tight. Lead mine
production in 2022 fell by c.2.3% which helped to keep the
concentrate market tight throughout the year, in spite of the fact
that one large European smelter remained closed (Stolberg). At the
end of 2022 the market was becoming stronger again as spot TCs
fell.
Performance Overview
Group profit before tax from continuing operations decreased by
50% to $54.6 million (2021: $109.3 million). This result reflects a
noncash impairment charge of $55.1 million related to the Sasa
operation as explained below. There was a foreign exchange gain of
$6.8 million (2021: $1.2 million) and reduced finance costs of $2.1
million (2021: $3.9 million) due to the repayment of the corporate
debt during the year. Recent global inflation has adversely
affected several key costs such as electricity and salaries which
have increased the Group cost base.
CAML's 2022 gross revenue was $232.2 million (2021: $235.2
million). In H1 2022, record interim financial results were
reported, aided by the strength in the metal prices and strong
markets. During H2 2022, market conditions worsened as metal prices
generally fell and inflation affected operations, not least the
electricity prices in North Macedonia.
The Group generated 2022 EBITDA of $131.6 million (2021: $141.5
million), and an EBITDA margin of 57% (2021: 60%) which, despite
the global inflationary pressures, reflects the Group's ability to
maintain relatively low costs across the operations.
Adjusted earnings per share ('EPS') from continuing operations
was higher than the previous year at 48.15 cents (2021: 47.69
cents). EPS from continuing operations, including the impairment
charge, was 19.10 cents (2021: 47.69 cents). See note 18 to the
financial statements for more information.
CAML generated free cash flow of $89.7 million (2021: $103.8
million), allowing the Board to propose a final 10 pence dividend
within policy. The Group fully repaid the corporate debt during the
year. As at 31 December 2022, drawn overdraft facilities totalled
$1.4 million (2021: $9.6 million) resulting in net cash of $58.9
million (2021: $22.7 million).
Sasa's 2022 EBITDA was $56.4 million (2021: $57.5 million), with
a margin of 52% (2021: 56%). The average zinc price received
increased by 11% and the average lead price received decreased by
4% compared to the prior year. Treatment charges reduced from April
2022 onwards. Sasa faced some cost increases due to inflationary
pressures including an increase in electricity costs. The impact of
cost increases has been reduced by a favourable movement in the
North Macedonian Denar exchange rate to the US Dollar.
Kounrad's 2022 EBITDA was $94.9 million (2021: $106.0 million),
with a margin of 77% (2021: 80%). Kounrad's gross revenue decreased
due to the average copper price received decreasing by 8%.
Kounrad's EBITDA reflects an increase in costs due to employee pay
rises. The impact of cost increases has been somewhat mitigated by
a favourable movement in the Kazakhstan Tenge exchange rate to the
US Dollar.
INCOME STATEMENT
Revenue
CAML generated 2022 gross revenue of $232.2 million (2021:
$235.2 million), which is reported after deduction of treatment
charges, but before deductions including offtake buyers' fees and
silver purchases for the Sasa silver stream. Net revenue after
these deductions was $220.9 million (2021: $223.4 million).
Sasa
Overall, Sasa generated 2022 gross revenue of $108.5 million
(2021: $103.1 million). A total of 17,862 tonnes (2021: 18,586
tonnes) of payable zinc in concentrate and 26,320 tonnes (2021:
25,245 tonnes) of payable lead in concentrate were sold during
2022. The payable lead in concentrate sales is 631 tonnes higher
than that disclosed in the Operational Review as the final lead
concentrate shipment of the prior year was delayed until January
2022 and, under the Free on Board ('FOB') terms, this revenue was
recognised in the 2022 financial year.
The zinc price received increased by 11% to an average of $3,358
per tonne (2021: $3,036 per tonne) and, for lead, the price
decreased by 4% to an average of $2,113 per tonne (2021: $2,209 per
tonne), leading to an overall increase in gross revenue generated
from the mine.
Treatment charges during the year reduced to $16.2 million
(2021: $18.8 million) due to improved negotiated terms for both
zinc and lead. Lead treatment charges are expected to decrease in
2023 whilst zinc treatment charges are expected to increase as a
result of the higher availability of zinc concentrate.
During 2022, the offtake buyers' fee for Sasa was $1.2 million
(2021: $1.2 million). Zinc and lead concentrate sales agreements
have been extended with Traxys on a one year rolling basis for 100%
of Sasa production. Sasa has an existing silver streaming agreement
with Osisko Gold Royalties whereby Sasa receives approximately $6
per ounce for its silver production for the life of the mine.
Kounrad
A total of 14,192 tonnes (2021: 13,983 tonnes) of copper cathode
from Kounrad were sold as part of the Company's offtake arrangement
with Traxys. The offtake arrangement with Traxys has been extended
from 1 January 2023 on a one-year rolling basis. The commitment is
for a minimum of 95% of Kounrad's annual production. A further 150
tonnes (2021: 68 tonnes) were sold locally. Total Kounrad copper
sales were 14,342 tonnes (2021: 14,051 tonnes).
Gross revenue decreased due to the copper price received
decreasing by 8% to an average of $8,625 per tonne (2021: $9,384
per tonne). This generated gross revenue for Kounrad of $123.7
million (2021: $132.0 million). During 2022, the offtaker's fee for
Kounrad increased to $3.1 million (2021: $2.6 million) due to
higher transportation costs as a result of the conflict in
Ukraine.
Cost of sales
The Group cost of sales for the year was $87.3 million (2021:
$80.5 million). This includes
depreciation and amortisation charges of $26.7 million (2021:
$28.9 million). Global macro-economic conditions led to an increase
in key production cost components such as electricity and salaries.
The impact of these cost increases has been somewhat mitigated by
favourable foreign exchange movements during the year. The Company
continues to focus on factors such as disciplined capital
investments, working capital initiatives and other cost control
measures.
Sasa
Sasa's cost of sales for the year was 10% higher than the
previous year at $60.8 million (2021: $55.4 million). During the
year, Sasa faced some cost increases due to inflationary pressures
including an increase in electricity costs of $5.5 million, as spot
energy prices increased throughout 2022 during which time Sasa had
a largely fixed price contract that expired in June. The impact of
these overall cost increases was mitigated by a weakening in the
North Macedonian Denar. The Denar, which is pegged to the Euro,
weakened by 12% to an average of 58.36 against the US Dollar versus
a 2021 average of 52.06.
2022 depreciation decreased by $2.0 million versus 2021, due
primarily to the weakening of the local currency.
2022 royalties were $2.9 million (2021: $2.8 million). This tax
is calculated at the rate of 2% (2021: 2%) on the value of metal
recovered during the year.
Kounrad
Kounrad's 2022 cost of sales was $26.5 million (2021: $25.1
million).
There was an increase of $1.7 million due to employee pay rises
during the year. There was a $0.2 million decrease in reagent costs
due to temporary increased consumption in the prior year which
occurred due to a metallurgical adjustment arising from solely
leaching the Western Dumps during the prior winter period. The
depreciation and amortisation charges during the year reduced to
$3.7 million (2021: $3.9 million).
Mineral Extraction Tax ('MET') is a royalty charged by the
Kazakhstan authorities at the rate of 5.7% (2021: 5.7%) on the
value of metal recovered during the year. MET for the year was $7.2
million (2021: $7.3 million). From 1 January 2023, the MET rate
increased to 8.55%.
The impact of the above cost increases was mitigated by a 8%
weakening in the Kazakhstan Tenge. The Tenge weakened to an average
of 460 against the US Dollar versus a 2021 average of 426.
C1 cash cost of production
C1 cash cost of production is a standard metric used in the
mining industry to allow comparison across the sector. In line with
the industry standard, CAML calculates C1 cash cost by including
all direct costs of production at Kounrad and Sasa (reagents,
power, production labour and materials, as well as realisation
charges such as freight and treatment charges), in addition to
local administrative expenses. Royalties, depreciation, and
amortisation charges are excluded from C1 cash cost.
Sasa
Sasa's on-site operating costs increased by 24% to $44.8 million
(2021: $36.1 million). The on-site unit cost increased by 26% to
$55.6 per tonne (2021: $44.1 per tonne) due to the higher costs
explained above and a 2% reduction in tonnes of ore mined in 2022
versus 2021.
Sasa's total C1 cash cost base, including realisation costs,
increased to $64.3 million (2021: $58.2 million), and Sasa's C1
zinc equivalent cash cost of production increased to $0.78 per
pound (2021: $0.63 per pound). The $0.15 per pound increase in the
C1 calculation was primarily due to the decreased production
volumes of zinc and higher electricity costs.
Kounrad
Kounrad's 2022 C1 cash cost of copper production was $0.65 per
pound (2021: $0.57 per pound) which remains amongst the lowest in
the copper industry. The increase in C1 cash cost versus 2021 is
due primarily to higher costs resulting from employee pay increases
and higher transportation costs.
Group
CAML reports its Group C1 cash cost on a copper equivalent basis
incorporating the production costs at Sasa and by also converting
lead and zinc production into copper equivalent tonnes. The Group's
2022 C1 copper equivalent cash cost was $1.39 per pound (2021:
$1.32 per pound). This number is calculated based on Sasa's 2022
zinc and lead payable production, which equated to 13,402 copper
equivalent tonnes (2021: 11,959 copper equivalent tonnes) added to
Kounrad's 2022 copper production of 14,254 tonnes (2021: 14,041
tonnes). The C1 cash cost increase on a copper equivalent basis is
due to the higher C1 cost base at both Sasa and Kounrad.
CAML also reports a fully inclusive cost that includes
sustaining capital expenditure, local taxes including MET and
concession fees, interest on loans and corporate overheads
associated with the Kounrad and Sasa projects as well as the C1
cost component. The Group's fully inclusive copper equivalent unit
cost for the year was $1.92 per pound (2021: $1.89 per pound). The
increase is a result of the higher C1 cost components at Sasa and
Kounrad somewhat offset by a reduction in interest on loans.
Impairment of non-current assets
At 31 December 2022, the Group recognised an impairment charge
of $55.1 million related to the Sasa operation due to the following
factors:
-- Completion of the life of mine study at the year end and
therefore amending the financial model inputs for updated reserves,
resources and expected 830,000 tonne long-term plant throughput
capacity per annum (reduced from 900,000 tonnes). The Resource and
Reserves are both reported using Net Smelter Return cut-off values
and the Resources have decreased due to management's assessment of
those which are economically viable and capable of future
extraction.
-- An increase in the discount rate used to calculate the net
present value of future cash flows to 12.52% (2021: 10.21%) due to
external economic conditions.
-- Cost increases for energy and wages to reflect near-term inflationary pressures.
-- The key economic assumptions used in the review were a
five-year forecast average nominal zinc and lead price of $2,760
and $2,081 per tonne respectively and a real long-term price of
$2,467 and $1,874 per tonne respectively with an inflationary
factor applied.
Administrative expenses
During the year, administrative expenses increased to $27.1
million (2021: $22.1 million), largely due to an increased non-cash
share-based payment charge of $4.5 million (2021: $2.4 million).
This increase was due to options exercised at a share price more
than the fair value of the options at the date of grant, arising
from the Company electing to settle in cash, as well as recognising
a full year's charge in relation to the 2021 mid-year share option
grants.
There was also an increase in employee-related costs due to
staff pay increases and new hires as well as an increase in
business travel costs.
Other losses
During the prior year, the Group entered into commodity price
hedge contracts resulting in $6.7 million of realised losses on
financial derivatives. These financial instruments expired at the
end of 2021 and the Group has not put in place any further hedge
contracts.
Foreign exchange gain
The Group incurred a foreign exchange gain of $6.8 million
(2021: $1.2 million) resulting from the retranslation of USD
denominated monetary assets held by foreign subsidiaries with a
local functional currency. The gain was significant due to the
weakening of the Kazakhstan Tenge and North Macedonian Denar as
mentioned above.
Finance costs
The Group incurred lower finance costs of $2.1 million (2021:
$3.9 million) resulting from the scheduled debt repayments during
the year.
Taxation
2022 Group corporate income tax decreased to $20.6 million
(2021: $25.1 million) as a result of lower profits at Kounrad taxed
at a corporate income tax rate of 20% and at Sasa taxed at a
corporate income tax rate of 10%. The decrease also resulted from a
reduction in the deferred tax liability due to the Sasa impairment
charge.
Discontinued operations
The Group continues to report the results of the Copper Bay
entities within discontinued operations. These assets were fully
written off in prior years.
BALANCE SHEET
Capital expenditure
During the year, there were additions to property, plant, and
equipment of $17.4 million (2021: $14.8 million). The additions
were a combination of $2.5 million (2021: $2.7 million) Kounrad
sustaining capital expenditure, $7.7 million (2021: $6.2 million)
Sasa sustaining capital expenditure and $7.2 million (2021: $5.9
million) in relation to the Sasa Cut and Fill Project.
Sasa sustaining capital expenditure includes capitalised mine
development of $2.5 million, $1.4 million on flotation equipment
and $1.7 million on underground fleet. Kounrad's sustaining capital
expenditure includes $0.5 million on new anodes, $0.6 million on
dripper pipes and $0.1 million on the solar power plant.
Cut and Fill Project
The Group continues to invest significantly at Sasa with the
implementation of the Cut and Fill Project, comprising the
construction of a Paste Backfill Plant and associated underground
reticulation infrastructure, a Dry Stack Tailings Plant and
associated landform and the development of the new Central
Decline.
During 2022, capital expenditure on the Cut and Fill Project
totalled $11.9 million of which $7.2 million has been capitalised
and $4.7 million prepaid. This includes $2.6 million of Central
Decline costs and $5.6 million on the Paste Backfill Plant. There
was a further $1.6 million spent on underground reticulation and
$1.8 million spent on the Dry Stack Tailings Plant and associated
landform.
CAML expects 2023 capital expenditure of between $28.0 million
and $30.0 million, of which between $11.0 million and $13.0 million
is expected to be committed to sustaining capex. Total expected
2023 capex also includes approximately $5.0 million related to the
Kounrad solar power plant. CAML expects Cut and Fill Project
capital expenditure in the order of $12.0 million in 2023. This
will be largely related to construction of the dry stack tailings
landform as well as capitalised decline development.
Working capital
As at 31 December 2022, current trade and other receivables were
$8.7 million (31 December 2021: $6.2 million), which includes trade
receivables from the offtake sales of $2.4 million (31 December
2021: $1.2 million) and $3.0 million in relation to prepayments and
accrued income (31 December 2021: $2.5 million).
Non-current trade and other receivables were $11.5 million (31
December 2021: $7.3 million). As at 31 December 2022, a total of
$3.4 million (31 December 2021: $3.3 million) of VAT receivable was
owed to the Group by the Kazakhstan authorities. Recovery is still
expected through a continued dialogue with the authorities for cash
recovery and further offsets.
As at 31 December 2022, current trade and other payables were
$16.6 million (31 December 2021: $16.1 million).
Asset retirement obligation
During the year, an updated Kounrad conceptual closure plan was
prepared by independent
external consultants WSP Golders. The report reassessed the
estimated closure costs at the end of the life of the operation
including rehabilitation, remediation, decommissioning and
demolition. The Group asset retirement obligation provision has
been increased by $1.2 million to account for additional estimated
costs in aggregate across Kounrad and Sasa and using latest
assumptions on discount and inflation rates.
Cash and borrowings
As at 31 December 2022, the Group had cash in the bank of $60.6
million (31 December 2021: $59.2 million) and current borrowings of
$1.4 million (31 December 2021: $33.0 million). Current borrowings
comprise $1.4 million of North Macedonian overdraft facilities. The
corporate debt facility with Traxys was repaid in full in August
2022.
The reduction in current borrowings of $31.6 million reflects
corporate debt repaid during the year of $23.8 million, repayments
of overdrafts of $7.5 million, a foreign exchange impact of $0.6
million as well as an effective interest rate amount of $0.4
million relating to unwinding directly attributable fees.
Allotment and issue of shares
In September 2022, the Company issued and allotted 5,600,000
Ordinary Shares of $0.01 each (the 'New Ordinary Shares') to the
trustee of the Central Asia Metals employee benefit trust. These
New Ordinary Shares were issued for the purposes of satisfying
current awards granted under the Company's Employee Share Plans
together with any future awards that may be granted by the Company.
Under the Trust deed the trustee must waive dividends and refrain
from voting unless the Board directs otherwise. The New Ordinary
Shares rank pari passu with the existing issued Ordinary Shares of
the Company.
CASH FLOWS
Net cash flow generated from operations was $99.8 million (2021:
$112.6 million).
During the year, corporate debt repayments of $23.8 million were
made in relation to the Traxys loan (2021: $48.4 million) and a
further $7.5 million of overdraft was repaid (2021: net drawdown
$0.6 million). In addition, interest of $0.6 million was paid
(2021: $2.4 million).
In 2022, corporate income tax payments to governments totalled
$22.2 million (2021: $21.6 million). This included $1.7 million
(2021: $0.5 million) of North Macedonia corporate income tax paid
in cash in addition to a $4.5 million (2021: $3.5 million) non-cash
payment offset against VAT and corporate income receivable. $20.5
million (2021: $21.1 million) of Kazakhstan corporate income tax
was paid during the year.
Considering sustaining capital expenditure, excluding project
capex, CAML's free cash flow for 2022 was $89.7 million (2021:
$103.8 million).
DIVID
The Company's dividend policy is to return to shareholders a
range of between 30% and 50% of free cash flow, defined as net cash
generated from operating activities less sustaining capital
expenditure. The dividends will only be paid provided there is
sufficient cash remaining in the Group to meet any contractual debt
repayments and that any banking covenants are not breached.
