TIDMCEY
RNS Number : 1258N
Centamin PLC
18 May 2020
18 May 2020
Centamin plc
("Centamin" or "the Company")
(LSE:CEY, TSX:CEE)
Audited Annual Results
for the twelve months ended 31 December 2019
FINANCIAL HIGHLIGHTS ([1])
FY2019 vs FY2018
-- Gross revenues[2] of US$ 658 .1 million for the twelve months
ending 31 December 2019, up 7% compared to the prior year
-- Costs within annual guidance: cash costs of US$699 per ounce
produced (1) , up 12%; all-in sustaining costs ("AISC") (1) of
US$943 per ounce sold, up 7%
-- EBITDA (1) improved 10% to US$284.0 million, at a 43% EBITDA margin[3]
-- Profit after tax increased 13% to US$172.9 million
-- Basic earnings per share ("EPS") increased 17% to 7.59 US cents
-- Operational cash flow improved by 11% to US$249.0 million,
after gross capital expenditure of US$97.6 million predominantly
invested in the long-term sustainability of the business
-- Adjusted Group free cash flow improved by 17% to US$74.3
million, after profit share distribution of US$87.1 million and
royalty payments of US$19.7 million to our local partner, the
Egyptian government
-- Debt-free balance sheet, with no hedging and cash &
liquid assets ([4]) of US$348.9 million, as at 31 December 2019,
which has increased further to US$379.2 million[5], as at 31 March
2020[6]
-- To give shareholders greater certainty and expedite the
dividend timetable, the previously proposed 2019 final dividend of
6 US cents per share was replaced[7] with a 2020 first interim
dividend of 6 US cents per share, equating to c.US$69.4 million,
and paid on 15 May 2020
Group Financial Summary
------------------ -------- --------
units FY 2019 FY 2018 H2 2019 H1 2019
---------------------------------- ------------------- -------- -------- -------- --------
Gold produced oz 480,528 472,418 2% 246,433 234,096
Gold sold oz 470,020 484,322 (3%) 245,891 224,129
Cash cost of production (1) US$'000 333,037 289,394 15% 173,592 159,445
Unit cash cost of production (1) US$/oz produced 699 624 12% 706 692
AISC (1) US$'000 439,317 420,116 5% 231,956 207,361
Unit AISC (1) US$/oz sold 943 884 7% 946 940
Average realised gold price US$/oz 1,399 1,267 10% 1,485 1,305
---------------------------------- ------------------- -------- -------- -------- --------
Gross revenue (2) US$'000 658,111 614,771 7% 365,266 292,845
EBITDA (1,3) US$'000 283,968 258,804 10% 166,654 117,314
Profit before tax US$'000 173,029 152,702 13% 113,402 59,627
Basic EPS US cents 7.59 6.50 17% 5.88 1.71
Capital expenditure US$'000 97,580 96,778 1% 49,593 47,987
Operating cash flow US$'000 249,004 223,404 11% 132,706 116,298
Adjusted free cash flow (1) US$'000 74,341 63,429 17% 38,711 35,630
---------------------------------- ------------------- -------- -------- -------- --------
GOVERNANCE HIGHLIGHTS
-- Substantial Board refreshment delivered in 2019, and thus far in 2020, including:
- Appointment of Dr Sally Eyre, Dr Catharine Farrow, Marna
Cloete and James "Jim" Rutherford as independent Non-Executive
Directors in 2019
- Josef El-Raghy, Chairman, Gordon "Ed" Haslam, Senior
Independent Director and Mark Arnesen, Non-Executive Director will
not stand for re-election at the upcoming 2020 annual general
meeting ("2020 AGM") on 29 June 2020
-- Completing a comprehensive handover, Jim Rutherford will
become the independent Non-Executive Chairman ("NEC"), effective 29
June 2020, following the 2020 AGM
-- Dr Sally Eyre will become the Senior Independent Director, effective 29 June 2020
2020 OUTLOOK
-- The impact and potential duration of the COVID-19 pandemic
remain uncertain. The Company has taken prudent steps including
risk scenario analysis and put in place contingency plans for the
business to navigate these difficult times. Centamin is closely
monitoring the situation, with an active response framework in
place to manage and mitigate future impacts within its control
-- Sukari operations have continued to be uninterrupted with
sufficient staffing resources and critical supplies in to Q3,
during which it is expected global travel restrictions may begin to
ease. Should such restrictions be extended well into H2, it is
possible that operations may be affected
-- Centamin maintains its 2020 full year guidance [8] ,
targeting production between 510,000-540,000 ounces of gold
(production weighted 55% to H2), at cash costs between US$630-680
per ounce produced and AISC between US$870-920 per ounce sold. Open
pit material is expected to contribute 80% of the full year
production driven by higher grade Stage 4 ore. The balance is
scheduled to come from the underground, specifically Ptah as
infrastructure upgrades are being implemented at Amun
-- As a precautionary move to protect the health and wellbeing
of the workforce, non-essential capital expenditure has been
temporarily deferred, including the Sukari solar plant. This is in
order to minimise additional contractors and other non-operating
traffic on and off site, while restrictions related to COVID-19
remain in place. As a result, 2020 capital expenditure is expected
to be in the range of US$150-US$170 million (previously US$190
million)
-- The Sukari life of asset review is ongoing. A series of
independent optimisation studies across each section of the mine
are underway, with results expected in H2 2020, identifying areas
of improvement
Ross Jerrard, CFO, commented on the Company's full year audited
results to 31 December 2019:
"2019 was characterised by continued operational improvements at
Sukari, a strong financial performance, excellent exploration
target generation, significant progress meeting our ESG initiatives
and a continued focus on delivering returns to all of our
stakeholders. Underlying EBITDA improved 10% on 2018 and profit
after tax improved 13%, demonstrating growing margins, assisted by
solid cost management and improved grade, delivering costs per
ounce produced and sold in the bottom half of the guidance
range.
We have made a good start to 2020 with production and costs on
track. The global uncertainty around the impact of the COVID-19
pandemic has created significant volatility in the global
investment markets, resulting in increased safe-haven investing.
Our clean balance sheet, with no debt nor hedging, offers pure
exposure to the gold price and our long cash position of c.US$379
million[9] [10] underpins the financial strength of the business
and self-funds current growth investment.
We continue to maintain focus on cost discipline and achieving
greater operational efficiency as the key margin and cash flow
drivers. ESG is rooted at the centre of our decision-making
framework, including water efficiency and air quality initiatives,
improved workplace training and a Board of Directors all focused on
accretive growth of Centamin over the coming years."
________________________________________________________________________________________________
For more information, please visit the website www.centamin.com or contact:
Centamin plc Buchanan Communications
Alexandra Carse, Investor Relations Bobby Morse
+44 (0) 7700 713 738 + 44 (0)20 7466 5000 Centamin@buchanan.uk.com
Alexandra.carse@centamin.je
______________________________________________________________________________________________
CHAIRMAN'S STATEMENT
Josef El-Raghy
Chairman
In the past few months, the world has come together to try to
safely navigate the threats presented by the coronavirus
("COVID-19") pandemic. We hope that you and your loved ones are
safe and well as we all adapt to living in these unprecedented
times.
PEOPLE
Centamin's strategy is to maximise free cash flow generation
through responsible mining, delivering long term stakeholder
returns. Successful execution of our strategy starts with our
people. The Company has undergone a tremendous step-change in
leadership, reflected in the strong performance at the end of 2019
and the solid start to 2020. In the past two years, investing in
people has been a priority for the Company, including attracting
high-calibre individuals and ongoing development of our existing
workforce, to further improve our technical expertise.
Though such transformational change has occasionally brought
some periods of inconsistency as individuals and ideas bed-into our
structure and culture, Centamin is pleased that the workforce
recruitment is largely complete and now the emphasis is on
embracing innovation and adopting technologies suitable for our
business.
Our number one priority is the health, safety and wellbeing of
our direct and indirect workforce, followed by our host
communities. Whilst we are pleased to report there are no cases of
COVID-19 on-site and operations have been largely uninterrupted,
there remains much uncertainty around true impacts and duration.
Centamin is committed to operating in line with our strict
corporate response plans and heightened measures for as long as
required to keep our people safe and operations secure.
GOVERNANCE
Centamin has a strong and diverse Board. As the Company
positions itself for the next decade of growth, we have delivered
against the ambitious Board succession programme announced in 2018,
ensuring we have the right composition of individuals. This has
been transformational, including seven Board appointments and five
Board retirements. In 2019, we were delighted to appoint Dr Sally
Eyre (10 April 2019), Dr Catharine Farrow (2 September 2019), Marna
Cloete (2 September 2019) and in 2020, James "Jim" Rutherford
(effective 1 January 2020) as independent Non-Executive
Directors.
Targeted succession remains at the forefront in 2020 and on 6
April 2020 it was a great pleasure to welcome Martin Horgan as your
new Chief Executive Officer ("CEO"), concluding a competitive
six-month recruitment process. Martin brings not only excellent
technical, commercial and financial experience but also strong
operational and leadership skills. Combined with his deep knowledge
and understanding of gold mining across Africa, I believe that he
will make an invaluable contribution to the Company.
At the upcoming 2020 AGM on 29 June, completing their nine-year
tenures, Non-Executive Directors Gordon "Ed" Haslam and Mark
Arnesen will not stand for re-election. Their devoted service has
been of significant value to Centamin and to me personally as there
have been many challenges on a corporate and personal level that
they have guided me through. Ed brought a wealth of crucial Board
experience, making him a truly dependable Deputy Chairman,
providing wise counsel and support when required. Mark's vast
experience in the resource industry has been invaluable in shaping
and mentoring the finance team as we transformed from a small
explorer to a sizeable gold producer. He has committed his time and
energy well in excess of what is traditionally required of a
non-executive director. I sincerely thank them both for their
contributions.
Furthermore, I would like to announce that I, Josef El-Raghy,
will not be standing for re-election at the 2020 AGM. It has been
an honour and pleasure to serve as a Director of your company for
the last 18 years. Centamin is well placed for the next phase of
growth, and I have all the confidence in Jim Rutherford, who will
step into the role of Chairman following the 2020 AGM, to guide
this Company to even greater success.
Jim and I have worked closely together during the last few
months, completing a comprehensive handover process. Jim comes with
over 25 years' experience in investment management, investment
banking and a multitude of other capital market skills, along with
a deep understanding of the global mining industry. His independent
views will provide additional value to the evolved Board.