Total dividends paid to shareholders during the year of $48.2
million comprised the final 2021 dividend of 12 pence per Ordinary
Share and the interim 2022 dividend of 10 pence per Ordinary
Share.
In conjunction with CAML's 2022 annual results, the Board
proposes a final 2022 dividend of 10 pence per Ordinary Share. This
brings total dividends (proposed and declared) for the year to 20
pence (2021: 20 pence) which represents 47% of free cash flow. The
final dividend is payable on 23 May 2023 to shareholders registered
on 28 April 2023. This latest dividend will increase the amount
returned to shareholders in dividends since the 2010 IPO listing to
$299.0 million.
GOING CONCERN
The Group sells and distributes its copper cathode product
primarily through an annual rolling offtake arrangement with Traxys
Europe S.A. ('Traxys') with a minimum of 95% of the SX-EW plant's
forecasted output committed as sales. The Group sells Sasa's zinc
and lead concentrate product through an annual rolling offtake
arrangement with Traxys. The
commitment is for 100% of the Sasa concentrate production.
The Group meets its day-to-day working capital requirements
through its profitable and cash generative operations at Kounrad
and Sasa. The Group manages liquidity risk by maintaining adequate
committed borrowing facilities and the Group has substantial cash
balances as at 31 December 2022.
The Board has reviewed forecasts for the period to December 2024
to assess the Group's liquidity which demonstrate substantial
headroom. The Board has considered additional sensitivity scenarios
in terms of the Group's commodity price forecasts, expected
production volumes, operating cost profile and capital expenditure.
The Board has assessed the key risks which could impact the
prospects of the Group over the going concern period including
commodity price outlook, cost inflation and supply chain disruption
with reverse stress testing of the forecasts in line with best
practice. Liquidity headroom was demonstrated in each reasonably
possible scenario. Accordingly, the Directors continue to adopt the
going concern basis in preparing the consolidated financial
statements.
OUTLOOK
During the second half of the year commodity prices declined and
inflation increased which brought into focus the Company's cost
control measures. The full repayment of debt provided additional
liquidity which mitigated against any cost increases that were
outside of the Company's control, such as electricity prices.
However, actions taken by governments to increase gas storage in
the latter part of the year as well as a mild winter resulted in
easing of energy prices and alleviated cost pressures for the
Company. Demand for the metals produced by the Group remains robust
and metal stocks are at low levels which should continue to support
prices and allow the Company to maximise cash flow and hence value
creation.
NON-IFRS FINANCIAL MEASURES
The Group uses alternative performance measures, which are not
defined by generally accepted accounting principles ('GAAP') such
as IFRS, as additional indicators. These measures are used by
management, alongside the comparable GAAP measures, in evaluating
the business performance. The measures are not intended as a
substitute for GAAP measures and may not be comparable to similarly
reported measures by other companies. The following non-IFRS
alternative performance financial measures are used in this
report:
Earnings before interest, tax, depreciation and amortisation
(EBITDA)
EBITDA is a valuable indicator of the Group's ability to
generate liquidity and is frequently used by investors and analysts
for valuation purposes. It is also a non-IFRS financial measure
which is reconciled as follows:
2022 2021
$'000 $'000
----------------------------------- -------- --------
Profit for the year 33,805 84,176
Plus/(less):
Income tax expense 20,588 25,147
Depreciation and amortisation 27,285 29,572
Impairment of noncurrent assets 55,116 -
Foreign exchange gain (6,829) (1,214)
Other income (86) (166)
Other expenses - 139
Finance income (515) (74)
Finance costs 2,060 3,920
Loss from discontinued operations 187 4
----------------------------------- -------- --------
EBITDA 131,611 141,504
----------------------------------- -------- --------
Gross revenue
Gross revenue is presented as the total revenue received from
sales of all commodities after
deducting the directly attributable treatment charges associated
for the sale of zinc, lead and silver. This figure is presented as
it reflects the total revenue received in respect of the zinc and
lead concentrate and is used to reflect the movement in commodity
prices and treatment charges during the year. The Board considers
gross revenue, together with the reconciliation to net IFRS revenue
to provide valuable information on the drivers of IFRS revenue.
Net cash
Net cash is a measure used by the Board for the purposes of
capital management and is
calculated as the total of the borrowings held plus the cash and
cash equivalents held at the
end of the year. This balance does not include the restricted
cash balance of $0.3 million (31
December 2021: $3.5 million):
31-Dec-22 31-Dec-21
$'000 $'000
------------------------------------------------ ----------- ----------
Borrowings (1,390) (32,978)
Cash and cash equivalents excluding restricted
cash 60,298 55,695
------------------------------------------------ ----------- ----------
Net cash 58,908 22,717
------------------------------------------------ ----------- ----------
Free cash flow
Free cash flow is a non-IFRS financial measure of the cash from
operations less sustaining capital expenditure on property, plant
and equipment and intangible assets and is presented as
follows:
2022 2021
$'000 $'000
---------------------------------------------- --------- --------
Net cash generated from operating activities 99,845 112,605
Less: Purchase of property, plant and
equipment (10,124) (8,750)
Less: Purchase of intangible assets (68) (56)
---------------------------------------------- --------- --------
Free cash flow 89,653 103,799
---------------------------------------------- --------- --------
The purchase of sustaining property, plant and equipment figure
above does not include the $7.2 million (2021: $5.9 million) of
capitalised expenditure on the Sasa Cut and Fill Projects. These
costs are not considered sustaining capital expenditure as they are
expansionary development costs required for the transition to the
paste fill mining techniques. These exceptional costs are expected
to continue until 2024.
Sustainability reporting standards Sustainability is at the core
of our business values, and we have reported in accordance with
Global Reporting Initiative ('GRI') Standards for the period 1
January 2022 to 31 December 2022.
We have an economically robust business that underpins our
ability to generate profits and
dividends for our shareholders and ensures that our successes
are also felt by other important stakeholders. We strongly believe
that by creating shared value we are ensuring the long-term
sustainability of our operations and acting as a good corporate
citizen. The table below highlights the economic value that has
been distributed amongst CAML stakeholders during 2022.
Stakeholder 2022 2021
$'m $'m
--------------------------------------- ----------------------- -------- ------
Direct economic value generated 232.2 235.2
--------------------------------------- ----------------------- -------- ------
Economic value distributed:
Suppliers
Operating expenses & contractors 58.0 48.6
Wages and other payments to
employees Employees 35.8 30.5
Dividend payments to shareholders Shareholders 48.2 38.8
Payment to creditors: Interest
payments on loans Lenders 0.5 2.4
Payments of tax(1) Government 35.5 36.7
Community investments Local communities 0.3 0.5
--------------------------------------- ---------------------- --------- ----------
Economic value distributed 178.4 157.5
--------------------------------------- ---------------------- --------- ----------
Economic value retained (generated
- distributed) 53.8 77.7
--------------------------------------- ---------------------- --------- ----------
(1) The tax disclosed is the total corporate income tax
recognised in the income statement, MET, concession fees and
property taxes. The figure excludes the payroll taxes and
additional cash payments made on corporate income tax during the
year.
On behalf of the Board
GAVIN FERRAR
CHIEF FINANCIAL OFFICER
28 March 2023
Consolidated Income Statement
for the year ended 31 December 2022
Group
2022 2021
Note $'000 $'000
--------------------------------------------------- -------- ---------- ----------
Continuing operations
Revenue 6 220,855 223,372
--------------------------------------------------- -------- ---------- ----------
Presented as:
Gross revenue (1) 6 232,206 235,152
Less:
Silver stream purchases 6 (7,080) (8,040)
Offtake buyers' fees 6 (4,271) (3,740)
--------------------------------------------------- -------- ---------- ----------
Revenue 220,855 223,372
--------------------------------------------------- -------- ---------- ----------
Cost of sales 7 (87,271) (80,511)
Distribution and selling costs 8 (2,166) (2,116)
--------------------------------------------------- -------- ---------- ----------
Gross profit 131,418 140,745
--------------------------------------------------- -------- ---------- ----------
Administrative expenses 9 (27,092) (22,077)
Impairment of non-current assets 19,20 (55,116) -
Other losses 10 - (6,875)
Other income 11 86 166
Foreign exchange gain 6,829 1,214
--------------------------------------------------- -------- ---------- ----------
Operating profit 56,125 113,173
--------------------------------------------------- -------- ---------- ----------
Finance income 15 515 74
Finance costs 16 (2,060) (3,920)
Profit before income tax 54,580 109,327
Income tax 17 (20,588) (25,147)
--------------------------------------------------- -------- ---------- ----------
Profit for the year from continuing operations 33,992 84,180
--------------------------------------------------- -------- ---------- ----------
Discontinued operations
Loss for the year from discontinued operations 22 (187) (4)
--------------------------------------------------- -------- ---------- ----------
Profit for the year 33,805 84,176
--------------------------------------------------- -------- ---------- ----------
Profit attributable to:
Non-controlling interests 21 (6) (1)
Owners of the parent 33,811 84,177
--------------------------------------------------- -------- ---------- ----------
Profit for the year 33,805 84,176
--------------------------------------------------- -------- ---------- ----------
Earnings/(loss) per share from continuing and
discontinued operations attributable to owners $ cents $ cents
of the parent during the year (expressed in cents
per share)
--------------------------------------------------- -------- ---------- ----------
Basic earnings/(loss) per share
From continuing operations 18 19.10 47.69
From discontinued operations (0.10) -
--------------------------------------------------- -------- ---------- ----------
From profit for the year 19.00 47.69
--------------------------------------------------- -------- ---------- ----------
Diluted earnings/(loss) per share
From continuing operations 18 18.39 46.23
From discontinued operations (0.10) -
--------------------------------------------------- -------- ---------- ----------
From profit for the year 18.29 46.23
--------------------------------------------------- -------- ---------- ----------
(1) Gross revenue is a non-IFRS financial measure which is used
by management, alongside the comparable GAAP measures, in
evaluating the business performance. The measures are not intended
as a substitute for GAAP measures and may not be comparable to
similarly reported measures by other companies.
Consolidated Statement of Comprehensive Income
Group
2022 2021
for the year ended 31 December 2022 Note $'000 $'000
-------------------------------------------------- ---- ----------- ----------
Profit for the year 33,805 84,176
Other comprehensive income/(expense):
Items that may be subsequently reclassified
to profit or loss:
Currency translation differences 27 (29,311) (31,283)
Other comprehensive income/(expense) for the
year, net of tax (29,311) (31,283)
-------------------------------------------------- ---- ----------- ----------
Total comprehensive income for the year 4,494 52,893
-------------------------------------------------- ---- ----------- ----------
Attributable to:
Non-controlling interests (6) (1)
Owners of the parent 4,500 52,894
-------------------------------------------------- ---- ----------- ----------
Total comprehensive income for the year 4,494 52,893
-------------------------------------------------- ---- ----------- ----------
Total comprehensive income/(expense) attributable
to equity shareholders arises from:
Continuing operations 4,681 52,897
Discontinued operations (187) (4)
-------------------------------------------------- ---- ----------- ----------
4,494 52,893
-------------------------------------------------- ---- ----------- ----------
Statements of Financial Position Registered no. 5559627
as at 31 December 2022
Group Company
2022 2021 2022 2021
Note $'000 $'000 $'000 $'000
------------------------------------ ------ ----------- ----------- ------------ ------------
Assets
Non-current assets
Property, plant and equipment 19 322,197 384,889 184 410
Intangible assets 20 26,552 52,090 - -
Deferred income tax asset 37 328 352 - -
Investments 21 - - 5,107 5,107
Other non-current receivables 23 11,478 7,347 268,750 269,241
------------------------------------ ------ ----------- ----------- ------------ ------------
360,555 444,678 274,041 274,758
------------------------------------ ------ ----------- ----------- ------------ ------------
Current assets
Inventories 24 13,149 10,452 - -
Trade and other receivables 23 8,715 6,210 19,577 34,204
Restricted cash 25 264 3,516 - 3,284
Cash and cash equivalents 25 60,298 55,695 35,812 40,189
------------------------------------ ------ ----------- ----------- ------------ ------------
82,426 75,873 56,789 77,677
------------------------------------ ------ ----------- ----------- ------------ ------------
Assets of disposal group classified
as held for sale 22 64 38 - -
------------------------------------ ------ ----------- ----------- ------------ ------------
82,490 75,911 55,389 77,677
------------------------------------ ------ ----------- ----------- ------------ ------------
Total assets 443,045 520,589 329,430 352,435
------------------------------------ ------ ----------- ----------- ------------ ------------
Equity attributable to owners
of the parent
Ordinary shares 26 1,821 1,765 1,821 1,765
Share premium 26 205,437 191,988 205,437 191,988
Treasury shares 26 (15,831) (2,360) (15,831) (2,360)
Currency translation reserve 27 (134,092) (104,781) - -
Retained earnings 312,107 323,951 94,354 77,943
369,442 410,563 285,781 269,336
------------------------------------ ------ ----------- ----------- ------------ ------------
Non-controlling interests 21 (1,322) (1,316) - -
------------------------------------ ------ ----------- ----------- ------------ ------------
Total equity 368,120 409,247 285,781 269,336
------------------------------------ ------ ----------- ----------- ------------ ------------
Liabilities
Non-current liabilities
Silver streaming commitment 30 17,085 18,220 - -
Deferred income tax liability 37 17,286 23,229 - -
Lease liability 10 334 - 199
Provisions for other liabilities
and charges 32 20,744 18,917 - -
55,125 60,700 - 199
------------------------------------ ------ ----------- ----------- ------------ ------------
Current liabilities
Borrowings 31 1,390 32,978 - 23,406
Silver streaming commitment 30 1,095 1,229 - -
Trade and other payables 29 16,643 16,056 43,471 59,311
Lease liability 295 302 178 183
Provisions for other liabilities
and charges 32 333 49 - -
------------------------------------ ------ ----------- ----------- ------------ ------------
19,756 50,614 43,649 82,900
------------------------------------ ------ ----------- ----------- ------------ ------------
Liabilities of disposal group
classified as held for sale 22 44 28 - -
------------------------------------ ------ ----------- ----------- ------------ ------------
19,800 50,642 43,649 82,900
------------------------------------ ------ ----------- ----------- ------------ ------------
Total liabilities 74,925 111,342 43,649 83,099
------------------------------------ ------ ----------- ----------- ------------ ------------
Total equity and liabilities 443,045 520,589 329,430 352,435
------------------------------------ ------ ----------- ----------- ------------ ------------
The Company has elected to take the exemption under section 408
of the Companies Act 2006 not to present the parent company income
statement or statement of comprehensive income. The profit for the
parent company for the year was $62,066,000 (2021:
$13,585,000).