There were some key Executive changes in 2019. Our longstanding
colleague, Andrew Pardey, stepped down as CEO in October. His
eleven-year tenure was instrumental in placing Centamin where it is
today. Andrew joined us as Sukari General Manager, working under
Trevor Schultz in building Egypt's first modern gold mine. Present
at the first gold pour, Andrew led his team through growth and
expansion to the Tier 1 gold operation it is today. Along his
journey he progressed to Chief Operating Officer ("COO") and
finally CEO. Thank you, Andrew for all your hard work and
dedication.
Following Andrew's retirement, Ross Jerrard, Chief Financial
Officer ("CFO"), was appointed interim CEO. Ross provided excellent
leadership, keeping Centamin focused during challenging
circumstances, as we navigated an unsolicited corporate approach
and the ongoing global pandemic. Ross' calm and measured management
is a valued asset to the Company. Following Martin's appointment,
Ross is focused on his role and responsibilities as CFO and
Executive Director on the Board.
PRIORITISING STAKEHOLDERS
Collectively we have developed, operated and grown Sukari into a
world class operation and a first of its kind in Egypt. This
success underpins Centamin's industry leading shareholder returns
and is the foundation of local employment, direct financial and
infrastructure investment in Egypt, as well as to our developing
hubs in Côte d'Ivoire and Burkina Faso.
Our performance in 2019 has seen the Company mature and
consolidate its position as one devoted to creating opportunity
through gold mining. Gold production was 480,528 ounces, broadly
in-line with the lower end of guidance (490,000 ounces). Strong
cost management and disciplined capital allocation delivered AISC
of US$943 per ounce sold, comfortably within our guidance range.
The Group generated strong free cash flow of US$74.3 million, a 17%
improvement on 2018.
On 14 January, announced in the Q4 2019 Results, the Board
proposed a final 6 US cent per share dividend, bringing the 2019
total dividend to 10 US cents per share which equates to returning
US$115.8 million to shareholders of surplus cash. This is an 82%
increase on the 2018 total dividend. Our ability to make such
strong returns for our shareholders lies in the core strategy of
putting our stakeholders first, a strong balance sheet and an
effective robust financial strategy.
Given the unprecedented global situation with COVID-19,
regulators, governments and public health authorities have issued
varying directives which have impacted the timing and structure of
2020 AGMs. As such the opportunity for shareholders to approve the
proposed 2019 final dividend could not go ahead with the previously
announced timetable. After much consideration, and in order to
ensure the dividend payment was made to shareholders in May 2020,
the Board resolved to declare a 2020 first interim dividend to
replace the 2019 final dividend. The 2020 first interim was paid on
15 May 2020, for 6 US cents per share (US$64.9 million), the same
quantum as the previously proposed 2019 final dividend and will not
be subject to shareholder approval.
Our ability to generate superior returns for our owners and
partners is only made possible by the fundamental strength of the
relationships with all of our stakeholder groups. On behalf of the
Board, I would like to thank the Egyptian Mineral Resource
Authority ("EMRA"), not only for their support during 2019, but
also for the last 10 years in particular, which with their guidance
has seen Egypt placed firmly on the map as a country with immense
opportunity to become a leading gold producer. We believe that
Sukari is the first of several Tier 1 gold assets which will
benefit Egypt for generations to come. In addition to employing and
training 2,249 Egyptians, cash flow generated from gold production
in 2019 resulted in US$107 million being distributed to Egypt in
profit share and royalties.
POSITIONED FOR GROWTH
Given the current volatility in world stock markets, brought on
in large part by COVID-19 outbreak, Centamin is well positioned
having no debt, unhedged and US$379.2million[11] [12] in cash &
liquid assets[13], providing full exposure to the gold price. I
have frequently stated a strong balance sheet and stringent cost
management as key to sustaining a robust business throughout the
cycle. The Company is constantly looking at ways to further
identify cost-savings, improve key operating metrics and social
improvements to those that work with and around us.
The Board are acutely aware of the quality and opportunity
within the Company portfolio of assets, which has attracted the
attention of other corporate entities, including the unsolicited
approach by Endeavour Mining in late 2019. Your Board is in favour
of risk diversification, but as disciplined capital allocators, we
believe it is important to be value investors first. As a
shareholder myself, I recognise the past two years have been
frustrating as our market valuation has at times been impacted by
short term performance inconsistencies during a period of change,
as well as being in an outperforming gold market. Regardless of
short-term performance setbacks we have always adhered to our core
principle of paying cash dividends to shareholders bi-annually
which we have now done for six consecutive years. The Board is
aligned that the best way to generate substantial sustainable
returns for shareholders is through long term organic investing and
the acquisition of value-accretive assets.
THANK YOU
I would like to take this opportunity to personally thank my
Centamin colleagues, friends and family. I am grateful to have
worked with you and achieved what we have together. We have
demonstrated what a clear plan, passion, and hard work can achieve.
The future opportunities for Centamin, and all its stakeholders,
are endless. You have the skills, assets, leadership and I look
forward to following and supporting your future successes.
Nothing would have been possible without our stakeholders.
Together, our shared vision is only the beginning for Centamin and
Egypt's growing presence in the gold industry. Thank you.
CORPORATE GOVERNANCE
Effective corporate governance begins with a strong Board, led
by the Chairman, with the appropriate skills and experience to
challenge and support the Executive team in delivering the
corporate strategy. The Board transformation throughout 2019
reflects the Company's ongoing commitment to achieving the highest
standards of corporate governance.