Consolidated Statement of Changes in Equity
for the year ended 31 December 2022
Non-controlling
Currency interests
Attributable Ordinary Share Treasury translation Retained Total $'000 Total
to owners of shares premium shares reserve earnings $'000 equity
the parent Note $'000 $'000 $'000 $'000 $'000 $'000
------------------- -------- ----------- --------- ---------- ------------ ---------- ---------- ---------------- ----------
Balance as
at 1 January
2021 1,765 191,537 (3,840) (73,498) 278,103 394,067 (1,315) 392,752
------------------- -------- ----------- --------- ---------- ------------ ---------- ---------- ---------------- ----------
Profit for the
year - - - - 84,177 84,177 (1) 84,176
Other
comprehensive
expense -
currency
translation
differences 27 - - - (31,283) - (31,283) - (31,283)
Total
comprehensive
income/(expense) - - - (31,283) 84,177 52,894 (1) 52,893
------------------- -------- ----------- --------- ---------- ------------ ---------- ---------- ---------------- ----------
Transactions
with owners
Share based
payments 28 - - - - 2,449 2,449 - 2,449
Exercise of
options 28 - 451 1,480 - (1,931) - - -
Dividends 35 - - - - (38,847) (38,847) - (38,847)
------------------- -------- ----------- --------- ---------- ------------ ---------- ---------- ---------------- ----------
Total
transactions
with owners,
recognised
directly
in equity - 451 1,480 - (38,329) (36,398) - (36,398)
------------------- -------- ----------- --------- ---------- ------------ ---------- ---------- ---------------- ----------
Balance as
at 31 December
2021 1,765 191,988 (2,360) (104,781) 323,951 410,563 (1,316) 409,247
------------------- -------- ----------- --------- ---------- ------------ ---------- ---------- ---------------- ----------
Profit for the
year - - - - 33,811 33,811 (6) 33,805
Other
comprehensive
expense -
currency
translation
differences 27 - - - (29,311) - (29,311) - (29,311)
------------------- -------- ----------- --------- ---------- ------------ ---------- ---------- ---------------- ----------
Total
comprehensive
income/(expense) - - - (29,311) 33,811 4,500 (6) 4,494
------------------- -------- ----------- --------- ---------- ------------ ---------- ---------- ---------------- ----------
Transactions
with owners
Shares issued 26 56 13,440 (13,496) - - - - -
Share based
payments 28 - - - - 3,818 3,818 - 3,818
Exercise of
options 28 - 9 25 - (1,263) (1,229) - (1,229)
Dividends 35 - - - - (48,210) (48,210) - (48,210)
------------------- -------- ----------- --------- ---------- ------------ ---------- ---------- ---------------- ----------
Total
transactions
with owners,
recognised
directly
in equity 56 13,449 (13,471) - (45,655) (45,621) - (45,621)
------------------- -------- ----------- --------- ---------- ------------ ---------- ---------- ---------------- ----------
Balance as
at 31 December
2022 1,821 205,437 (15,831) (134,092) 312,107 369,442 (1,322) 368,120
------------------- -------- ----------- --------- ---------- ------------ ---------- ---------- ---------------- ----------
Company Statement of Changes in Equity
for the year ended 31 December 2022
Ordinary Share Treasury Retained Total
Shares premium shares earnings equity
Company Note $'000 $'000 $'000 $'000 $'000
--------------------------- ------- -------- -------- ---------- ---------- -----------
Balance as at 1 January
2021 1,765 191,537 (3,840) 102,687 292,149
--------------------------- ------- -------- -------- ---------- ---------- -----------
Profit for the year - - - 13,585 13,585
--------------------------- ------- -------- -------- ---------- ---------- -----------
Total comprehensive
income - - - 13,585 13,585
--------------------------- ------- -------- -------- ---------- ---------- -----------
Transactions with
owners
Share based payments 28 - - - 2,449 2,449
Exercise of options 28 - 451 1,480 (1,931) -
Dividends 35 - - - (38,847) (38,847)
--------------------------- ------- -------- -------- ---------- ---------- -----------
Total transactions
with owners, recognised
directly in equity - 451 1,480 (38,329) (36,398)
--------------------------- ------- -------- -------- ---------- ---------- -----------
Balance as at 31 December
2021 1,765 191,988 (2,360) 77,943 269,336
--------------------------- ------- -------- -------- ---------- ---------- -----------
Profit for the year - - - 62,066 62,066
--------------------------- ------- -------- -------- ---------- ---------- -----------
Total comprehensive
income - - - 62,066 62,066
--------------------------- ------- -------- -------- ---------- ---------- -----------
Transactions with
owners
Shares issued 26 56 13,440 (13,496) - -
Share based payments 28 - - - 3,818 3,818
Exercise of options 28 - 9 25 (1,263) (1,229)
Dividends 35 - - (48,210) (48,210)
--------------------------- ------- -------- -------- ---------- ---------- -----------
Total transactions
with owners, recognised
directly in equity 56 13,449 (13,471) (45,655) (45,621)
--------------------------- ------- -------- -------- ---------- ---------- -----------
Balance as at 31 December
2022 1,821 205,437 (15,831) 94,354 285,781
--------------------------- ------- -------- -------- ---------- ---------- -----------
Consolidated Statement of Cash Flows
for the year ended 31 December 2022
2022 2021
Note $'000 $'000
------------------------------------------- ---- ---- -------- ---------- ----------
Cash flows from operating activities
Cash generated from operations 33 122,565 136,555
Interest paid (554) (2,378)
Corporate income tax paid (22,166) (21,572)
Net cash flow generated from operating
activities 99,845 112,605
------------------------------------------------------- -------- ---------- ----------
Cash flows from investing activities
Purchase of property, plant and equipment (17,396) (14,692)
Proceeds from sale of property, plant
and equipment 7 16
Purchase of intangible assets (68) (56)
Interest received 15 515 74
Decrease in restricted cash 25 3,252 125
Net cash used in investing activities (13,690) (14,533)
------------------------------------------------------- -------- ---------- ----------
Cash flows from financing activities
Drawdown of overdraft 31 - 644
Repayment of overdraft 31 (7,531) -
Repayment of borrowings 31 (23,820) (48,400)
Dividends paid to owners of the parent 35 (48,210) (38,847)
Cash settlement of share options (1,939) -
Receipt on exercise of share options 28 6 13
Net cash used in financing activities (81,494) (86,590)
------------------------------------------------------- -------- ---------- ----------
Effect of foreign exchange loss on cash
and cash equivalents (31) (38)
Net increase in cash and cash equivalents 4,630 11,444
Cash and cash equivalents at the beginning
of the year 25 55,731 44,287
------------------------------------------------------- -------- ---------- ----------
Cash and cash equivalents at the end
of the year 25 60,361 55,731
------------------------------------------------------- -------- ---------- ----------
Cash and cash equivalents at 31 December 2022 includes cash at
bank and on hand included in assets held for sale of $63,000 (31
December 2021: $36,000) (note 22). The consolidated statement of
cash flows does not include the restricted cash balance of $264,000
(2021: $3,516,000) (note 25).
The notes below are an integral part of the consolidated
financial information.
Notes to the Financial Information
for the year ended 31 December 2022
1. General information
Central Asia Metals plc ('CAML' or the 'Company') and its
subsidiaries (the 'Group') are a mining organisation with
operations in Kazakhstan and North Macedonia and a parent holding
company based in England in the United Kingdom ('UK').
The Group's principal business activities are the production of
copper cathode at its Kounrad operations in Kazakhstan and the
production of lead, zinc and silver at its Sasa operations in North
Macedonia. CAML owns 100% of the Kounrad SX-EW copper project in
Kazakhstan and 100% of the Sasa zinc-lead mine in North Macedonia.
The Company also owns a 76% equity interest in Copper Bay Limited
which is currently held for sale. See note 22 for details.
CAML is a public limited company, which is listed on the AIM
market of the London Stock Exchange and incorporated and domiciled
in England, UK. The address of its registered office is Masters
House, 107 Hammersmith Road, London, W14 0QH. The Company's
registered number is 5559627.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of
the consolidated financial information are set out below. These
policies have been consistently applied to all the years presented,
unless otherwise stated.
Basis of preparation of the Financial Information
The financial information set out herein does not constitute the
Group's statutory financial statements for the year ended 31
December 2022, but is derived from the Group's audited financial
statements. The auditors have reported on the 2022 financial
statements and their reports were unqualified and did not contain
statements under s498(2) or (3) Companies Act 2006, nor did they
contain a material uncertainty in relation to going concern. The
2022 Annual Report was approved by the Board of Directors on 28
March 2023, and will be mailed to shareholders in April 2023. The
financial information in this statement is audited but does not
have the status of statutory accounts within the meaning of Section
434 of the Companies Act 2006.
The Group's consolidated financial statements, which form part
of the 2022 Annual Report, have been prepared in accordance with
international accounting standards as adopted in the United Kingdom
and the Companies Act 2006. The consolidated financial statements
have been prepared under the historical cost convention with the
exception of assets held for sale which have been held at fair
value. The accounting policies which follow set out those policies
which apply in preparing the financial statements for the year
ended 31 December 2022. The Group financial information is
presented in US Dollars ($) and rounded to the nearest
thousand.
The parent company meets the definition of a qualifying entity
under FRS 100 (Financial Reporting Standard 100) issued by the
Financial Reporting Council. The parent company financial
statements have therefore been prepared in accordance with FRS
101
(Financial Reporting Standard 101) 'Reduced Disclosure
Framework' as issued by the Financial Reporting Council. As
permitted by
FRS 101, the Company has taken advantage of the disclosure
exemptions available under that standard in relation to
share-based
payments, financial instruments, fair value measurements,
capital management, presentation of a cash flow statement, new
standards not yet effective, impairment of assets and related
party transactions. Where relevant, equivalent disclosures have
been
given in the Group financial statements of Central Asia Metals
plc.
The preparation of the Group financial information in conformity
with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in
the process of applying the Group's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas
where assumptions and estimates are significant to the consolidated
financial information are explained in note 4.
Going concern
The Group sells and distributes its copper cathode product
primarily through an annual rolling offtake arrangement with Traxys
Europe S.A. ('Traxys') with a minimum of 95% of the SX-EW plant's
forecasted output committed as sales. The Group sells Sasa's zinc
and lead concentrate product through an annual rolling offtake
arrangement with Traxys. The commitment is for 100% of the Sasa
concentrate production.
The Group meets its day to day working capital requirements
through its profitable and cash generative operations at Kounrad
and
Sasa. The Group manages liquidity risk by maintaining adequate
committed borrowing facilities and the Group has substantial
cash
balances as at 31 December 2022.
The Board has reviewed forecasts for the period to December 2024
to assess the Group's liquidity which demonstrate substantial
headroom. The Board have considered additional sensitivity
scenarios in terms of the Group's commodity price forecasts,
expected production volumes, operating cost profile and capital
expenditure. The Board have assessed the key risks which could
impact the prospects of the Group over the going concern period
including commodity price outlook, cost inflation and supply chain
disruption with reverse stress testing of the forecasts in line
with best practice. Liquidity headroom was demonstrated in each
reasonably possible scenario. Accordingly, the Directors continue
to adopt the going concern basis in preparing the consolidated
financial information.
Please refer to notes 6, 25 and 29 for information on the
Group's revenues, cash balances and trade and other payables.
New and amended standards and interpretations adopted by the
Group
The Group has adopted the following standards and amendments for
the first time for the annual reporting period commencing 1 January
2022, however there is no impact on the current reporting
period:
IAS 37 - Onerous Contracts - Cost of Fulfilling a Contract
amending the standard regarding costs a company should include as
the cost of fulfilling a contract when assessing whether a contract
is onerous.
IAS 16 - Property, Plant and Equipment - Proceeds before
Intended Use regarding proceeds from selling items produced while
bringing an asset into the location and condition necessary for it
to be capable of operating in the manner intended by
management.
New standards, interpretations, and amendments not yet
effective
Certain new accounting standards and interpretations have been
published that are not mandatory for 31 December 2022 reporting
periods and have not been early adopted by the Group. These
standards include:
IAS 1 - Presentation of Financial statements - The
classification of liabilities as current or non-current basing the
classification on contractual arrangements at the reporting date.
These amendments are effective for periods beginning 1 January
2024.
Amendments to IAS 8 - Definition of Accounting Estimates
effective 1 January 2023.
Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure
of Accounting policies effective 1 January 2023.
These standards are not expected to have a material impact on
the entity in the current or future reporting periods and on
foreseeable future transactions.
Basis of consolidation
The Group financial statements consolidate the financial
statements of CAML and the entities it controls drawn up to 31
December 2022.
Subsidiaries are all entities (including structured entities)
over which the Group has control. The Group controls an entity when
the Group is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the
Group. They are deconsolidated from the date that control
ceases.
Intercompany transactions, balances and unrealised losses/gains
on transactions between Group companies are eliminated. Unrealised
losses/gains are also eliminated but considered an impairment
indicator of the asset transferred. Accounting policies of
subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Business combinations
The Group applies the acquisition method to account for business
combinations. The consideration transferred for the acquisition of
a subsidiary is the fair value of the assets transferred, the
liabilities incurred to the former owners of the acquiree and the
equity interests issued by the Group. The consideration transferred
includes the fair value of any asset or liability resulting from a
contingent consideration arrangement. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the
acquisition date. The Group recognises any non-controlling interest
in the acquiree on an acquisition-by-acquisition basis, either at
fair value or at the non-controlling interest's proportionate share
of the recognised amounts of the acquiree's identifiable net
assets. Acquisition-related costs are expensed as incurred and
reported within other expenses.
Goodwill
The excess of the consideration transferred of a business
combination, the amount of any non-controlling interest in the
acquired entity, and acquisition-date fair value of any previous
equity interest in the acquired entity over the fair value of the
net identifiable assets acquired is recorded as goodwill. If those
amounts are less than the fair value of the net identifiable assets
of the business acquired, the difference is recognised directly in
profit or loss as a bargain purchase. Goodwill is capitalised as an
intangible asset with any impairment in carrying value being
charged to the consolidated statement of comprehensive income.
Where the fair value of identifiable assets, liabilities and
contingent liabilities exceed the fair value of consideration paid,
the excess is credited in full to the consolidated statement of
comprehensive income on the acquisition date.
After initial recognition, goodwill is stated at cost less any
accumulated impairment losses, with the carrying value being
reviewed for impairment, at least annually and whenever events or
changes in circumstances indicate that the carrying value may be
impaired.
For the purpose of impairment testing, goodwill is allocated to
the cash-generating unit expected to benefit from the business
combination in which the goodwill arose. Where the recoverable
amount is less than the carrying amount, including goodwill, an
impairment loss is recognised in the income statement. The carrying
amount of goodwill allocated to an entity is taken into account
when determining the gain or loss on disposal of the unit.
Where settlement of any part of cash consideration is deferred,
the amounts payable in the future are discounted to their present
value as at the date of exchange. The discount rate used is the
entity's incremental borrowing rate, being the rate at which a
similar borrowing could be obtained from an independent financier
under comparable terms and conditions.
Non-controlling interests
Non-controlling interests represent the portion of profit or
loss and net assets in subsidiaries that are not held by the Group
and are presented separately within equity in the consolidated
statement of financial position distinct from parent shareholder's
equity.
Where losses are incurred by a partially owned subsidiary, they
are consolidated such that the non-controlling interests' share in
the losses is apportioned in the same way as profits.
Where profits are then made in future periods, such profits are
then allocated to the parent company until all unrecognised losses
attributable to the non-controlling interests but absorbed by the
parent are recovered at which point, profits are allocated as
normal.
Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker
which is considered to be the Board. The Group's segmental
reporting reflects the operational focus of the Group. The Group
has been organised into geographical and business units based on
its principal business activities of mining production, having two
reportable segments as follows:
-- Kounrad (production of copper cathode) in Kazakhstan
-- Sasa (production of lead, zinc and silver) in North Macedonia
Included within the unallocated segment are corporate costs for
Central Asia Metals Plc and other holding companies within the
Group which are not separately reported to the Board.
Foreign currency translation
The functional currency for each entity in the Group is
determined as the currency of the primary economic environment in
which it operates. The consolidated financial statements are
presented in US Dollars, which is the Group and Company
presentation currency. The functional currency of the Company is US
Dollars.
Transactions in currencies other than the currency of the
primary economic environment in which they operate are initially
recorded at the rate ruling at the date of the transaction. Foreign
currency monetary assets and liabilities denominated in foreign
currencies are retranslated at the functional currency rate of
exchange ruling at the reporting date. Exchange differences arising
on the retranslation of unsettled monetary assets and liabilities
are recognised immediately in profit or loss.
Exchange gains and losses arising on the retranslation of
monetary financial assets are treated as a separate component of
the change in fair value and recognised in profit or loss. Exchange
gains and losses on non-monetary OCI financial assets form part of
the overall gain or loss in OCI recognised in respect of that
financial instrument.
On consolidation, the results of overseas operations are
translated into USD at rates approximating to those ruling when the
transactions took place. All assets and liabilities of overseas
operations, including goodwill arising on the acquisition of those
operations, are translated at the rate ruling at the reporting
date. Exchange differences arising on translating the opening net
assets at opening rate and the results of overseas operations at
actual rates are recognised in other comprehensive income and
accumulated in the foreign exchange reserve.
On disposal of a foreign operation, the cumulative exchange
differences recognised in the foreign exchange reserve relating to
that operation up to the date of disposal are transferred to the
consolidated statement of comprehensive income as part of the
profit or loss on disposal.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses. Cost
comprises the aggregate amount paid and the fair value of any other
consideration given to acquire the asset and includes costs
directly attributable to making the asset capable of operating as
intended.
The cost of the item also includes the cost of decommissioning
any buildings or plant and equipment and making good the site,
where a present obligation exists to undertake the rehabilitation
work.
Development costs relating to specific mining properties are
capitalised once management determines a property will be
developed. A development decision is made based upon consideration
of project economics, including future metal prices, reserves and
resources, and estimated operating and capital costs.
Capitalisation of costs incurred and proceeds received during the
development phase ceases when the property is capable of operating
at levels intended by management and is considered commercially
viable. Costs incurred during the production phase to increase
future output by providing access to additional reserves, are
deferred and depreciated on a units-of-production basis over the
component of the reserves to which they relate. Ore reserves may be
declared for an undeveloped mining project before its commercial
viability has been fully determined. Development costs incurred
after the commencement of production are capitalised to the extent
they are expected to give rise to a future economic benefit.
Development costs are not depreciated until such time as the areas
under development enter production.
Depreciation is provided on all property, plant and equipment on
a straight-line basis over its total expected useful life. As at 31
December 2022 the remaining useful lives were as follows:
-- Construction in progress - not depreciated
-- Land - not depreciated
-- Plant and equipment - over 5 to 16 years
-- Mining assets - over 2 to 16 years
-- Motor vehicles - over 2 to 10 years
-- Office equipment - over 2 to 10 years
-- Right of use assets - term of lease agreement
Mineral rights are depreciated on a Unit of Production basis
('UoP'), in proportion to the volume of ore mined in the year
compared with total proven and probable reserves as well as
measured, indicated and certain inferred resources which are
considered to have a sufficiently high certainty of commercial
extraction at the beginning of the year. Assets within operations
for which production is not expected to fluctuate significantly
from one year to another or which have a physical life shorter than
the related mine are depreciated on a straight-line basis.
Construction in progress is not depreciated until transferred to
other classes of property, plant and equipment.
The carrying values of property, plant and equipment are
reviewed for impairment if events or changes in circumstances
indicate the carrying value may not be recoverable and are written
down immediately to their recoverable amount. Useful lives and
residual values are reviewed annually and where adjustments are
required, these are made prospectively.
An item of property, plant and equipment is de-recognised upon
disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Any gain or loss arising on
de-recognition of the asset is included in the income
statement.
Leases
Leases are recognised as a right-of-use asset and a
corresponding liability at the date at which the leased asset is
available for use by the Group.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
-- fixed payments (including in-substance fixed payments), less
any lease incentives receivable and variable payments based on
index or rate;
-- amounts expected to be payable by the Group under residual value guarantees; and
-- payments of penalties for terminating the lease, if the lease
term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be readily determined,
which is generally the case for leases in the Group, the lessee's
incremental borrowing rate is used, being the rate that the
individual lessee would have to pay to borrow the funds necessary
to obtain an asset of similar value to the right-of-use asset in a
similar economic environment with similar terms, security and
conditions.
The Group leases offices and equipment. Rental contracts are
typically made for fixed periods of six months to five years and
have extension options. Lease terms are negotiated on an individual
basis and contain a wide range of different terms and conditions.