BOARD COMPOSITION[14]
In accordance with the 2018 UK Corporate Governance Code ("2018
Code") and Centamin's ongoing board succession programme, the
Company has made the following changes to its Board
composition:
-- Appointment of Dr Sally Eyre, Marna Cloete and Dr Catharine
Farrow as independent Non-Executive Directors in 2019, and in 2020,
appointment of Jim Rutherford as independent Deputy Non-Executive
Chairman
-- On 3 October 2019, Andrew Pardey stepped down as CEO and
Executive Director; Ross Jerrard, CFO and Executive Director
stepped in as interim CEO
-- On 6 April 2020, Martin Horgan was appointed as CEO and
Executive Director, following a thorough international search
process; Ross Jerrard continued with his responsibilities as
CFO
-- Josef El-Raghy, Chairman, will not stand for re-election at the upcoming 2020 AGM
-- Completing a comprehensive handover, Jim Rutherford will
become the independent Non-Executive Chairman ("NEC") from 29 June
2020
-- Following a nine-year tenure, Gordon "Ed" Haslam, Senior
Independent Director ("SID"), will not stand for re-election at the
upcoming 2020 AGM
-- Dr Sally Eyre will assume the Senior Independent Director role, effective 29 June 2020
-- Following a nine-year tenure, Mark Arnesen, Non-Executive
Director, will not stand for re-election at the upcoming 2020
AGM
-- An active recruitment process is underway to identify and
appoint an independent non-executive director to chair the new
Technical Committee which will be mandated from 29 June 2020
Following the 2020 AGM, as at 29 June 2020, there will be eight
Board Directors, including six Non-Executive Directors and two
Executive Directors. In accordance with the 2018 Code the Board is
greater than 50% independent.
Committee restructuring
effective 29 June 2020
As part of the Company's recent Board transformation, a full
effectiveness review and refreshment was conducted across the Board
committee mandates and composition. The material changes are
outlined below:
Health, Safety, Environmental and Social Committee ("HSES") to
be evolved into the Sustainability Committee
-- The new Sustainability Committee will have focus across the
health and safety, environmental, social (including employee
engagement) and governance. Aspects of risk associated with the
Company's licence to operate will be considered by this committee.
A review of the charter and interaction with the Board Audit and
Risk Committees and other committees, including a new Technical
Committee will be considered in the review.
Technical Committee to be established as a new committee
-- The new Technical Committee will support and advise the Board
in reviewing technical and operational matters. The committee will
help in monitoring decisions and processes designed to ensure the
integrity of the Group's reserve and resource estimations. The
committee will also be responsible for technical reporting,
internal quality control and assurance over the Group's mining
assets and exploration, including oversight of the life of asset,
production and exploration.
-- The recruitment process for a new Non-Executive Director,
with technical and operating experience, has been led by the
Nomination Committee and is well progressed. An appointment is
expected to be announced in Q2 2020 and it is intended they will
chair the Technical Committee.
Compliance and Corporate Governance Committee to be discontinued
in its current form
-- The Compliance and Corporate Governance Committee
responsibilities have been reassigned to the Sustainability
Committee, the Audit and Risk Committee and the Board.
-- The Disclosure Committee will continue in accordance with the
Company's Continuous Disclosure policy and will report directly to
the Audit and Risk Committee and, where necessary, to the
Board.
COMMITTEE rotation
effective 29 June 2020
The Board understands the benefits of refreshing its
composition, committee structures as well as planning for future
succession. The changes to the committee structures illustrate the
Company's commitment to continue to evolve and strengthen our
governance model in line with the rapidly changing global
environment with which we operate. Please see the below planned
changes to the Board committee membership, effective 29 June 2020,
following the 2020 AGM:
-- Dr Sally Eyre will chair the Remuneration Committee and
become a member of the Nomination Committee and Technical
Committee
-- Jim Rutherford will chair the Nomination Committee and become
a member of the Remuneration Committee
-- Dr Catharine Farrow will chair the new Sustainability
Committee and become a member of the Technical Committee and Audit
and Risk Committee
-- Marna Cloete will chair the Audit and Risk Committee and
become a member of the Remuneration Committee and Sustainability
Committee
-- Dr Ibrahim Fawzy will become a member of the Nomination
Committee and Sustainability Committee
-- Ongoing succession planning including an active process is
underway to appoint an independent Non-Executive Director
specifically with technical and operating expertise to Chair the
newly established Technical Committee and planned to become a
member of the Audit and Risk Committee and Sustainability
Committee.
-- Mark Bankes will join the Technical Committee and in the
short term will remain on the Audit and Risk Committee until the
above appointment is made - expected in H1 2020
Current Committee membership [15] , as at 18 May 2020
Audit & Remuneration Nomination Health, Corporate
Risk Safety, Governance
Environmental
& Social
-------------- ---- -------- ------------- ----------- --------------- ------------
Edward Haslam SID Member Chair Chair Chair Member
Mark Arnesen NED Chair Member Member Member
Mark Bankes NED Member Member Chair
Marna Cloete NED Member
Dr Sally Eyre NED Member
Dr Ibrahim NED Member Member
Fawzy
-------------- ---- -------- ------------- ----------- --------------- ------------
Planned Committee membership, effective 29 June 2020
At the recommendation of the Nomination Committee, the Centamin
Board has approved the following planned Committee membership to
take effect following the 2020 AGM:
Audit & Remuneration Nomination Sustainability Technical
Risk
--------------- ---- -------- ------------- ----------- --------------- ----------
Jim Rutherford NEC Member Chair
Dr Sally Eyre SID Chair Member Member
Mark Bankes NED Member Member Member
[16]
Marna Cloete NED Chair Member Member
Dr Catharine NED Member Chair Member
Farrow
Dr Ibrahim NED Member Member
Fawzy
New Technical NED Member Member Chair
Director
--------------- ---- -------- ------------- ----------- --------------- ----------
2019 CEO REVIEW
Ross Jerrard
Interim Chief Executive Officer, Chief Financial Officer and
Executive Director
Acting as interim CEO and managing the Company during a
transformational time has been an honour and a privilege. It is a
great pleasure to welcome Martin Horgan as Centamin's new CEO and I
look forward to working with Martin to deliver value to all our
stakeholders through the implementation of our consistent and
long-term strategy.