The lease agreements do not impose any covenants other than the
security interests in the leased assets that are held by the
lessor. Leased assets may not be used as security for borrowing
purposes.
Intangible assets
a) Exploration and evaluation expenditure
Capitalised costs include costs directly related to any Group
exploration and evaluation activities in areas of interest for
which there is a high degree of confidence in the feasibility of
the project. Exploration and evaluation expenditure capitalised
includes acquisition of rights to explore, topographical,
geological, geochemical and geophysical studies, exploration
drilling, trenching, sampling and activities in relation to the
evaluation of the technical feasibility and commercial viability of
extracting a mineral resource.
Exploration and evaluation assets are measured at cost less
provision for impairment, where required.
b) Mining licences, permits and computer software
The historical cost model is applied, with intangible assets
being carried at cost less accumulated amortisation and accumulated
impairment losses. Intangible assets with a finite life have no
residual value and are amortised on a straight-line basis over
their expected useful lives with charges included in either cost of
sales or administrative expenses:
Computer software - over 2 to 5 years
Mining licences and permits - over the duration of the legal agreement
The carrying value of intangible assets is reviewed for
impairment whenever events or changes in circumstances indicate the
carrying value may not be recoverable.
Impairment of non-financial assets
The Group carries out impairment testing on all assets when
there exists an indication of an impairment. If any such indication
exists, the Group makes an estimate of the asset's recoverable
amount. An asset's recoverable amount is the higher of an asset's
or cash-generating unit's fair value less costs to sell or its
value in use.
Where the carrying amount of an asset exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount. Impairment losses are recognised in the income
statement.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and risks specific to the asset.
The best evidence of an asset's fair value is the value obtained
from an active market or binding sale agreement. Where neither
exists, fair value less costs to sell is based on the best
available information to reflect the amount the Group could receive
for the cash-generating unit in an arm's length sale. In some
cases, this is estimated using a discounted cash flow analysis on a
post-tax basis.
A previously recognised impairment loss is reversed if the
recoverable amount increases as a result of a reversal of the
conditions that originally resulted in the impairment. This
reversal is recognised in the income statement and is limited to
the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised in prior
years.
Goodwill is also reviewed annually, as well as whenever events
or changes in circumstances indicate that the carrying amount may
not be recoverable. Non-financial assets other than goodwill which
have suffered an impairment are reviewed for possible reversal of
the impairment at each reporting date.
Revenue
IFRS 15 establishes a comprehensive framework for determining
whether, how much and when revenue is recognised. These steps are
as follows: identification of the customer contract; identification
of the contract performance obligations; determination of the
contract price; allocation of the contract price to the contract
performance obligations; and revenue recognition as performance
obligations are satisfied.
Under IFRS 15, revenue is recognised when the performance
obligations are satisfied and the customer obtains control of the
goods or services, usually when title has passed to the buyer and
the goods have been delivered in accordance with the contractual
delivery terms.
Revenue is measured at the fair value of consideration received
or receivable from sales of metal to an end user, net of any
buyers' discount, treatment charges and value added tax. The Group
recognises revenue when the amount of revenue can be reliably
measured and when it is probable that future economic benefits will
flow to the entity.
The value of consideration is fair value which equates to the
contractually agreed price. The offtake agreements provide for
provisional pricing i.e. the selling price is subject to final
adjustment at the end of the quotation period based on the average
price for the month following delivery to the buyer. Such a
provisional sale contains an embedded derivative which is not
required to be separated from the underlying host contract, being
the sale of the commodity. At each reporting date, if any sales are
provisionally priced, the provisionally priced copper cathode, zinc
and lead sales are marked-to-market using forward prices, with any
significant adjustments (both gains and losses) being recorded in
revenue in the income statement and in trade receivables in the
statement of financial position.
The Company may mitigate commodity price risk by fixing the
price in advance for its copper cathode with the offtake partner
and also its zinc and lead sales with the banks where a facility
has been set up and agreed. The price fixing arrangements are
outside the scope of IFRS 9 Financial Instruments: Recognition and
Measurement and do not meet the criteria for hedge accounting.
The Group reports both a gross revenue and revenue line. Gross
revenue is reported after deductions of treatment charges but
before deductions of offtaker fees and silver purchases under the
Silver Stream (note 6).
Inventory
Inventories are stated at the lower of cost and net realisable
value. Cost is determined using the weighted average method.
The cost of finished goods and work in progress comprises raw
materials, direct labour and all other direct costs associated with
mining the ore and processing it to a saleable product.
Net realisable value is the estimated selling price in the
ordinary course of business, less any further costs expected to be
incurred to completion. Provision is made, if necessary, for
slow-moving, obsolete and defective inventory.
Non-current assets (or disposal groups) held for sale and
discontinued operations
Non-current assets (or disposal groups) are classified as held
for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use and a
sale is considered highly probable. They are measured at the lower
of their carrying amount and fair value less costs to sell, except
for assets such as deferred tax assets, assets arising from
employee benefits, financial assets and investment property that
are carried at fair value and contractual rights under insurance
contracts, which are specifically exempt from this requirement.
An impairment loss is recognised for any Initial or subsequent
write-down of the asset (or disposal group) to fair value less
costs to sell. A gain is recognised for any subsequent increases in
fair value less costs to sell an asset (or disposal group), but not
in excess of any cumulative impairment loss previously recognised.
A gain or loss not previously recognised by the date of the sale of
the non-current asset (or disposal group) is recognised at the date
of derecognition.
Non-current assets (including those that are part of a disposal
group) are not depreciated or amortised while they are classified
as held for sale. Interest and other expenses attributable to the
liabilities of a disposal group classified as held for sale
continue to be recognised.
Non-current assets classified as held for sale and the assets of
a disposal group classified as held for sale are presented
separately from the other assets in the balance sheet. The
liabilities of a disposal group classified as held for sale are
presented separately from other liabilities in the balance
sheet.
A discontinued operation is a component of the entity that has
been disposed of or is classified as held for sale and that
represents a separate major line of business or geographical area
of operations, is part of a single co-ordinated plan to dispose of
such a line of business or area of operations, or is a subsidiary
acquired exclusively with a view to resale. The results of
discontinued operations are presented separately in the statement
of comprehensive income.
Current and deferred income tax
The current income tax charge is calculated based on the tax
laws enacted or substantively enacted at the reporting date in the
countries where the Group's subsidiaries operate and generate
taxable income.
Deferred income tax assets and liabilities are recognised where
the carrying amount of an asset or liability in the consolidated
statement of financial position differs from its tax base, except
for differences arising on:
-- The initial recognition of goodwill,
-- The initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of
the transaction affects neither accounting or taxable profit,
and
-- Investments in subsidiaries and joint arrangements where the
Group is able to control the timing of the reversal of the
difference and it is probable that the difference will not reverse
in the foreseeable future.
Recognition of deferred tax assets is restricted to those
instances where it is probable that taxable profit will be
available against which the difference can be utilised. The amount
of the asset or liability is determined using tax rates that have
been enacted or substantively enacted by the reporting date and are
expected to apply when the deferred tax liabilities/(assets) are
settled/(recovered). When there is uncertainty concerning the
Group's filing position regarding the tax bases of assets or
liabilities, the taxability of certain transactions or other
tax-related assumptions, then the Group:
-- Considers whether uncertain tax treatments should be
considered separately, or together as a group, based on which
approach provides better predictions of the resolution;
-- Determines if it is probable that the tax authorities will
accept the uncertain tax treatment; and
-- If it is not probable that the uncertain tax treatment will
be accepted, measure the tax uncertainty based on the most likely
amount or expected value, depending on whichever method better
predicts the resolution of the uncertainty. This measurement is
required to be based on the assumption that each of the tax
authorities will examine amounts they have a right to examine and
have full knowledge of all related information when making those
examinations.
Deferred income tax assets and liabilities are offset when the
Group has a legally enforceable right to offset current tax assets
and liabilities and the deferred tax assets and liabilities relate
to taxes levied by the same tax authority on either:
-- The same taxable group company, or
-- Different group entities which intend either to settle
current tax assets and liabilities on a net basis, or to realise
the assets and settle the liabilities simultaneously, in each
future period in which significant amounts of deferred tax assets
or liabilities are expected to be settled or recovered.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held
at call with banks and other short-term highly liquid investments
with original maturities of three months or less.
Restricted cash
Restricted cash is cash with banks that is not available for
immediate use by the Group. Restricted cash is shown separately
from cash and cash equivalents on the statement of financial
position.
Investments
Investments in subsidiaries are recorded at cost less provision
for impairment.
Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares are shown in
equity as a deduction, net of tax, from the proceeds.
Treasury shares
Where any Group company purchases the Company's equity share
capital (treasury shares), the consideration paid, including any
directly attributable incremental costs (net of income taxes) is
deducted from equity attributable to the Company's equity holders
until the shares are cancelled or reissued. Where such ordinary
shares are subsequently reissued, any consideration received, net
of any directly attributable incremental transaction costs and the
related income tax effects, is included in equity attributable to
the Company's equity holders.
Share based compensation
Where equity settled share options are awarded to employees, the
fair value of the options at the date of grant is charged to the
consolidated statement of comprehensive income over the vesting
period. Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each
reporting date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of
options that eventually vest. Non-vesting conditions and market
vesting conditions are factored into the fair value of the options
granted. As long as all other vesting conditions are satisfied, a
charge is made irrespective of whether the market vesting
conditions are satisfied. The cumulative expense is not adjusted
for failure to achieve a market vesting condition or where a
non-vesting condition is not satisfied. An option pricing model is
used to measure the fair value of the options.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the consolidated statement of comprehensive income over the
remaining vesting period.
Where the Company has no choice but to settle in cash, for
example due to the inability to settle in shares, the Company shall
recognise an additional expense for the excess value given at the
settlement date.
Trade and other receivables
Trade and other receivables are accounted for under IFRS 9 using
the expected credit loss model and are initially recognised at fair
value and subsequently measured at amortised cost less any
allowance for expected credit losses.
Impairment of financial assets
Impairment provisions for current and non-current trade
receivables are recognised based on the ' simplified approach '
within IFRS 9 using a provision matrix in the determination of the
lifetime expected credit losses. During this process the
probability of the non-payment of the trade receivables is
assessed. This probability is then multiplied by the amount of the
expected loss arising from default to determine the lifetime
expected credit loss for the trade receivables. For trade
receivables, which are reported net, such provisions are recorded
in a separate provision account with the loss being recognised in
profit or loss. On confirmation that the trade receivable will not
be collectable, the gross carrying value of the asset is written
off against the associated provision.
Impairment provisions for receivables from subsidiaries and
loans to subsidiaries are recognised based on the 'general
approach' within IFRS 9. The methodology used to determine the
amount of the provision is based on whether there has been a
significant increase in credit risk since initial recognition of
the financial asset with the assessment also taking into account
the ability of the subsidiary to repay the receivable or loan in
the event that it was called due. For those where the credit risk
has not increased significantly since initial recognition of the
financial asset, twelve month expected credit losses along with
gross interest income are recognised. For those for which credit
risk has increased significantly, lifetime expected credit losses
along with the gross interest income are recognised. For those that
are determined to be credit impaired, lifetime expected credit
losses along with interest income on a net basis are recognised.
Lifetime expected credit losses are the expected credit losses that
result from all possible default events over the expected life of
the loan whereas twelve month expected credit losses are a portion
of lifetime expected credit losses that represent the expected
credit losses that result from default events that are possible
within twelve months of the reporting date.
From time to time, the Group elects to renegotiate the terms of
trade receivables due from customers with which it has previously
had a good trading history. Such renegotiations will lead to
changes in the timing of payments rather than changes to the
amounts owed and, in consequence, the new expected cash flows are
discounted at the original effective interest rate and any
resulting difference to the carrying value is recognised in the
consolidated statement of comprehensive income (operating
profit).
Trade and other payables
Trade and other payables are not interest bearing and are
initially recognised at fair value and subsequently measured at
amortised cost using the effective interest method.
Silver stream commitment
The silver stream arrangement has been accounted for as a
commitment as the Group has obligations to deliver silver to a
third party at a price below market value. On acquisition,
following completion of the business combination, the silver stream
commitment was identified as an unfavourable contract and recorded
at fair value. Payments received under the arrangement prior to the
acquisition by the Group were not considered to be a transaction
with a customer. Management has determined that the agreement is
not a derivative as it will be satisfied through the delivery of
non-financial items (i.e. silver commodity from the Company's
production), rather than cash or financial assets. Subsequent to
initial recognition the silver stream commitment is not revalued
and is amortised on a units of production basis to cost of
sales.
The fair value of consideration received for delivered silver
under the agreement is recorded as revenue. In addition, silver
produced in conjunction with the Group's lead and zinc production
and sold under the offtake agreement is recorded in gross revenue
with a corresponding deduction for silver purchased to deliver
under the silver stream recorded in arriving at net revenue.
Borrowings
Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption amount is recognised in
profit or loss over the period of the borrowings using the
effective interest method. Fees paid on the establishment of loan
facilities are recognised as transaction costs of the loan to the
extent that it is probable that some or all of the facility will be
drawn down. In this case, the fee is deferred until the draw down
occurs. To the extent there is no evidence that it is probable that
some or all of the facility will be drawn down, the fee is
capitalised as a prepayment for liquidity services and amortised
over the period of the facility to which it relates.
Borrowings are removed from the balance sheet when the
obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial
liability that has been extinguished or transferred to another
party and the consideration paid, including any non-cash assets
transferred or liabilities assumed, is recognised in profit or loss
as other income or finance costs.
Borrowings are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting period.
Derivative financial instruments
The Group may use commodity price contracts to reduce its
exposure to risks from commodity price movements. Derivative
financial instruments are primarily used as a means of managing
exposure to price in line with the Group risk management strategy.
Derivative financial liabilities are initially recognised and
measured at fair value on the date a derivative contract is entered
into and then subsequently re-measured at fair value by reference
to valuation models and the probability of outcome scenarios and
categorised as level 2 measurements:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
-- Inputs other than quoted prices within level 1 that are
observable for the asset or liability, either directly (that is, as
prices) or indirectly (that is, derived from prices) (level 2)
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level 3).
For the derivative contracts held the Group are recognising the
financial instruments with level 2 data as the valuation is
obtained using MTM market data using the forward curve of the
commodity prices. However, there is no readily observable market
information for these exact derivative instruments. The realised
losses gains are recognised in other gains and losses in the income
statement.
Provisions
a) Asset retirement obligation
Provisions for environmental restoration of mining operations
are recognised when the Group has a present legal or constructive
obligation as a result of past events; it is probable that an
outflow of resources will be required to settle the obligation; and
the amount can be reliably estimated. Provisions are not recognised
for future operating losses.
Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation using a pre-tax
rate that reflects current market assessments of the time value of
money and the cash flows incorporate assessments of risk. The
increase in the provision due to passage of time is recognised as
interest expense.
b) Employee benefits - pension
The Group, in the normal course of business, makes payments on
behalf of its employees for pensions, health-care, employment and
personnel tax, which are calculated based on gross salaries and
wages according to legislation. The cost of these payments is
charged to the consolidated statement of comprehensive income in
the same period as the related salary cost.
c) Employee benefits - retirement benefits and jubilee awards
Pursuant to the labour law prevailing in the North Macedonian
subsidiaries, the Group is obliged to pay retirement benefits for
an amount equal to two average monthly salaries, at their
retirement date. According to the collective labour agreement, the
Group is also obliged to pay jubilee anniversary awards for each
ten years of continuous service of the employee. Due to the
long-term nature of these plans, such estimates are subject to
uncertainty.
Retirement benefit obligations arising on severance pay are
stated at the present value of expected future cash payments
towards the qualifying employees. These benefits have been
calculated by an independent actuary in accordance with the
prevailing rules of actuarial mathematics and recognised as a
liability with no pension plan assets (note 32). Actuarial gains
and losses arising from experience adjustments and changes in
actuarial assumptions are charged or credited to profit and loss
over the employees' expected average remaining working lives.
3. Financial instruments - risk management
The Group's activities expose it to a variety of financial
risks; market price risk (including foreign currency exchange risk,
commodity price risk and interest rate risk), liquidity risk,
capital risk and credit risk. These risks are mitigated wherever
possible by the Group's financial management policies and practices
described below. The Group's risk management is carried out by a
central treasury department (Group treasury) under policies
approved by the Board. Group treasury identifies, evaluates and
hedges financial risks in close co-operation with the Group's
operating units.
Foreign currency exchange risk
The Group operates internationally and is exposed to foreign
exchange risk arising from various currency exposures. The primary
Group currency requirements are US Dollar, British Pound,
Kazakhstan Tenge, Euro and North Macedonian Denar.
The following table highlights the major currencies the Group
operates in and the movements against the US Dollar during the
course of the year:
Average rate Reporting date
spot rate
2022 2021 Movement 2022 2021 Movement
Kazakhstan Tenge 460.15 425.91 8% 462.65 431.67 7%
Macedonian Denar 58.36 52.06 12% 57.65 54.37 6%
British Pound 0.80 0.73 10% 0.83 0.74 12%
----------------- --------- --------- -------- -------- -------- --------
Foreign exchange risk does not arise from financial instruments
that are non-monetary items or financial instruments denominated in
the functional currency. Kazakhstan Tenge and North Macedonian
Denar denominated monetary items are therefore not reported in the
tables below, as the functional currency of the Group's
Kazakhstan-based and North Macedonian-based subsidiaries is the
Tenge and Denar respectively.
The Group's exposure to foreign currency risk based on US Dollar
equivalent carrying amounts at the reported date:
Group
----------------------------- ------------------------------------------------------------------------------- -----------------------
2022
--------------------------------------------------------------------------------------------------------
In $'000 equivalent USD EUR GBP
----------------------------- ------------- ------------- --------------- ------------------ ------------ -----------------------
Cash and cash equivalents 20,055 556 886
Trade and other receivables - 2 167
Trade and other payables (20) (333) (3,268)
----------------------------- ------------- ------------- --------------- ------------------ ------------ -----------------------
Net exposure 20,035 225 (2,215)
----------------------------- ------------- ------------- --------------- ------------------ ------------ -----------------------
Group
----------------------------- -------------------------------------------------------------------------- ----------------------------
2021
--------------------------------------------------------------------------------------------------------
In $'000 equivalent USD EUR GBP
----------------------------- ------------ ------------ -------------- ----------------- ----------- ----------------------------
Cash and cash equivalents 10,495 865 2,452
Trade and other receivables 203 151 187
Trade and other payables (66) (353) (3,395)
----------------------------- ------------ ------------ -------------- ----------------- ----------- ----------------------------
Net exposure 10,632 663 (756)
----------------------------- ------------ ------------ -------------- ----------------- ----------- ----------------------------
Trade and other receivables excludes prepayments and VAT
receivable and trade and other payables excludes corporation tax,
social security and other taxes as they are not considered
financial instruments.
At 31 December 2022, if the foreign currencies had
weakened/strengthened by 10% against the US Dollar, post-tax Group
profit for the year would have been $1,804,000 lower/higher (2021:
$1,021,000 lower/higher).
Commodity price risk
The Group has a hedging policy in place to manage commodity
price risk however the Directors elected not to hedge during
2022.
The offtake agreement at Kounrad and Sasa provides for the
option of provisional pricing i.e. the selling price is subject to
final adjustment at the end of the quotation period based on the
average price for the month following delivery to the buyer. This
could result in fluctuations of revenue recognised ultimately. The
Company may mitigate commodity price risk by fixing the price in
advance for its copper cathode sales with the offtake partner.
The following table details the Group's sensitivity to a 10%
increase and decrease in the copper, zinc and lead price against
the invoiced price. 10% is the sensitivity used when reporting
commodity price internally to management and represents
management's assessment of the possible change in price. A positive
number below indicates an increase in profit for the year and other
equity where the price increases.
Estimated effect on earnings and equity
2022 2021
$'000 $'000
-------------------------------------------- --------- --------
10% increase in copper, zinc and lead price 23,931 17,312
-------------------------------------------- --------- --------
10% decrease in copper, zinc and lead price (23,931) (17,535)
-------------------------------------------- --------- --------
Liquidity risk
Liquidity risk relates to the ability of the Group to meet
future obligations and financial liabilities as and when they fall
due. The Group currently has sufficient cash resources and a
material income stream from the Kounrad and Sasa projects.
The following table sets out the contractual maturities
(representing undiscounted contractual cash-flows) of financial
liabilities. They agree to those amounts presented in the statement
of financial position because the impact of discounting is
immaterial.
Future expected payment s: Group
31 Dec 31 Dec
22 $'000 21 $'000
-------------------------------------------- --------- ---------
Trade and other payables within one year 12,751 8,224
Borrowings payable within one year (note
31) 1,390 32,978
Lease liability payable within one year 295 302
Lease liability payable later than one year
but not later than five years 10 334
14,446 41,838
-------------------------------------------- --------- ---------
Capital risk
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal structure to reduce the
cost of capital.
The Group manages its capital in order to provide sufficient
funds for the Group's activities. Future capital requirements are
regularly assessed and Board decisions taken as to the most
appropriate source for obtaining the required funds, be it through
internal revenue streams, external fund raising, issuing new shares
or selling assets. In order to maintain or adjust the capital
structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or
sell assets to reduce debt.
Consistent with others in the industry, the Group monitors
capital on the basis of the following gearing ratio:
Net cash
2022 2021
Note $'000 $'000
------------------------------------ ----- ----------- ----------
Cash and cash equivalents excluding
restricted cash 25 60,298 55,695
Bank overdraft 31 (1,390) (9,572)
Borrowings repayable within one
year 31 - (23,406)
Net cash 58,908 22,717
-------------------------------------------- ----- ----------- ----------
Total equity 368,120 409,247
-------------------------------------------- ----- ----------- ----------
Net cash to equity ratio 16% 6%
-------------------------------------------- ----- ----------- ----------
Changes in liabilities arising from financing activities
The total borrowings as at 1 January 2022 were $32,978,000 (1
January 2021: $80,412,000). During the year, total repayments on
the corporate debt package were $23,820,000 (2021: $48,400,000).
During the year, there were drawdowns on unsecured overdrafts of
$nil (2021: $644,000) and repayments of $7,531,000 (2021: $nil).
Other changes amounted to a reduction of $237,000 (2021: increase
of $322,000) leading to a closing debt balance of $1,390,000 (2021:
$32,978,000). See note 31 for more details.
The cash and cash equivalents including cash at bank and on hand
in assets held for sale brought forward were $55,731,000 (2021:
$44,287,000) with a net $4,630,000 inflow (2021: $11,444,000
inflow) during the year and therefore a closing balance of
$60,361,000 (2021: $55,731,000).
Credit risk
Credit risk refers to the risk that the Group's financial assets
will be impaired by the default of a third party. The Group is
exposed to credit risk primarily on its cash and cash equivalents
as set out in note 25 and on its trade and other receivables as set
out in note 23. The Group sells a minimum of 95% of Kounrad's
copper cathode production to the offtake partner which pays on the
day of dispatch and during the year 100% of Sasa's zinc and lead
concentrate was sold to Traxys which assumes the credit risk.
For banks and financial institutions, only parties with a
minimum rating of BBB- are accepted. 91% of the Group's cash and
cash equivalents including restricted cash at the year-end were
held by banks with a minimum credit rating of A- (2021: 98%). The
rest of the Group's cash was held with a mix of institutions with
credit ratings between A to BB- (2021: A to BBB-). The Directors
have considered the credit exposures and do not consider that they
pose a material risk at the present time. The credit risk for cash
and cash equivalents is managed by ensuring that all surplus funds
are deposited only with financial institutions with high quality
credit ratings.
The expected credit loss for intercompany loans receivable is
considered immaterial (note 23).
Interest rate risk
The Group's main interest rate risk arose from the corporate
debt which was repaid during the year.
Categories of financial instruments
Financial assets
Group
----------------------------------------------- --------------------
31 Dec 31 Dec
Cash and receivables: 22 $'000 21 $'000
----------------------------------------------- --------- ---------
Cash and cash equivalents including restricted
cash (note 25) 60,562 59,211
Trade and other receivables 4,178 2,343
------------------------------------------------- --------- ---------
64,740 61,554
----------------------------------------------- --------- ---------
Trade and other receivables excludes prepayments and VAT
receivable as they are not considered financial instruments. All
trade and other receivables are receivable within one year for both
reporting years.
Financial liabilities
Group
-------------------------------------------- --------------------
31 Dec 31 Dec
Measured at amortised cost: 22 $'000 21 $'000
-------------------------------------------- --------- ---------
Trade and other payables within one year 12,751 8,224
Borrowings payable within one year (note
31) 1,390 32,978
Lease liability within one year 295 334
Lease liability payable later than one year
but not later than five years 10 302
14,446 41,838
-------------------------------------------- --------- ---------
Trade and other payables excludes the silver streaming
commitment, corporation tax, social security and other taxes as
they are not considered financial instruments.
4. Critical accounting estimates and judgements
The preparation of the consolidated financial statements
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets and liabilities, income, and expense. Actual
results may differ from these judgements and estimates. The Group
makes certain estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions.
Significant accounting estimates and judgements
The following are significant accounting estimates and
judgements that have a significant risk of a material change to the
carrying value of assets and liabilities within the next financial
year:
Impairment of non-current assets
The carrying value of the goodwill generated by accounting for
the business combination of the Group acquiring an additional 40%
in the Kounrad project in May 2014 (the "Kounrad Transaction") and
the CMK Resources Limited acquisition in November 2017 requires an
annual impairment review. The carrying values of property, plant
and equipment are reviewed for impairment if events or changes in
circumstances indicate the carrying value may not be recoverable.
This review determines whether the value of the goodwill and
property, plant and equipment can be justified by reference to the
carrying value of the business assets and the future discounted
cash flows of the respective CGUs. The key assumptions used in the
Group's impairment assessments and sensitivity analysis are
disclosed in note 20.
Estimates are required periodically to assess assets for
impairment. The critical accounting estimates are future commodity
prices, treatment charges, future ore production, discount rates
and projected future costs of development and production. Ore
reserves and resources included in the forecasts include certain
resources considered to be sufficiently certain and economically
viable. The Group's resources statements include additional
resources which are not included in the life of mine plan or
impairment test.
Decommissioning and site rehabilitation estimates
Provision is made for the costs of decommissioning and site
rehabilitation costs ("asset retirement obligation") when the
related environmental disturbance takes place. External expert
consultants conducted an independent assessment and judgement and
experience is used in determining the expected timing, closure and
decommissioning methods, which can vary in response to changes in
the relevant legal requirements or decommissioning technologies.
The estimated Sasa decommissioning costs included a re-assessment
of the surrounding managing surface water in-line with the GISTM
and lining of the tailings facilities as well as updating the
discount rate using latest assumptions on inflation rates and
discount rates.
During the year, the Group engaged an external expert consultant
to prepare a conceptual closure plan and asset retirement
obligation for the Kounrad operation and associated infrastructure.
The increase in estimate in relation to the asset retirement
obligation is primarily due to additional estimated costs.
The discounted provision recognised represents management's best
estimate of the costs that will be incurred, and many of these
costs will not crystallise until the end of the life of the mine.
Estimates are reviewed annually and are based on current
contractual and regulatory requirements and the estimated useful
life of mines. Engineering and feasibility studies are undertaken
periodically and in the interim management make assessments for
appropriate changes based on the environmental management strategy;
however significant changes in the estimates of contamination,
restoration standards, timing of expenditure and techniques will
result in changes to provisions from period to period.
The Group has performed sensitivity analysis of reasonable
possible changes in the significant assumptions taking into account
historical experience, however the estimates may vary by greater
amounts. A 2% change in the discount rate would result in an impact
of $4,591,000 on the provision for asset retirement obligation. A
2% change in the inflation rate would result in an impact of
$6,339,000 on the provision for asset retirement obligation. A 20%
change in cost would result in an impact of $3,976,000 on the
provision for asset retirement obligation.
Mineral reserves and resources
The major value associated with the Group is the value of its
mineral reserves and resources. The value of the reserves and
resources have an impact on the Group's accounting estimates in
relation to depreciation and amortisation, impairment of assets and
the assessment of going concern. These resources are the Group's
best estimate of product that can be economically and legally
extracted from the relevant mining property.
The Group's estimates are supported by geological studies and
drilling samples to determine the quantity and grade of each
deposit. The Group estimates its mineral reserves and resources
based on information compiled by Competent Persons as defined in
accordance with the Joint Ore Reserves Committee (JORC) code. The
Kounrad resources were classified as JORC Compliant in 2013 and
mineral resources were estimated in June 2017 and the Sasa JORC ore
reserves and mineral resources were estimated on 31 December
2022.
The estimation of mineral reserves and resources requires
judgement to interpret available geological data to select an
appropriate mining method. Estimation requires assumptions about
future commodity prices, exchange rates, production costs, closure
costs and discount rates. Ore resource estimates may vary from
period to period. This judgement has a significant impact on
impairment consideration and the period over which capitalised
assets are depreciated within the financial statements.
Tax
Management make judgements in relation to the recognition of
various taxes payable and receivable by the Group and VAT
recoverability for which the recoverability and timing of recovery
is assessed. The Group operates in jurisdictions which necessarily
require judgment to be applied when assessing the applicable tax
treatment for transactions and the Group obtains professional
advice where appropriate to ensure compliance with applicable
legislation. To the extent that a final tax outcome is different
than the amounts recorded, such differences will impact income tax
in the period in which such determination is made.
5. Segmental information
The segmental results for the year ended 31 December 2022 are as
follows:
Kounrad Sasa Unallocated Total
$'000 $'000 $'000 $'000
--------------------------------------- ------------- ----------- ----------------- ------------
Gross revenue 123,657 108,549 - 232,206
Silver stream purchases - (7,080) - (7,080)
Offtake buyers' fees (3,090) (1,181) - (4,271)
--------------------------------------- ------------- ----------- ----------------- ------------
Revenue 120,567 100,288 - 220,855
--------------------------------------- ------------- ----------- ----------------- ------------
EBITDA 94,920 56,397 (19,706) 131,611
Depreciation and amortisation (3,705) (23,330) (250) (27,285)
Foreign exchange gain 3,287 3,318 224 6,829
Impairment of non-current assets (note
19,20) - (55,116) - (55,116)
Other income (note 11) 50 36 - 86
Finance income (note 15) 29 - 486 515
Finance costs (note 16) (214) (1,040) (806) (2,060)
--------------------------------------- ------------- ----------- ----------------- ------------
Profit/(loss) before income tax 94,367 (19,735) (20,052) 54,580
--------------------------------------- ------------- ----------- ----------------- ------------
Income tax (20,588)
--------------------------------------- ------------- ----------- ----------------- ------------
Profit for the year after tax from
continuing operations 33,992
--------------------------------------- ------------- ----------- ----------------- ------------
Loss from discontinued operations (187)
--------------------------------------- ------------- ----------- ----------------- ------------
Profit for the year 33,805
--------------------------------------- ------------- ----------- ----------------- ------------
Depreciation and amortisation include amortisation on the fair
value uplift on acquisition of Sasa and Kounrad of $15,419,000.
The segmental results for the year ended 31 December 2021 are as
follows:
Kounrad Sasa Unallocated Total
$'000 $'000 $'000 $'000
----------------------------------- ------------- ----------- ----------------- -----------
Gross revenue 132,039 103,113 - 235,152
Silver stream purchases - (8,040) - (8,040)
Offtake buyers' fees (2,586) (1,154) - (3,740)
----------------------------------- ------------- ----------- ----------------- -----------
Revenue 129,453 93,919 - 223,372
----------------------------------- ------------- ----------- ----------------- -----------
EBITDA 105,966 57,472 (21,934) 141,504
Depreciation and amortisation (4,007) (25,321) (244) (29,572)
Foreign exchange gain/(loss) 673 599 (58) 1,214
Other income (note 11) 147 7 12 166
Other expenses (note 10) (4) - (135) (139)
Finance income (note 15) 14 - 60 74
Finance costs (note 16) (157) (479) (3,284) (3,920)
----------------------------------- ------------- ----------- ----------------- -----------
Profit/(loss) before income tax 102,632 32,278 (25,583) 109,327
----------------------------------- ------------- ----------- ----------------- -----------
Income tax (25,147)
----------------------------------- ------------- ----------- ----------------- -----------
Profit for the year after tax from
continuing operations 84,180
----------------------------------- ------------- ----------- ----------------- -----------
Loss from discontinued operations (4)
----------------------------------- ------------- ----------- ----------------- -----------
Profit for the year 84,176
----------------------------------- ------------- ----------- ----------------- -----------
Depreciation and amortisation include amortisation on the fair
value uplift on acquisition of Sasa and Kounrad of $16,900,000.
A reconciliation between profit for the year and EBITDA is
presented in the Financial Review section.
Group segmental assets and liabilities for the year ended 31
December 2022 are as follows:
Segmental assets Additions to non-current Segmental liabilities
assets
---------------------- ------------------ -------------------------- ------------------------
31 Dec 31 Dec 21 31 Dec 31 Dec 21 31 Dec 31 Dec 21
22 22 22
$'000 $'000 $'000 $'000 $'000 $'000
---------------------- ------- --------- ----------- ------------- ---------- ------------
Kounrad 82,258 70,316 2,525 2,704 (13,928) (11,637)
Sasa 324,197 405,928 14,920 12,104 (54,718) (69,980)
Assets held for
sale (note 22) 64 38 - - (44) (28)
Unallocated including
corporate 36,526 44,307 19 17 (6,235) (29,697)
---------------------- ------- --------- ----------- ------------- ---------- ------------
443,045 520,589 17,464 14,825 (74,925) (111,342)
---------------------- ------- --------- ----------- ------------- ---------- ------------
6. Revenue
2022 2021
Group $'000 $'000
------------------------------------------ ---
International customers (Europe) - copper
cathode 122,371 131,464
International customers (Europe) - zinc
and lead concentrate 106,578 101,241
Domestic customers (Kazakhstan) - copper
cathode 1,286 574
International customers (Europe) - silver 1,971 1,873
--------------------------------------------------- ----------- ----------
Total gross revenue 232,206 235,152
--------------------------------------------------- ----------- ----------
Less:
Silver stream purchases (7,080) (8,040)
Offtake buyers' fees (4,271) (3,740)
Revenue 220,855 223,372
--------------------------------------------------- ----------- ----------
Kounrad
The Group sells and distributes its copper cathode product
primarily through an offtake arrangement with Traxys. The offtake
arrangements are for a minimum of 95% of the SX-EW plant's output.
Revenue is recognised at the Kounrad mine gate when the goods have
been delivered in accordance with the contractual delivery
terms.
The offtake agreement provides for the option of provisional
pricing i.e. the selling price is subject to final adjustment at
the end of the quotation period based on the average price for the
month following delivery to the buyer. The Company may mitigate
commodity price risk by fixing the price in advance for its copper
cathode sales with the offtake partner.
The costs of delivery to the end customers have been effectively
borne by the Group through means of an annually agreed buyer's fee
which is deducted from the selling price.