GOOD BUSINESS
For the past 25 years Centamin has been building a responsible
culture that values and supports environmental, social and
governance ("ESG") matters. From ethical code of conduct to
decision-making, ESG is critical to the sustainability of our
business. The key ESG improvement in 2019 has been effectively
communicating this culture, framework and progress. To Centamin ESG
is simply, good business. Testament to this , Centamin was
recognised by the UK FTSE Series and qualified to be a constituent
of the FTSE4Good Index. Our second Sustainability Report will be
published on 8 June 2020 and will provide the framework and detail
of our commitment to good corporate citizenship.
The safety, health and wellbeing of our workforce and local
communities are our top priority every day. We instil a strong
safety culture and continue to strive for a zero-harm workplace
environment and I was disappointed that our safety record suffered
a setback in 2019 with ten Lost Time Injuries ("LTIs") and the
tragic loss of a contractor in Côte d'Ivoire due to a swarm of
killer bees in February 2019. Lost Time Injury Frequency Rate
("LTIFR") was 0.29 per 200,000 workplace hours in 2019. With each
safety incident we learn and adapt our conduct accordingly so as to
mitigate it from happening again.
In 2019, there were no major environmental incidents recorded
and a 33% reduction in total environmental incidents. Improving
on-site water management is an ongoing key focus, including
developing and implementing a new Water Management Plan. In 2019 we
set the target to exit the year with a 50:50 salt water draw vs
recycled circuit water balance. I am pleased to report we beat our
target and achieved an average of 76% circuit water recycled
throughout the year. Consequently, this meant more tailings water
was drawn from the tailings dam, which increased the available
capacity of our active tailings storage facility ("TSF1") to the
end of 2020. Construction of our second tailings storage facility
("TSF2") is underway and on schedule.
Centamin is committed to leaving a strong legacy for the benefit
of our local, regional and national hosts - it is with excitement
that we embark on significantly lowering our carbon footprint
through increased operational efficiencies as well as the
construction of the Sukari hybrid solar power plant. The Stage 1
30MW solar plant is expected to replace 18-20 million litres of
diesel consumption per annum through operation during daylight
hours. Over time it is expected this capacity will be expanded and,
importantly, it will continue to operate for decades to come,
delivering sustainable energy beyond the life of mine. The plant
electrical upgrades and earth clearing works are underway in
preparation for construction of the solar plant, which has been
temporarily postponed due to health and safety measures around
COVID-19.
2019 PERFORMANCE
Centamin matured as a business in 2019. I am very pleased with
the teams' efforts and focus, delivering a near record quarter in
Q4 2019. A weaker Q3 2019, due to slower mining rates from a
section of the open pit, impacted annual production performance of
480,528 ounces, which was a 2% improvement on 2018.
Notwithstanding, all other guidance metrics were delivered within
range.
In 2019, we significantly strengthened our operational teams
across all of our assets, particularly with senior technical
managers. Through our workplace development programmes, 2019
concluded with 57% of Group leadership positions held by nationals,
as we look to nurture and promote indigenous talent. I am confident
we have the right team, mine plan and culture in place to deliver
future performance.
We delivered another strong financial performance in 2019, which
further benefited from improved gold prices. Revenues increased by
8% to US$652 million and underlying EBITDA (1) increased 10% to
US$284 million with a 43% margin. Profit after tax increased 13% to
US$173 million. Operating cash flow increased 11% to US$249 million
and Group free cash flow (1) , after a 14% increase in profit share
paid to EMRA, improved 17% to US$74.3 million.
Through strong cash management and disciplined capital
allocation, we have built a stronger financial position, with
US$379.2 million(8) in cash and liquids assets (1) at 31 March
2020, after distributing US$570 million to shareholders in cash
dividends, and almost US$500 million in profit share and royalty
payments to Egypt, to date. Unique amongst our peers, Centamin has
never had debt, hedging nor streaming in place, maximising the
strength and flexibility of the balance sheet today and offering
shareholders pure gold exposure throughout the cycle.
With our disciplined approach to capital allocation and
responsibility as custodians of shareholder invested capital, we
are proud of our established track record of returning surplus cash
to shareholders - as well as investing in both sustaining the
business and self-funding investment opportunities. Our commitment
to shareholder returns is core to our strategy, as demonstrated
with our six-year dividend stream.
INVESTING FOR THE FUTURE
Our strong balance sheet and future cash flow potential enables
significant capital to be re-invested in the business for
sustainability and future growth, as well as, maintaining industry
leading shareholder returns. This year and 2021 will see Centamin
invest further in value driven projects, transforming Centamin for
the future - including substantial upgrades to the underground,
increased brownfield exploration and integrating solar power at
Sukari.
In the second half of the year, a series of optimisation
studies, across all facets of the mine, commenced, with a focus on
long term planning and identifying cost-saving, operational
efficiency and improved productivity opportunities. These studies
are underway and have already begun to identify potential
cost-saving, performance enhancing opportunities and social
improvements, including improvements to open pit operations,
process plant productivity and on-site camp facilities, which are
budgeted for implementation in 2020. We expect the review to be
completed during the second half of 2020 and look forward to
updating stakeholders on any material developments in due
course.
EXPLORATION
During 2019 the discovery of Horus Deeps was made at Sukari, an
exciting target which is located 300 metres below the current
underground infrastructure of two high-grade shallow dipping
structures. Mineralisation was similarly intersected below the Ptah
and Amun zones, indicating that the structure extends to both the
north and south. A surface step-out drill programme is underway in
2020, at 250 metre spacing which will tie into the current seismic
programme, increasing the resource potential and geological
understanding across the tenement.
In 2019 we commenced a small-scale regional exploration
programme outside the mine gate, though within the larger Sukari
tenement. There are several underexplored known deposits, all
within trucking distance to our process plant. A 2D geoseismic
programme was completed during 2019. Initial data interpretation is
very encouraging, identifying multiple potential gold systems and
exploration targets for further investigation during 2020 and
beyond.
We have over 3,000km(2) of exploration ground across some of
West Africa's most prolific producing gold belts. Our combined West
African resource has grown to over five million Measured and
Indicated ounces, all located within 250 metres from surface. After
nine months of drilling, the exploration team increased the Doropo
Project resource by greater than 20% and made the significant
Kilosegui discovery. We believe this could be the source of
significant resource growth and is a priority exploration target
for 2020, ahead of progressing feasibility infrastructure
conceptual layouts.
OUTLOOK
The world is everchanging and it is important we continue to
evolve with it. As people, and as an organisation, globally we find
ourselves working together more than ever to navigate the
challenges that have and will continue to affect us all with the
global spread of COVID-19.
Our purpose and strategy remain clear and consistent - create
opportunities for our stakeholders through value-focused gold
mining over volume - and starting with 2020, we expect to deliver
year-on-year operational, financial, exploration, environmental,
social and governance progress, and look forward to communicating
these developments to you as the year progresses.
Our near-term focus is on driving margins through value over
volume decision making. The forecast for 2020[17] is gold
production of 510,000 - 540,000 ounces at an AISC(1) range of
US$870 - US$920 per ounce sold. Production is weighted to the
second half of the year, due to the open pit mining sequence, with
an approximate split of 45:55. The open pit will do most of the
heavy lifting in 2020, contributing 80% of the ounces we expect to
produce, as we are mining deeper into the pit in Stage 4 and
accessing higher grade ore than in previous years, while the
underground focus is on infrastructure upgrades to enhance future
production.
Centamin has a very active growth pipeline of opportunities.
Today we find ourselves in a strong position, looking back and
learning from our ten-year production track record, in which to
optimally position ourselves to deliver sustainable returns for at
least the next 15 years, as underpinned by our current gold reserve
and resource. At present, as caretakers and custodians, our
immediate focus is to navigate the current risks associated with
the COVID-19 pandemic and delivering our strategy in 2020. We will
update shareholders with detailed medium-term forecasts for 2021
and beyond later in the year, in conjunction with the completion of
the life of asset review.
Sukari is an exceptional asset and as our sole operating mine,
currently dominates our asset portfolio. In the near term, the best
return on capital comes from our ESG initiatives including the
hybrid solar power farm, employee equipment training, and targeted
reductions in reagent consumption. Results driven exploration
programmes aimed at significant resource growth and target
generation across the portfolio and in line with our development
criteria drives medium term value accretion.
We continue to look at strategic opportunities that can add
value to shareholders. The Board is extremely encouraged by
Centamin's Egyptian government partner, EMRA's launch of a gold
license bid round for exploration ground across Egypt. This is the
first bid round to be launched under the new tax, rent, and royalty
mining code. Whilst in its infancy, we view this to be very
positive for the country and believe that Centamin is strategically
positioned with an unrivalled operating track record, developed
workforce and established supply chain in modern gold mining
operations in Egypt.
TODAY
The first quarter of 2020 was a strong start to the year with
operational and financial performance delivered ahead of budget.
The commitment and response by our workforce to the COVID-19
pandemic has been exceptional, and we would also like to
acknowledge the assistance and support of the Egyptian
government.
Our top priority is to safeguard the health and wellbeing of our
people, while taking necessary action to protect our business.
Centamin has and will continue to implement proactive measures to
minimise the impact to our people, business, community and wider
stakeholders.
We are closely monitoring the development of COVID-19, including
the potential impact of any disruption to our supply chain and gold
exports. Our workforce, partners' and community safety and
well-being remain our very top priorities, and our Board and
Leadership team are actively engaged to respond to any developments
as quickly as we can. To date there has been no material impact to
our operations and there have been no reported cases of COVID-19 on
site.
Centamin is a resilient and responsibly run business with zero
debt and US$379.2 million in cash and liquid assets[18] [19], as at
31 March 2020. I am confident in our long-term strategy and our
ability to respond quickly in this difficult environment. We
continue to operate diligently and invest prudently, and I believe
Centamin is both well equipped to navigate these challenges and
remains well positioned for the future.