During 2022, the Group sold 14,192 tonnes (2021: 13,983 tonnes)
of copper through the offtake arrangements. Some of the copper
cathodes are also sold locally and during 2022, 150 tonnes (2021:
68 tonnes) were sold to local customers.
Sasa
The Group sells Sasa's zinc and lead concentrate product to
smelters through an offtake arrangement with Traxys. The commitment
is for 100% of the Sasa concentrate production. The agreements with
the smelters provide for provisional pricing i.e. the selling price
is subject to final adjustment at the end of the quotation period
based on the average price for the month, two months or three
months following delivery to the buyer and subject to final
adjustment for assaying results.
The Group sold 17,862 tonnes (2021: 18,856 tonnes) of payable
zinc in concentrate and 26,320 tonnes (2021: 25,245 tonnes) of
payable lead in concentrate.
The revenue arising from silver relates to a contract with
Osisko Gold Royalties where the Group has agreed to sell all of its
silver at approximately $6 per ounce for the life of the mine,
significantly below market value and arising from the silver stream
commitment inherited on acquisition (note 30).
7. Cost of sales
2022 2021
Group $'000 $'000
------------------------------------ --------- ---------
Reagents, electricity and materials 27,989 21,157
Depreciation and amortisation 26,709 28,937
Silver stream commitment (note 30) (1,971) (1,873)
Royalties 10,117 10,062
Employee benefit expense 17,951 16,356
Consulting and other services 6,106 5,491
Taxes and duties 370 381
87,271 80,511
------------------------------------ --------- ---------
8. Distribution and selling costs
2022 2021
Group $'000 $'000
------------------------------ ---------- ---------
Freight costs 1,934 1,800
Transportation costs 24 19
Depreciation and amortisation 5 11
Materials and other expenses 203 286
------------------------------ ---------- ---------
2,166 2,116
------------------------------ ---------- ---------
The above distribution and selling costs are those incurred at
Kounrad and Sasa in addition to the costs associated with the
offtake arrangements.
9. Administrative expenses
2022 2021
Group $'000 $'000
--------------------------------------------- -------------- ---------
Employee benefit expense 11,382 10,360
Share based payments (note 28) 4,494 2,449
Consulting and other services 8,090 7,114
Auditors' remuneration (note 12) 486 430
Office-related and travel costs 1,652 922
Taxes and duties 417 178
Depreciation and amortisation 571 624
--------------------------------------------- -------------- ---------
Total from continuing operations 27,092 22,077
--------------------------------------------- -------------- ---------
Total from discontinued operations (note 22) 179 18
--------------------------------------------- -------------- ---------
27,271 22,095
--------------------------------------------- -------------- ---------
10. Other losses
2022 2021
Group $'000 $'000
----------------------------------------- --------- --------
Realised losses on financial derivatives - 6,736
Other expenses - 139
- 6,875
--------------------------------------------------- --------
During 2021, the Group entered into commodity price hedge
contracts for a portion of its 2021 metal production. As a result
of these financial instruments, in the prior year ended 31 December
2021, the Company recognised $6,736,000 of realised losses. These
financial instruments expired at the end of 2021 and therefore
there are were no hedging gains or losses during the year ending 31
December 2022. The Group did not put in place any further hedge
contracts during the year.
11. Other income
2022 2021
Group $'000 $'000
-------------------------------------------------- -------- --------
Gain on disposal of property, plant and equipment - 2
Other income 86 164
86 166
-------------------------------------------------- -------- --------
12. Auditors' remuneration
During the year, the Group obtained the following services from
the Company's Auditors and its associates:
2022 2021
$'000 $'000
-------------------------------------------------------- --------- ---------
Fees payable to BDO LLP the Company's Auditors for the
audit of the parent company and consolidated financial
statements 243 230
Fees payable to BDO LLP the Company's Auditors and its
associates for other services:
- The audit of Company's subsidiaries 183 145
Fees payable to BDO LLP the Company's Auditors and its
associates for other services:
- Other assurance services 60 55
486 430
-------------------------------------------------------- --------- ---------
13. Employee benefit expense
The aggregate remuneration of staff, including Directors, was as
follows:
Group 2022 2021
$'000 $'000
--------------------------------------------- ---------- ---------
Wages and salaries 22,374 19,878
Social security costs and similar taxes 2,859 2,802
Staff healthcare and other benefits 3,187 2,141
Other pension costs 2,929 3,238
Share based payment expense (note 28) 4,494 2,449
Total for continuing operations 35,843 30,508
Total for discontinuing operations (note 22) 74 75
35,917 30,583
The total employee benefit expense includes an amount of
$2,016,000 (2021: $1,418,000) which has been capitalised within
property, plant and equipment.
Company 2022 2021
$'000 $'000
Wages and salaries 6,779 6,091
Social security costs 1,328 1,098
Staff healthcare and other benefits 584 595
Other pension costs 108 114
Share based payments (note 28) 4,494 2,449
13,293 10,347
Key management remuneration is disclosed in the Remuneration
Committee report.
14. Monthly average number of people employed
Group 2022 2021
Number Number
Operational 944 934
Management and administrative 148 133
1,092 1,067
The monthly average number of staff employed by the Company
during the year was 19 (2021: 18).
15. Finance income
Group 2022 2021
$'000 $'000
Bank interest received 515 74
515 74
16. Finance costs
Group 2022 2021
$'000 $'000
Provisions: unwinding of discount (note 32) 1,088 347
Interest on borrowings (note 31) 910 3,483
Lease interest expense and bank charges 62 90
Total for continuing operations 2,060 3,920
17. Income tax
2022 2021
Group $'000 $'000
Current tax on profits for the year 25,142 26,610
Deferred tax credit (note 37) (4,554) (1,463)
Income tax expense 20,588 25,147
Taxation for each jurisdiction is calculated at the rates
prevailing in the respective jurisdictions.
The tax on the Group's profit before tax differs from the
theoretical amount that would arise using the weighted average tax
rate applicable to profits of the consolidated entities as
follows:
2022 2021
Group $'000 $'000
Profit before income tax 54,580 109,327
Tax calculated at domestic tax rates applicable to
profits in the respective countries 10,117 19,244
Tax effects of:
Expenses not deductible for tax purposes 12,546 4,309
Deferred income tax credit (note 37) (4,554) (1,463)
Movement on unrecognised deferred tax - tax losses 2,479 3,057
Income tax expense 20,588 25,147
Corporate income tax is calculated at 19% (2021: 19%) of the
assessable profit for the year for the UK parent company, 20% for
the operating subsidiaries in Kazakhstan (2021: 20%) and 10% (2021:
10%) for the operating subsidiaries in North Macedonia.
Expenses not deductible for tax purposes includes share-based
payment charges, transfer pricing adjustments in accordance with
local tax legislation, impairment and depreciation and amortisation
charges.
Deferred tax assets have not been recognised on tax losses
primarily at the parent company as it remains uncertain whether
this entity will have sufficient taxable profits in the future to
utilise these losses.
18. Earnings/(loss) per share
(a) Basic
Basic earnings/(loss) per share is calculated by dividing the
profit/(loss) attributable to owners of the Company by the weighted
average number of Ordinary Shares in issue during the year
excluding Ordinary Shares purchased by the Company and held as
treasury shares (note 26).
2022 2021
$'000 $'000
Profit from continuing operations attributable to owners
of the parent 33,998 84,181
Loss from discontinued operations attributable to owners
of the parent (187) (4)
Profit attributable to owners of the parent 33,811 84,177
2022 2021
No. No.
Weighted average number of Ordinary Shares in issue 177,955,800 176,498,266
2022 2021
$ cents $ cents
Earnings/(loss) per share from continuing and discontinued
operations attributable to owners of the parent during
the year (expressed in $ cents per share)
From continuing operations 19.10 47.69
From discontinued operations (0.10) -
From profit for the year 19.00 47.69
(b) Diluted
The diluted earnings/(loss) per share is calculated by adjusting
the weighted average number of ordinary shares outstanding after
assuming the conversion of all outstanding granted share
options.
2022 2021
No. No.
Weighted average number of Ordinary Shares in issue 177,955,800 176,498,266
Adjusted for:
* Share options 6,914,311 5,589,467
Weighted average number of Ordinary Shares for diluted
earnings per share 184,870,111 182,087,733
2022 2021
Diluted earnings/(loss) per share $ cents $ cents
From continuing operations 18.39 46.23
From discontinued operations (0.10) -
From profit for the year 18.29 46.23
(c) Adjusted basis earnings per share
To allow comparability, the Directors believe that the Adjusted
EPS provides a more appropriate representation of the underlying
earnings of the Group adjusting for the impairment of non-current
assets and the corresponding deferred tax movement arising from the
impairment of mineral rights. This is considered a one-off
impairment and not expected to be recurring.
The adjusting items are shown in the table below:
2022 2021
$'000 $'000
Profit from continuing operations attributable to
owners of the parent 33,998 84,181
Adjustments:
Impairment of non-current assets 55,116 -
Deferred tax movement resulting from impairment of
mineral rights (3,419) -
Adjusted profit from continuing operations attributable
to owners of the parent 85,695 -
Loss from discontinued operations attributable to
owners of the parent (187) (4)
Adjusted profit attributable to owners of the parent 85,508 84,177
2022 2021
$ cents $ cents
Adjusted earnings/(loss) per share from continuing
and discontinued operations attributable to owners
of the parent during the year (expressed in $ cents
per share)
From adjusted continuing operations 48.15 47.69
From discontinued operations (0.10) -
From adjusted profit for the year 48.05 47.69
(d) Adjusted diluted earnings per share
2022 2021
Adjusted diluted earnings/(loss) per share $ cents $ cents
From adjusted continuing operations 46.35 46.23
From discontinued operations (0.10) -
From adjusted profit for the year 46.25 46.23
19. Property, plant and equipment
Motor
Construction Plant Mining vehicles Mineral
in and assets and ROU Land rights
progress equipment $'000 assets $'000 $'000 Total
Group $'000 $'000 $'000 $'000
Cost
At 1 January 2021 4,737 146,799 1,292 2,874 677 369,029 525,408
Additions 14,268 456 - 45 - - 14,769
Disposals (17) (24) - - (41)
Change in estimate - asset
retirement obligation
(note 32) - 8,981 - - - - 8,981
Transfers (9,846) 9,843 - 3 - - -
Exchange differences (499) (5,643) (33) (38) (51) (23,259) (29,523)
At 31 December 2021 8,643 160,412 1,259 2,884 626 345,770 519,594
Additions 17,054 143 - 199 - - 17,396
Disposals - (244) - (43) - - (287)
Change in estimate - asset
retirement obligation
(note 32) - 1,153 - - - - 1,153
Transfers (9,282) 9,282 - - - - -
Exchange differences (410) (6,153) (84) (96) (36) (15,809) (22,588)
At 31 December 2022 16,005 164,593 1,175 2,944 590 329,961 515,268
Accumulated depreciation
and impairment
At 1 January 2021 - 50,266 401 1,532 - 55,164 107,363
Provided during the year - 12,006 112 380 - 15,374 27,872
Disposals - (19) - (8) - - (27)
Exchange differences - (471) (10) (22) - - (503)
At 31 December 2021 - 61,782 503 1,882 - 70,538 134,705
Provided during the year - 11,659 111 381 - 13,581 25,732
Impairment (note 20) - - - - - 34,195 34,195
Disposals - (144) - (42) - - (186)
Exchange differences - (1,281) (34) (60) - - (1,375)
At 31 December 2022 - 72,016 580 2,161 - 118,314 193,071
Net book value at 31
December
2021 8,643 98,630 756 1,002 626 275,232 384,889
Net book value at 31
December 2022 16,005 92,577 595 783 590 211,647 322,197
The Company had $184,000 of office equipment at net book value
as at 31 December 2022 (2021: $410 ,000 ).
The increase in estimate in the asset retirement obligation of
$1,153,000, in relation to both Kounrad and Sasa, is due to a
combination of adjusting the provision recognised at the net
present value of future expected costs using latest assumptions on
inflation rates and discount rates as well as updating the
provision for management's best estimate of the costs that will be
incurred based on current contractual and regulatory requirements
(note 32).
During the year there were total disposals of plant, property
and equipment at cost of $287,000 (2021: $41,000) with accumulated
depreciation of $186,000 (2021: $27,000). The Group received $7,000
(2021: $16,000) consideration for these assets and therefore a loss
of $94,000 was recognised (2021: gain of $2,000).
Amounts recognised in the income statement
The income statement shows the following amounts relating to
leases:
2022 2021
$'000 $'000
Depreciation charge of right-of-use
assets
Office 48 171
Other 123 121
171 292
Interest expense included in finance
costs 18 77
20. Intangible assets
Mining Computer
licences software
Goodwill and permits and website Total
Group $'000 $'000 $'000 $'000
Cost
At 1 January 2021 31,553 36,160 271 67,984
Additions - - 56 56
Exchange differences (1,681) (1,136) (3) (2,820)
At 31 December 2021 29,872 35,024 324 65,220
Additions - - 68 68
Exchange differences (1,536) (1,654) (3) (3,193)
At 31 December 2022 28,336 33,370 389 62,095
Accumulated amortisation and impairment
At 1 January 2021 - 11,082 262 11,344
Provided during the year - 1,847 17 1,864
Exchange differences - (79) 1 (78)
At 31 December 2021 - 12,850 280 13,130
Provided during the year - 1,689 23 1,712
Impairment 20,921 - - 20,921
Exchange differences - (219) (1) (220)
At 31 December 2022 20,921 14,320 302 35,543
Net book value at 31 December 2021 29,872 22,174 44 52,090
Net book value at 31 December 2022 7,415 19,050 87 26,552
The Company had nil intangible assets at net book value as at 31
December 2022 (2021: nil).
Impairment assessment
In accordance with IAS 36 "Impairment of assets" and IAS 38
"Intangible Assets", a review for impairment of goodwill is
undertaken annually or at any time an indicator of impairment is
considered to exist and in accordance with IAS 16 "Property, plant
and equipment", a review for impairment of long-lived assets is
undertaken at any time an indicator of impairment is considered to
exist. The recoverable amounts of the goodwill and property, plant
and equipment were measured based on net present value. The net
present value of all CGUs are determined by discounted cash flow
techniques based on the most recent approved financial budgets,
underpinned and supported by the life of asset plans of the
respective operations.
The valuation models use a combination of internal sources and
those inputs available to a market participant, which comprise the
most recent reserve and resource estimates, relevant cost
assumptions and where possible, market forecasts of commodity price
and foreign exchange rate assumptions, discount rates.
The valuations generally remain most sensitive to price and a
deterioration / improvement in the pricing outlook may result in
additional impairments/reversals. When undertaken, an impairment
review is completed for each Cash Generating Unit (CGU).
Kounrad project
The Kounrad project located in Kazakhstan has an associated
goodwill balance of $7,415,000 (2021: $7,948,000), the movement
being solely due to foreign exchange differences.
In accordance with IAS 36 'Impairment of assets' and IAS 38
'Intangible Assets', a review for impairment of goodwill is
undertaken annually or at any time an indicator of impairment is
considered to exist and in accordance with IAS 16 'Property, plant
and equipment', a review for impairment of long-lived assets is
undertaken at any time an indicator of impairment is considered to
exist. The discount rate applied to calculate the present value is
based upon the nominal weighted average cost of capital applicable
to the cash generating unit ('CGU'). A CGU is the smallest
identifiable group of assets that generates cash inflows that are
largely independent of the cash inflows from other assets or groups
of assets. The recoverable amount of the CGU is assessed by
reference to the higher of value in use ('VIU'), being the net
present value ('NPV') of future cash flows expected to be generated
by the asset, and fair value less costs to dispose ('FVLCD'). The
FVLCD is considered to be higher than VIU and has been derived
using discounted cash flow techniques (NPV of expected future cash
flows of a CGU), which incorporate market participant
assumptions.
The discount rate reflects equity risk premiums over the
risk-free rate, the impact of the remaining economic life of the
CGU and the risks associated with the relevant cash flows based on
the country in which the CGU is located. These risk adjustments are
based on observed equity risk premiums, country risk premiums and
average credit default swap spreads for the period.
The Kounrad cash flows have been projected until 2034, the
remaining life of operation, and the key economic assumptions used
in the review were a five-year forecast average nominal copper
price of $7,777 per tonne (2021: $7,914 per tonne) and a long-term
price of $7,436 per tonne (2021: $7,592 per tonne) based on market
consensus prices and a discount rate of 8.07% (2021: 8.07%) as well
as market inflation rates. Assumptions in relation to operational
and capital expenditure are based on the latest budget approved by
the Board.
The carrying value of the net assets is not currently sensitive
to any reasonable changes in key assumptions. Management concluded
and the net present value of the asset is significantly in excess
of the net book value of assets, and therefore no impairment has
been identified.
Sasa project
Prior to the current year impairment, the Sasa project located
in North Macedonia, had an associated goodwill balance of
$20,921,000 (2021: $21,924,000), the movement being solely due to
foreign exchange differences.
The business combination in 2017 was accounted for at fair value
under IFRS 3 and therefore recoverable value is sensitive to
changes in commodity prices, operational performance, treatment
charges, future cash costs of production and capital expenditures.
In accordance with IAS 36 'Impairment of assets' and IAS 38
'Intangible Assets', a review for impairment of goodwill is
undertaken annually or at any time an indicator of impairment is
considered to exist and in accordance with IAS 16 'Property, plant
and equipment', a review for impairment of long-lived assets is
undertaken at any time an indicator of impairment is considered to
exist.