CORONAVIRUS ("COVID-19")
Thus far in 2020, COVID-19 has significantly impacted the world,
presenting an unprecedented medical, economic and social challenge.
Centamin has been proactive in how it manages and mitigates the
impacts within its control. As of 18 May 2020, Centamin has no
recorded cases of COVID-19 on-site and has experienced no material
disruption to operations, supply chain or gold shipments. The
Company has, however, put in place contingency plans to deal with
various possible disruption in the coming months.
At the centre of any decision is the health, safety and
wellbeing of our employees and communities. We have stringent
safety protocols across all sites, including clear operating
standards on workplace conduct. In response to COVID-19, early
action was taken at Sukari, in line with our Severe Communicable
Disease Outbreak Management Plan and in accordance with the advice
of governments and health authorities. These include the following
actions taken:
-- Established social distancing and strict hygiene measures
-- Established a robust multi-functional response framework with a clear chain of command
-- Proactively engaged with the Egyptian Government, Health
Authorities and the City of Marsa Alam
-- Ceased non-essential travel
-- Extended on-site roster cycles supported by clear fatigue management protocols
-- Enabled employees to work from home where possible
-- Continue to educate the workforce on the virus (symptoms and preventative measures)
-- Ceased non-essential visits and stringent controls in place for essential visitors
-- Established multiple mandatory checkpoints (Marsa Alam
airport, community centre and mine gate) for possible symptoms and
travel history screening for all visitors
-- Quarantine requirements for any individuals accessing site
with rigid hospital isolation protocols in place for any suspected
infected persons
-- Ongoing supply chain assessment and reviews to ensure the
site can operate for an extended period of time
Safely managing the mobility of our workforce, in line with
government and public health advice, has been paramount in
mitigating the risk of spreading the virus. Government imposed
travel restrictions on the movement of people are expected to ease
in the coming months. Until the timing of those changes are fully
understood and global mobility stabilises the Company have
identified alternative measures for varying scenarios.
Whilst the impact and potential duration of the COVID-19
pandemic remains uncertain, the Company has carried out scenario
risk analysis on the Group and the Company believes it is well
positioned to continue to manage through these difficult times. As
the pandemic progresses we will continue to monitor the global
situation - closely within our host countries Egypt, Côte d'Ivoire,
Burkina Faso, Jersey and the United Kingdom - adapting our
policies, procedures and controls to minimise the impacts that are
within our control.
A COVID-19 Executive Committee has been established to provide
oversight during the pandemic, supported by multifunctional teams
and a framework led by Risk and Operations. At a minimum, the Board
are updated weekly, the Executive Committee meets three times a
week and the support team meet daily, providing workforce updates
and supply chain assessment.
Supply Chain
We are supportive of the action being taken by governments
globally to address the threat of COVID-19. As with many countries
globally, Egypt has temporarily closed the national borders to
commercial air travel until further notice. The ports and air
freight borders remain open for importing and exporting goods.
Understandably, supply chain logistics have been impacted by the
global government imposed travel restrictions on the movement of
goods. Increased logistical planning and flexibility has been
crucial in mitigating these impacts.
The domestic supply chain has not been materially impacted,
allowing for transportation of domestic goods in compliance with
State curfews. International essential supplies are sufficiently
stocked in to Q3 2020. As a precautionary measure, successful
efforts have been made to further identify and, or increase the
stores of essential supplies. However, if travel restrictions are
extended into H2 and/or critical supply disruptions arise,
operations could be affected.
Daily supply chain assessment is conducted, monitoring stock and
usage levels, maintaining a risk schedule of our current and
prospective suppliers, and supported by continuous open dialogue
with our key international and domestic suppliers. Where a
potential risk to a supplier has been flagged, and with all
essential supplies, precautionary measures have been taken to
identify alternative potential supply channels.
Gold Sales
There have been no material disruptions related to gold
shipments to our longstanding refiner, Asahi Refining Canada.
Regular dialogue is maintained with both Asahi and Brinks, our
security company whom take responsibility for the gold at the mine
gate.
Comprehensive scenario assessment continues, with precautionary
measures in place, including utilising alternative refiners, Brinks
stockpiling gold shipments and Centamin stockpiling gold produced.
Each scenario involves variable short-term but limited cost
implications.
Further information on COVID-19 was provided in our Q1 2020
Report published on 21 April 2020. We have also ensured that where
relevant in the document we have referred to the potential impact
of COVID-19, which is recognised as a new and emerging risk.
DISCLAIMERS
The person responsible for the release of this announcement on
behalf of Centamin is Josef El-Raghy, Chairman.
Cautionary note regarding forward --looking statements
There are risks associated with an investment in the shares of
Centamin. Recipients of this presentation should review the risk
factors and other disclosures regarding Centamin contained in the
preliminary prospectus and subsequent annual reports and Management
Discussion and Analysis reports of Centamin that have been filed
with Canadian securities regulators and are available at
www.sedar.com.
This report contains "forward-looking information" (or
"forward-looking statements") which may include, but are not
limited to, statements with respect to the future financial or
operating performance of the Company, its subsidiaries and its
projects (including the Sukari Gold Mine), the future price of
gold, the estimation of mineral reserves and resources, the
realisation of mineral reserve estimates, the timing and amount of
estimated future production, revenues, margins, costs of
production, capital, operating and exploration expenditures, costs
and timing of the development of new deposits, costs and timing of
construction, costs and timing of future exploration, the timing
for delivery of plant and equipment, requirements for additional
capital, foreign exchange risk, government regulation of mining and
exploration operations, environmental risks, reclamation expenses,
title disputes or claims, insurance coverage and the timing and
possible outcome of pending litigation and regulatory matters.
Often, but not always, forward-looking statements can be identified
by the use of words such as "plans", "hopes", "expects", "is
expected", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates", or "believes" or variations (including
negative variations) of such words and phrases, or state that
certain actions, events or results "may", "could", "would", "might"
or "will" be taken, occur or be achieved.
Forward-looking information involves and is subject to known and
unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company and/or
its subsidiaries to be materially different from any future
results, performance or achievements expressed or implied by the
forward-looking information. Such factors include, among others,
general business, economic, competitive, political and social
uncertainties; the actual results of current exploration activities
and feasibility studies; assumptions in economic evaluations which
prove to be inaccurate; fluctuations in the value of the United
States dollar and the Canadian dollar relative to each other, to
the Australian dollar and to other local currencies in the
jurisdictions in which the Company operates; changes in project
parameters as plans continue to be refined; future prices of gold
and other metals; possible variations of ore grade or recovery
rates; failure of plant, equipment or processes to operate as
anticipated; accidents, labour disputes or slow downs and other
risks of the mining industry; climatic conditions; political
instability, insurrection or war; arbitrary decisions by
governmental authorities; delays in obtaining governmental
approvals or financing or in the completion of development or
construction activities. Discovery of archaeological ruins of
historical value could lead to uncertain delays in the development
of the mine at Sukari.
As set out in the Strategic report, at the date of this report,
COVID-19 has significantly impacted the world, presenting an
unprecedented medical, economic and social challenge. Centamin has
been proactive in how it manages and mitigates the impacts within
its control. As of 18 May 2020, Centamin has no recorded cases of
COVID-19 on-site and has experienced no material disruption to
operations, supply chain or gold shipments. The Company has,
however, put in place contingency plans to deal with various
possible disruption in the coming months.
Although the Company has attempted to identify important factors
that could cause actual actions, events or results to differ
materially from those described in forward-looking information,
there may be other factors that cause actions, events or results to
differ from those anticipated, estimated or intended.
Forward-looking information contained herein is made as of the date
of this announcement and the Company disclaims any obligation to
update any forward-looking information, whether as a result of new
information, future events or results or otherwise. There can be no
assurance that forward-looking information or statements will prove
to be accurate, as actual results and future events could differ
materially from those anticipated in such information or
statements. Accordingly, readers should not place undue reliance on
forward-looking statements.
LEI: 213800PDI9G7OUKLPV84
Company No: 109180
[1] Adjusted EBITDA, Cash cost of production, AISC, Cash and
cash equivalents, bullion on hand, gold sales receivables and
financial assets at fair value through profit or loss and Adjusted
free cash flow are non-GAAP measures, referenced in 2019 Audited
Annual Report and Accounts
[2] Gross revenue from gold sales includes US$5.8 million in
pre-production gold sales from Cleopatra development ore.
[3] EBITDA margin is EBITDA as a percentage of gross revenue
[4] Cash and cash equivalents, bullion on hand, gold sales
receivables and financial assets at fair value through profit or
loss
[5] Unaudited, as per Q1 2020 Report, published 21 April 2020.
Audited cash and liquid assets of US$348.9 million as at 31
December 2019
[6] Before 2020 first interim dividend distribution of US$69.4
million on 15 May 2020
[7] On 21 April 2020, the Board declared the 2020 first interim
dividend to equally replace the proposed 2019 final dividend
[8] Centamin is closely monitoring the global COVID-19 pandemic
and the Company guidance may be impacted if the workforce,
operation or projects are disrupted due to the virus or efforts to
slow the spread of the virus.
[9] Unaudited, as per Q1 2020 Report, published 21 April 2020.
Audited cash and liquid assets of US$348.9 million as at 31
December 2019
[10] Before 2020 first interim dividend distribution of US$69.4
million on 15 May 2020
[11] Unaudited, as per Q1 2020 Report, published 21 April 2020.
Audited cash and liquid assets of US$348.9 million as at 31
December 2019
[12] Before 2020 first interim dividend distribution of US$69.4
million on 15 May 2020
[13] Cash cost of production, AISC, EBITDA, Cash, bullion on
hand, gold sales receivables, financial assets at fair value
through profit and loss (also known as Cash and liquid assets) and
Adjusted free cash flow are non-GAAP measures and are defined in
the Financial Review non-GAAP measures section.
[14] Disclosures in accordance with LR9.6.11
[15] Jim Rutherford has been attending Committee meetings as
part of his Chairman handover, to understand the activities that
are undertaken
[16] Mark Bankes to step down from the committee following the
appointment of a new technical non-executive director
[17] Centamin is closely monitoring the global COVID-19 pandemic
and the Company guidance may be impacted if the workforce,
operation or projects are disrupted due to the virus or efforts to
slow the spread of the virus.
[18] Unaudited, as per Q1 2020 Report, published 21 April 2020.
Audited cash and liquid assets of US$348.9 million as at 31
December 2019
[19] Before 2020 first interim dividend distribution of US$69.4
million on 15 May 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR KKOBNCBKDDPD
(END) Dow Jones Newswires
May 18, 2020 02:00 ET (06:00 GMT)
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