The assessment compared the recoverable amount of the Sasa Cash
CGU with cash flows projected until 2040, over the remaining life
of mine and post closure costs with its carrying value for the year
ended 31 December 2022. The recoverable amount of the CGU is
assessed by reference to the higher of VIU, being the NPV of future
cash flows expected to be generated by the asset, and FVLCD. The
FVLCD has been derived using discounted cash flow techniques (NPV
of expected future cash flows of a CGU), which incorporate market
participant assumptions. Cost to dispose is based on management's
best estimates of future selling costs at the time of calculating
FVLCD. Costs attributable to the disposal of the CGU are not
considered significant. The methodology used for the fair value is
a level 3 valuation.
The expected future cash flows utilised in the FVLCD model are
derived from estimates of projected future revenues based on broker
consensus commodity prices, treatment charges, future cash costs of
production and capital expenditures contained in the life of mine
('LOM') plan, and as a result FVLCD is considered to be higher than
VIU. The Group's discounted cash flow analysis reflects probable
reserves as well as indicated resources and certain inferred
resources which are considered sufficiently certain and
economically viable, and is based on detailed research, analysis
and modelling. The forecast operational and capital expenditure
reflects the transition of mining method from sub-level caving to
cut and fill stoping.
At 31 December 2022, the Group has reviewed the indicators for
impairment, including forecasted commodity prices, treatment
charges, discount rates, operating and capital expenditure, and the
mineral reserves and resources' estimates. Following an analysis
management have decided to recognise an impairment charge due to
the following factors:
-- Completion of the life of mine study at the year end and
therefore amending the financial model inputs for updated reserves,
resources and expected 830,000 tonne long-term plant throughput
capacity per annum (reduced from 900,000 tonnes). The Resource and
Reserves are both reported using Net Smelter Return cut-off values
and the Resources have decreased due to management's assessment of
those which are economically viable and capable of future
extraction.
-- An increase in the discount rate to 12.52% (2021: 10.21%)
supported by a detailed WACC calculation considering both the
country and company risk premiums. These are affected by external
economic conditions with significant global inflation and an
increase in risk applied to calculate the present value of the CGU.
The main factor behind the increase in discount rate is the rise US
treasury yields and a higher country risk premium given where the
Group operates.
-- The key economic assumptions used in the review were a
five-year forecast average nominal zinc and lead price of $2,760
and $2,081 per tonne respectively and a long-term price of $2,467
and $1,874 per tonne respectively based on market consensus prices
inflated at 3.1%.
-- The financial model calculation also factors in cost
increases for energy and wages to reflect near-term inflationary
pressures facing the Group reflecting the current macroeconomic
environment using market inflation rates.
-- Indicated and 30% of inferred resources from Golema Reka have
been added to the end of life of mine in accordance with the
Resources statement in the Competent Person Report are considered
to have a sufficient level of confidence of economic
extraction.
These revised changes resulted in a reduction of Sasa's
estimated recoverable value to $257,525,0000 recognising an
impairment charge of $55,116,000 through the income statement. This
has been recognised as $20,921,000 against the total Sasa goodwill
in intangible assets. The impairment charge of $34,195,000 related
to property, plant and equipment has been recorded against mineral
rights as the impairment is largely due to a reduction to the ore
reserves and resources and consequential extraction profile, such
that certain ore reserves and resources are excluded from the Life
of Mine and the related mineral rights impaired accordingly. The
fair value of the mineral rights was initially determined as part
of the purchase price allocation ('PPA') when CAML acquired the
Sasa mine in 2017.
Management have performed sensitivity analyses whereby certain
parameters were flexed upwards and downwards by reasonable amounts
for the CGU to assess whether this would increase the impairment
charge or reduce the impairment. The following sensitivities were
applied as part of the assessment:
Parameter Sensitivity applied Increased Reduced impairment
impairment $'000
$'000
Zinc price (5%)/5% change 14,100 (13,800)
Lead price (5%)/5% change 20,400 (22,100)
Increase to 15%/decrease
Discount rate to 10% 27,600 (34,100)
Treatment
charges 20%/(20%) change 19,800 (19,800)
Head grade (5%)/5% change 29,500 (29,500)
Capital expenditure 10%/(10%) change 7,200 (7,200)
The Group exercises judgement in making assumptions on the
inputs into the model and are comfortable the most reliable inputs
have been applied in assessment the FVLCD and therefore the
downward sensitivities outlined above are as likely as upward
sensitivities and therefore feel no further impairment is
necessary.
The Group has measured the FVLCD using various fair value
measurements obtaining inputs from market data. It has used quoted
prices (level 1) inputs for its commodity price assumptions,
inflation rates, exchange rates and discount rate. The treatment
charges have been forecast over life of mine using assumptions
based on market data (level 2).
At the balance sheet date, the Board considers the base case
forecasts to be appropriate and balanced best estimates.
21. Investments
Shares in Group undertakings:
Company
31 Dec 31 Dec
22 $'000 21 $'000
At 1 January 5,107 5,491
Impairment of investment in KBV - (384)
At 31 December 5,107 5,107
Investments in Group undertakings are recorded at cost which is
the fair value of the consideration paid, less impairment.
Details of the Company holdings are included in the table
below:
Non-controlling
interest
%
2022
CAML CAML Date
% % of incorporation
Registered office 2022 2021
Subsidiary address Activity
Masters House, 107
Hammersmith Road,
London, W14 0QH,
United Holding 28 June
CAML KZ Limited Kingdom Company 100 - 100 2021
Masters House, 107
Hammersmith Road,
London, W14 0QH, Seller of
United zinc and 5 Sep
CAML MK Limited Kingdom lead concentrate 100 - 100 17
Prins
Bernhardplein
200
1097 JB
Amsterdam, Holding 30 June
CMK Mining B.V. The Netherlands Company 100 - 100 2015
Ivo Lola Ribar no.
57-1/6, 1000
CMK Europe SPLLC Skopje, Holding 10 July
Skopje North Macedonia Company 100 - 100 2015
Masters House, 107
Hammersmith Road,
London, W14 0QH,
Copper Bay United Holding 29 Oct
Limited Kingdom Company 76 24 76 10
Masters House, 107
Hammersmith Road,
London, W14 0QH,
Copper Bay (UK) United Holding 9 Nov
Ltd Kingdom Company 76 24 76 11
Ebro 2740, Oficina
603, Las Condes,
Copper Bay Chile Santiago, Holding 12 Oct
Limitada Chile Company 76 24 76 11
Business Centre
No.
2, 4 Mira Street,
Balkhash, Shuak project 5 Oct
Ken Shuak LLP Kazakhstan (exploration) 10 90 10 16
Business Centre
No.
2, 4 Mira Street, Kounrad
Kounrad Copper Balkhash, project 29 Apr
Company LLP Kazakhstan (SX-EW plant) 100 - 100 08
Ebro 2740, Oficina
603, Las Condes,
Minera Playa Santiago, Exploration 20 Oct
Verde Limitada Chile - Copper 76 24 76 11
28 Rudarska Str,
Makedonska
Rudnik SASA DOOEL Kamenica, 2304,
Makedonska North 22 June
Kamenica Macedonia Sasa project 100 - 100 2005
Business Centre
No.
2, 4 Mira Street, Kounrad
Balkhash, project 6 Feb
Sary Kazna LLP Kazakhstan (SUC operations) 100 - 100 06
CAML MK
For the year ended 31 December 2022, CAML MK Limited (registered
number: 10946728) has opted to take advantage of a statutory
exemption from audit under section 479A of the Companies Act 2006
relating to subsidiary companies. The members of CAML MK Limited
have not required it to obtain an audit of their financial
statements for the year ended 31 December 2022. In order to
facilitate the adoption of this exemption, Central Asia Metals plc,
the parent company of the subsidiaries concerned, undertakes to
provide a guarantee under Section 479C of the Companies Act 2006 in
respect of CAML MK Limited.
CAML KZ
For the year ended 31 December 2022, CAML KZ Limited (registered
number: 13479896) has opted to take advantage of a statutory
exemption from audit under section 479A of the Companies Act 2006
relating to subsidiary companies. The members of CAML KZ Limited
have not required it to obtain an audit of their financial
statements for the year ended 31 December 2022. In order to
facilitate the adoption of this exemption, Central Asia Metals plc,
the parent company of the subsidiaries concerned, undertakes to
provide a guarantee under Section 479C of the Companies Act 2006 in
respect of CAML KZ Limited.
Non-controlling interest
31 Dec 31 Dec
22 21
$'000 $'000
Balance at 1 January 1,316 1,315
Loss attributable to non-controlling interests 6 1
Balance at 31 December 1,322 1,316
Non-controlling interests were held at year end by third parties
in relation to Copper Bay Limited, Copper Bay (UK) Limited, Copper
Bay Chile Limitada and Minera Playa Verde Limitada.
22. Assets held for sale
The assets and liabilities of the Copper Bay entities continue
to be presented as held for sale in the statement of financial
position . The exploration assets and property, plant and equipment
held in Copper Bay were fully written off in prior periods. The
results of the Copper Bay entities for the year ended 31 December
2022 and the comparative year ended 31 December 2021 are shown
within discontinued operations in the consolidated income
statement.
Assets of disposal group classified as held for sale: 31 Dec
22
31 Dec
$'000 21 $'000
Cash and cash equivalents 63 36
Trade and other receivables 1 2
64 38
Liabilities of disposal group classified 31 Dec 31 Dec
as held for sale: 22 $'000 21 $'000
Trade and other payables 44 28
44 28
During the year the following have been recognised in
discontinued operations:
2022 2021
Loss from discontinued operations: $'000 $'000
General and administrative expenses (179) (18)
Foreign exchange (loss)/gain (8) 14
Loss from discontinued operations (187) (4)
2022 2021
Cash flows of disposal group classified
as held for sale: $'000 $'000
Operating cash flows 27 (19)
Total cash flows 27 (19)
23. Trade and other receivables
Group Company
--------------------
31 Dec 31 Dec 31 Dec 31 Dec
Current receivables 22 $'000 21 $'000 22 $'000 21 $'000
--------- ---------
Receivable due from subsidiary - - 744 581
Loan due from subsidiary - - 18,100 32,900
Trade receivables 2,362 1,249 - -
Prepayments and accrued income 2,991 2,545 334 422
VAT receivable 1,546 1,322 109 110
Other receivables 1,816 1,094 290 191
8,715 6,210 19,577 34,204
Non-current receivables
Loan due from subsidiary - - 268,750 269,241
Prepayments 8,221 4,308 - -
VAT receivable 3,257 3,039 - -
11,478 7,347 268,750 269,241
The carrying value of all the above receivables is a reasonable
approximation of fair value. There are no amounts past due at the
end of the reporting period that have not been impaired apart from
the VAT receivable balance as explained below. Trade and other
receivables and loan due from subsidiary are accounted for under
IFRS 9 using the expected credit loss model and are initially
recognised at fair value and subsequently measured at amortised
cost less any allowance for expected credit losses.
The loan due from subsidiary is owed by CAML MK Limited, a
directly owned subsidiary for $286,850,000 (2021: $302,141,000),
which accrues interest at a rate of 2.25% per annum (2021: 2.25%).
The loan has been assessed for expected credit loss under IFRS 9,
however as the Group's strategies are aligned there is no realistic
expectation that repayment would be demanded early ahead of the
current repayment plans. The expected future cash flows arising
from the asset exceed the intercompany loan value under various
scenarios considered which are outlined in the intangible assets
impairment assessment so it is believed this loan can be repaid and
the expected credit loss is immaterial.
As at 31 December 2022, the total Group VAT receivable was
$4,803,000 (2021: $4,361,000) which included an amount of
$3,399,000 (2021: $3,299,000) of VAT owed to the Group by the
Kazakhstan authorities. During the year, the Kazakhstan authorities
refunded $718,000. The Group is working closely with its advisors
to recover the remaining portion. The planned means of recovery
will be through a combination of the local sales of cathode copper
to offset VAT recoverable and by a continued dialogue with the
authorities for cash recovery and further offsets.
Non-current prepayments have increased as a result of prepaid
capital expenditure on the Sasa Cut and Fill Project.
24. Inventories
31 Dec 31 Dec
22 21
Group $'000 $'000
Raw materials 11,917 9,208
Finished goods 1,232 1,244
13,149 10,452
The Group recognises all inventory at the lower of cost and net
realisable value and did not have any slow-moving, obsolete or
defective inventory as at 31 December 2022 and therefore there were
no write-offs to the income statement during the year (2021: nil).
The total inventory recognised through the income statement was
$6,527,000 (2021: $6,599,000).
25. Cash and cash equivalents and restricted cash
Group Company
31 Dec 31 Dec 31 Dec 31 Dec
22 21 22 21
$'000 $'000 $'000 $'000
Cash at bank and on hand 60,298 55,695 35,812 40,189
Cash and cash equivalents 60,298 55,695 35,812 40,189
Restricted cash 264 3,516 - 3,284
Total cash and cash equivalent including
restricted cash 60,562 59,211 35,812 43,473
The restricted cash amount of $264,000 (2021: $3,516,000) is
held at bank to cover Kounrad subsoil user licence requirements
(2021: to cover corporate debt service compliance and Kounrad
subsoil user licence requirements).
The Group holds an overdraft facility in North Macedonia and
these amounts are disclosed in note 31 Borrowings.
Reconciliation to cash flow statements
The above figures reconcile to the amount of cash shown in the
statement of cash flows at the end of the financial year as
follows:
Group
31 Dec 31 Dec
22 $'000 21 $'000
Cash and cash equivalents as above (excluding
restricted cash) 60,298 55,695
Cash at bank and on hand in assets held
for sale (note 22) 63 36
Balance per statement of cash flows 60,361 55,731
26. Share capital and premium
Ordinary Share Treasury
Number shares premium shares
of $'000 $'000 $'000
shares
At 1 January 2021 176,498,266 1,765 191,537 (3,840)
Exercise of options - - 451 1,480
At 31 December 2021 176,498,266 1,765 191,988 (2,360)
Shares issued 5,600,000 56 13,440 (13,496)
Exercise of options - - 9 25
At 31 December
2022 182,098,266 1,821 205,437 (15,831)
The par value of ordinary shares is $0.01 per share and all
shares are fully paid. On 27 September 2022, the Company issued and
allotted 5,600,000 ordinary shares to the trustee of the Central
Asia Metals employee benefit trust (the "EBT"). These new ordinary
shares have been issued for the purposes of satisfying current
awards granted under the Company's Employee Share Plans together
with any future awards that may be granted by the Company.
During the year there was an exercise of share options by
employees and Directors which were partly settled by selling trust
shares. The proceeds of disposal of trust and treasury shares
exceeded the purchase price by $9,000 (2021: $451,000) and has been
recognised in share premium. The remaining share options exercises
during the year were cash settled amounting to $1,939,000 (2021:
nil) with a reduction in share option reserve of $1,263,000 (2021:
$1,931,000) to account for those now exercised.
Treasury
shares EBT shares
No. No.
At 1 January 2021 471,647 3,052,633
Disposal of trust shares - (712,601)
At 31 December 2021 471,647 2,340,032
Disposal of trust shares - (9,280)
Shares issued - 5,600,000
At 31 December 2022 471,647 7,930,752
27. Currency translation reserve
Currency translation differences arose primarily on the
translation on consolidation of the Group's Kazakhstan-based and
North Macedonian-based subsidiaries whose functional currency is
the Tenge and North Macedonian Denar respectively. In addition,
currency translation differences arose on the goodwill and fair
value uplift adjustments to the carrying amounts of assets and
liabilities arising on the Kounrad Transaction and CMK Resources
acquisition which are denominated in Tenge and Denar respectively.
During 2022, a non-cash currency translation loss of $29,311,000
(2021: loss of $31,283,000) was recognised within equity.
28. Share based payments
The Company provides rewards to staff in addition to their
salaries and annual discretionary bonuses, through the granting of
share options in the Company. The Company share option scheme has
an exercise price of effectively nil for the participants.
The share options granted during 2012 until 2018 were based on
the achievement by the Group and the participant of the performance
targets as determined by the CAML Remuneration Committee that are
required to be met in year one and then options could be exercised
one third annually from the end of year one. Options granted during
2012 to 2018 had straight forward conditions attached and were
valued using a Black-Scholes model.
Share options granted in 2019 vested after three years depending
on achievement of the Group of performance target relating to the
level of absolute total shareholder return compound annual growth
rate of the value of the Company's shares over the performance
period of three financial years ending 31 December 2021.
Share options granted in 2020 to 2022 vest after three years
depending on a combination of the achievement of the Group of
performance target relating to the level of absolute total
shareholder return compound annual growth rate of the value of the
Company's shares over the performance period of three financial
years relative to the constituents of a selected group mining index
of companies as well as sustainability performance targets.
The fair value at grant date of the 2019 to 2022 grants are
independently determined using a Monte Carlo simulation model that
takes into account the exercise price, the term of the option, the
impact of dilution (where material), the share price at grant date
and expected price volatility of the underlying share, the expected
dividend yield, the risk-free interest rate for the term of the
option, and the correlations and volatilities of the share
price.
The assessed fair value at grant date of options granted during
the year ended 31 December 2022 was $3,232,000 in total which is
recognised over the vesting period commencing 22 June 2022 until 31
March 2025 and $613,000 was recognised during the year. For the
2021 options $938,000 (2021: $435,000) was expensed for the year
ended 31 December 2022. For the 2020 options $942,000 (2021:
$980,000) was expensed for the year ended 31 December 2021. For the
2019 share options $82,000 (2021: $290,000) was expensed for the
year ended 31 December 2022. An additional dividend related share
option charge of $1,242,000 (2021: $720,000) was recognised and
also additional costs associated when share options were exercised
of $677,000 (2021: $24,000). The number of shares covered by such
awards is increased by up to the value of dividends declared as if
these were reinvested in Company shares at the dates of payment.
The outstanding share options included in the calculation of
diluted earnings/(loss) per share (note 18) includes these
additional awards but they are excluded from the disclosures in
this note. In total, an amount of $4,494,000 (2021: $2,449,000) has
been expensed within employee benefits expense from continuing
operations for share based payment charges for the year ended 31
December 2022.
The model inputs for options granted during the year
included:
31 Dec 2022 31 Dec 2021
Vesting period 2 years 10 months 2 years 9 months
Exercise price $0.01 $0.01
Grant date: 22 June 2022 15 July 2021
Expiry date: 21 June 2032 14 July 2031
Share price at grant date $2.82 $3.27
Risk-free interest rate 2.19% 0.38%
As at 31 December 2022, 5,467,454 (2021: 4,594,192) options were
outstanding. Share options are granted to Directors and selected
employees. The exercise price of the granted options is presented
in the table below for every grant. The Company has the option but
not the legal or constructive obligation to repurchase or settle
the options in cash.
Movements in the number of share options outstanding and their
related weighted average price are as follows:
2022 2021
Average exercise Average
price in exercise
$ per price
share option in $ per
Options share Options
(number) option (number)
At 1 January 0.01 4,594,192 0.01 4,420,348
Granted 0.01 1,500,223 0.01 1,009,284
Exercised 0.01 (473,303) 0.01 (439,020)
Non-vesting 0.01 (153,658) 0.01 (396,420)
At 31 December 0.01 5,467,454 0.01 4,594,192
Non-vesting shares relates to options granted for which the
performance targets were not met. Out of the outstanding options of
5,467,454 (2021: 4,594,192), 2,096,325 options (2021: 1,741,528)
were exercisable as at 31 December 2022 excluding the value of
additional share options for dividends declared on those
outstanding. The related weighted average share price at the time
of exercise was $3.32 (2021: $3.49) per share. Share options
exercised by the Directors during the year are disclosed in the
Remuneration Committee Report.
Share options outstanding at the end of the year have the
following expiry date and exercise prices:
Grant - vest Option 2022 2021
Expiry date exercise Options Options
of option price (number) (number)
$
8 May 12 7 May 22 0.01 76,032 76,032
24 Jul 13 23 Jul 23 0.01 36,801 36,801
3 Jun 14 2 Jun 24 0.01 143,064 143,064
8 Oct 14 7 Oct 24 0.01 160,000 160,000
22 Apr 15 21 Apr 25 0.01 212,121 212,121
18 Apr 16 17 Apr 26 0.01 338,940 338,940
21 Apr 17 20 Apr 27 0.01 296,591 296,591
2 May 18 1 May 28 0.01 484,090 560,428
30 May 19 29 May 29 0.01 355,103 752,068
16 Dec 20 15 Dec 30 0.01 979,548 1,008,863
15 Jul 21 14 Jul 31 0.01 974,392 1,009,284
22 Jun 22 21 Jun 32 0.01 1,410,772 -
5,467,454 4,594,192
Employee Benefit Trust
The Company set up an Employee Benefit Trust ('EBT') during 2009
as a means of incentivising certain Directors and senior management
of CAML prior to the Initial Public Offering ('IPO'). All of the
shares awarded as part of the EBT scheme vested on the successful
completion of the IPO on 30 September 2010.
2,534,688 Ordinary Shares were initially issued as part of the
arrangements in December 2009 followed by a further issue of
853,258 in September 2010. The shares were issued at the exercise
price of $0.68, which was the best estimate of the Company's
valuation at the time. Details of the awards to Directors of the
Company are contained in the Remuneration Committee Report.
29. Trade and other payables
Group Company
31 Dec 31 Dec 31 Dec 31 Dec
22 21 22 21
$'000 $'000 $'000 $'000
Trade and other payables 6,722 3,363 365 363
Accruals 6,029 4,861 5,451 4,401
Corporation tax, social security and
other taxes 3,892 7,832 246 1,147
Loan due to subsidiary - - 37,409 53,400
--------
16,643 16,056 43,471 59,311
The carrying value of all the above payables is equivalent to
fair value.
The loan due to subsidiary is payable to Kounrad Copper Company
LLP, an indirectly owned subsidiary for $37,409,000 (2021:
$53,400,000), which accrues interest at a rate of 4.40% per annum
and is repayable on demand.
All Group and Company trade and other payables are payable
within less than one year for both reporting periods.
30. Silver streaming commitment
The carrying amounts of the silver streaming commitment for
silver delivery are as follows:
Group Company
31 Dec 31 Dec 31 Dec 31 Dec
22 21 22 $'000 21 $'000
$'000 $'000
Current 1,095 1,229 - -
Non-current 17,085 18,220 - -
18,180 19,449 - -
On 1 September 2016, the CMK Group entered into a Silver
Purchase Agreement. The Group acquired this agreement as part of
the acquisition of the CMK Group and inherited a silver streaming
commitment related to the production of silver during the life of
the mine. The reduction in the silver streaming commitment is
recognised in the income statement within cost of sales as the
silver is delivered based on the units of production and is updated
to reflect the latest estimate of Reserves.
31. Borrowings
Group Company
31 Dec 31 Dec 31 Dec 31 Dec
22 21 22 21
$'000 $'000 $'000 $'000
Secured: Current
Bank loans - 23,406 - 23,406
Unsecured: Current
Bank overdraft 1,390 9,572 - -
Total current 1,390 32,978 - 23,406
The carrying value of loans approximates fair value:
Carrying amount Fair value
31 Dec 31 Dec 31 Dec 31 Dec
22 $'000 21 $'000 22 $'000 21 $'000
Traxys Europe S.A. - 23,406 - 23,406
Bank overdrafts 1,390 9,572 1,390 9,572
1,390 32,978 1,390 32,978
The movement on borrowings can be summarised as follows:
Group Company
31 Dec 31 Dec 31 Dec 31 Dec
22 21 22 21
$'000 $'000 $'000 $'000
Balance at 1 January 32,978 80,412 23,406 70,720
Repayment of corporate borrowings (23,820) (48,400) (23,820) (48,400)
Repayments of overdraft (7,531) - - -
Drawdown of overdraft - 644 - -
Finance charge interest 496 2,398 374 2,162
Finance charge unwinding of directly
attributable fees 414 1,086 414 1,086
Interest paid (511) (2,398) (374) (2,162)
Foreign exchange (636) (764) - -
Balance at 31 December 1,390 32,978 - 23,406
During the year, $23,820,000 (2021: $48,400,000) of the
principal amount of corporate debt was repaid as well as $7,531,000
repayment of overdrafts (2021: nil) with total interest paid of
$511,000 (2021: $2,398,000).
The Group held one corporate debt package with Traxys with a
variable interest rate which was repaid in full in August 2022.
Security was provided over the shares in CAML Kazakhstan BV,
certain bank accounts and the Kounrad offtake agreement as well as
over the Sasa offtake agreement. The debt was subject to financial
covenants which included the monitoring of gearing and leverage
ratios, and these were all complied with.
The overdraft is held with a North Macedonian bank and is
denominated in Euro payable at 1.98% above the National Bank of
North Macedonia reference rate.
As at 31 December 2022, the Group measured the fair value using
techniques for which all inputs which have a significant effect on
the recorded fair value are observable, either directly or
indirectly (Level 2).
The different levels have been defined as follows:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (Level
2).
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level
3).
32. Provisions for other liabilities and charges
Group
Asset Employee Other
retirement retirement employee
obligation benefits benefits Legal claims Total
$'000 $'000 $'000 $'000 $'000
At 1 January 2021 9,196 239 235 16 9,686
Change in estimate 8,981 48 56 6 9,091
Settlements of provision - (23) (12) (20) (55)
Unwinding of discount (note
16) 347 - - - 347
Exchange rate difference (64) (19) (20) - (103)
At 31 December 2021 18,460 245 259 2 18,966
Change in estimate 1,153 40 62 - 1,255
Settlements of provision - (23) (11) - (34)
Unwinding of discount (note
16) 1,088 - - - 1,088
Exchange rate difference (158) (18) (22) - (198)
At 31 December 2022 20,543 244 288 2 21,077
Non-current 20,265 204 273 2 20,744
Current 278 40 15 - 333
At 31 December 2022 20,543 244 288 2 21,077
a) Asset retirement obligation
The Group provides for the asset retirement obligation
associated with the mining activities at Kounrad, estimated to be
required in 2034. During the year, the Group engaged an external
expert consultant to prepare a conceptual closure plan and asset
retirement obligation for the leaching and Kounrad operation and
associated infrastructure. The expected current cash flows were
projected over the useful life of the mining site and inflated
using an inflation rate of 5.85% (2021: 3.77%) and discounted to
2022 terms using a nominal pre-tax risk free discount rate of 7.43%
(2021: 8.07%). The cost of the related assets are depreciated over
the useful life of the assets and are included in property, plant
and equipment. The increase in estimate in relation to the asset
retirement obligation is primarily due to additional estimated
costs and management has built in an additional cost contingency of
10%, the selection of such a contingency requires judgement.
During 2021, Sasa engaged an external expert consultant to
prepare an updated conceptual closure plan. The expected current
cash flows were projected over the useful life of the mining site
and inflated using an inflation rate of 3.53% (2021: 2.0%) and
discounted to 2022 terms using a discount rate of 9.17% (2021:
5.50%). The cost of the related assets are depreciated over the
useful life of the assets and are included in property, plant and
equipment. During the year, the cost estimate has been amended by
management to build in an additional cost contingency of 10%, the
selection of such a contingency requires judgement.
b) Employee retirement benefits
All employers in North Macedonia are obliged to pay employees
minimum severance pay on retirement equal to two months of the
average monthly salary applicable in the country at the time of
retirement. The retirement benefit obligation is stated at the
present value of expected future payments to employees with respect
to employment retirement pay. The present value of expected future
payments to employees is determined by an independent authorised
actuary in accordance with the prevailing rules of actuarial
mathematics.
c) Other employee benefits
The Group is also obliged to pay jubilee anniversary awards in
North Macedonia for each ten years of continuous service of the
employee. Provisions for termination and retirement obligations are
recognised in accordance with actuary calculations. Basic 2022
actuary assumptions are used as follows:
Discount rate: 5%
Expected rate of salary increase: 4.7%
d) Legal claims
The Group is party to certain legal claims and the recognised
provision reflects management's best estimate of the most likely
outcome. The Group reviews outstanding legal cases following
developments in the legal proceedings and at each reporting date,
in order to assess the need for provisions and disclosures in its
financial statements. Among the factors considered in making
decisions on provisions are the nature of litigation, claim or
assessment, the legal process and potential level of damages in the
jurisdiction in which the litigation, claim or assessment has been
brought, the progress of the case (including the progress after the
date of the financial statements but before those statements are
issued), the opinions or views of legal advisers, experience on
similar cases and any decision of the Group's management as to how
it will respond to the litigation, claim or assessment.
33. Cash generated from operations
(Group) 2022 2021
Note $'000 $'000
Profit before income tax including discontinued
operations 54,393 109,323
Adjustments for:
Depreciation and amortisation 27,285 29,572
Silver stream commitment (1,971) (1,369)
Loss/(gain) on disposal of property, plant
and equipment 19 94 (2)
Foreign exchange gain (6,829) (1,214)
Share based payments 28 4,494 2,449
Impairment of non-current assets 19,20 55,116 -
Finance income 15 (515) (74)
Finance costs 16 2,060 3,920
Changes in working capital:
Increase in inventories (2,538) (2,622)
Increase in trade and other receivables (10,503) (6,216)
Increase in trade and other payables 1,513 2,843
Provisions for other liabilities and charges (34) (55)
Cash generated from operations 122,565 136,555
The increase in trade and other receivables of $10,503,000
(2021: $6,216,000) includes a movement in the Sasa VAT receivable
balance of $4,472,000 (2021: $3,468,000) which is offset against
corporate income tax payable during the year.
34. Commitments
Significant expenditure contracted for at the end of the
reporting period but not recognised as liabilities is as
follows:
Group 31 Dec 31 Dec
22 $'000 21 $'000
Property, plant and equipment 6,159 8,241
Other 170 396
6,329 8,637
35. Dividend per share
In line with the Company dividend policy, during the year the
Company paid $48,210,000 (2021: $38,847,000) which consisted of a
2022 interim dividend of 10 pence per share and 2021 final dividend
of 12 pence per share (2021: 2021 interim dividend of 8 pence per
share and 2020 final dividend of 8 pence per share).
36. Related party transactions
Key management remuneration
Key management remuneration comprises the Directors'
remuneration, including Non-Executive Directors and is as
follows:
2022 2022 2022 2022
Basic Annual 2022 Benefits Employers 2022 2021
salary/ bonus Pension in kind NI Total Total
fees $'000 $'000 $'000 $'000 $'000 $'000
$'000
Executive Directors:
Nigel Robinson 509 403 - 12 126 1,050 1,061
Gavin Ferrar 416 330 - - 211 957 1,011
Louise Wrathall(1) 165 138 - 4 42 349 -
Non-Executive Directors:
Nick Clarke 217 - - - 29 246 273
Mike Armitage(2) 93 - - - 13 106 -
Roger Davey 98 - - - 12 110 116
Dr Gillian Davidson 99 - - - 14 113 125
Mike Prentis(3) 101 - - - 14 115 91
David Swan 99 - - - 13 112 124
Nurlan Zhakupov 93 - - - - 93 51
Robert Cathery(4) 44 - - - 5 49 124
Nigel Hurst-Brown(5) - - - - - - 91
1,934 871 - 16 479 3,300 3,067
i. Appointed on 26 May 2022
ii. Appointed on 10 January 2022
iii. Appointed 31 March 2021
iv. Resigned on 26 May 2022
v. Resigned on 31 July 2021
During the year Gavin Ferrar exercised 226,612 shares for a
total share option gain of $719,000, see the Directors' option
awards table in the Remuneration Committee Report.
Kounrad Foundation
The Kounrad Foundation, a charitable foundation through which
Kounrad donates to the community, was advanced $300,000 (2021:
$214,000). This is a related party by virtue of common
Directors.
Sasa Foundation
The Sasa Foundation, a charitable foundation through which Sasa
donates to the community, was advanced $220,000 (2021: $320,000).
This is a related party by virtue of common Directors.
37. Deferred income tax asset and liability
Group
The movements in the Group's deferred tax assets and liabilities
are as follows:
Currency Credit At 31
translation to income December
At 1 differences statement 2022
January $'000 $'000
2022 $'000
$'000
Other temporary differences (349) 23 - (326)
Deferred tax liability on fair value adjustment
on Kounrad Transaction (5,069) 338 274 (4,457)
Deferred tax liability on fair value adjustment
on CMK acquisition (17,459) 1,004 4,280 (12,175)
Deferred tax liability, net (22,877) 1,365 4,554 (16,958)
Reflected in the statement of financial 31 Dec 31 Dec
position as: 22 21
$'000 $'000
Deferred tax asset 328 352
Deferred tax liability (17,286) (23,229)
Currency Credit
translation to income
At 1 January differences statement At 31 December
$'000
2021 $'000 2021 $'000
$'000
Other temporary differences (553) 11 193 (349)
Deferred tax liability on fair value
adjustment on Kounrad Transaction (5,501) 136 296 (5,069)
Deferred tax liability on fair value
adjustment on CMK acquisition (19,909) 1,476 974 (17,459)
Deferred tax liability, net (25,963) 1,623 1,463 (22,877)
A taxable temporary difference arose as a result of the Kounrad
Transaction and CMK Resources Limited acquisition, where the
carrying amount of the assets acquired were increased to fair value
at the date of acquisition but the tax base remained at cost. The
deferred tax liability arising from these taxable temporary
differences has been reduced by $4,554,000 during the year (2021:
$1,270,000) to reflect the tax consequences of impairing and
depreciating the recognised fair values of the assets during the
year.
31 Dec 31 Dec
2022 2021
$'000 $'000
Deferred tax liability due within
12 months (1,135) (1,463)
Deferred tax liability due after
12 months (19,570) (21,766)
Deferred tax liability (20,705) (23,229)
All deferred tax assets are due after 12 months.
Where the realisation of deferred tax assets is dependent on
future profits, the Group recognises losses carried forward and
other deferred tax assets only to the extent that the realisation
of the related tax benefit through future taxable profits is
probable.
The Group did not recognise other potential deferred tax assets
arising from losses of $13,917,000 (2021: $18,471,000) as there is
insufficient evidence of future taxable profits within the entities
concerned. Unrecognised losses can be carried forward
indefinitely.
At 31 December 2022, the Group had other deferred tax assets of
$1,271,000 (2021: $1,440,000) in respect of share-based payments
and other temporary differences which had not been recognised
because of insufficient evidence of future taxable profits within
the entities concerned.
There are no significant unrecognised temporary differences
associated with undistributed profits of subsidiaries at 31
December 2022 and 2021, respectively.
Company
At 31 December 2022 and 2021 respectively, the Company had no
recognised deferred tax assets or liabilities.
At 31 December 2022, the Company had not recognised potential
deferred tax assets arising from losses of $12,911,000 (2021:
$11,445,000) as there is insufficient evidence of future taxable
profits. The losses can be carried forward indefinitely.
At 31 December 2022, the Company had other deferred tax assets
of $1,271,000 (2021: $1,440,000) in respect of share-based payments
and other temporary differences which had not been recognised
because of insufficient evidence of future taxable profits.
38. Events after the reporting period
There were no events after the reporting period.
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END
FR NKFBKFBKDANB
(END) Dow Jones Newswires
March 29, 2023 02:00 ET (06:00 GMT)
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