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Regulatory Story
Company Centamin PLC
TIDM CEY
Headline Q3 2018 Results
Released 07:00 01-Nov-2018
Number 9927F07

RNS Number : 9927F
Centamin PLC
01 November 2018
 

For immediate release

 

1 November 2018

 

Centamin plc ("Centamin" or "the Company")

(LSE:CEY, TSX:CEE)

 

Centamin plc Results for the Third Quarter and Nine Months Ended 30 September 2018

 

Financial Highlights(1,2,3,4)

Q3 2018 compared with Q2 2018

·      Sukari Gold Mine ("Sukari") produced 117,720 ounces, a 27% improvement on the second quarter ("Q2") QoQ, resulting from month on month operational improvements in the open pit and underground;

·      Gold sales of 106,798 ounces, a 9% increase QoQ. The increased difference between gold produced and gold sold is due to the timing of final month end gold pour and the gold shipment schedule; The 20,163 unsold ounces were sold at the next shipment, contributing to fourth quarter ("Q4") revenue;

·      Average realised gold price of US$1,206 per ounce, a decrease of approximately 7% QoQ;

·      Revenue of US$125.1 million, a 1% increase QoQ, due to the 9% increase in ounces sold offset by 7% decrease in gold price; Revenue of US$421.5 million generated YTD from gold sales of 328,433 ounces (Excl. Cleopatra ounces) at an average realised gold price of US$1,281 per ounce;

·      EBITDA (1,2,4) of US$48.7 million, a 6% increase QoQ, resulting in EBITDA of US$178.5 million YTD;

·      Profit before tax(4) of US$21.8 million, a 1% decrease QoQ, and US$102.2 million YTD;

·      Basic earnings per share after profit share(2,4) ("EPS") of 0.93 US cents, a 29% decrease QoQ, largely reflecting the Sukari profit share mechanism as per the Concession Agreement with Egyptian Minerals Resources Authority ("EMRA"), Centamin's state partners, which from July 2018 moved from a ratio of 60:40 to 55:45 (Centamin:EMRA); YTD EPS of 4.80 US cents;

·      Operational cash flow of US$27.3 million, a 27% decrease QoQ, due to the factors mentioned above and an 8% increase in operating costs driven by increased volumes of material moved; Operational cash flow YTD of US$150.0 million;

·      Royalties of US$3.9 million payable to Arab Republic of Egypt ("ARE") and profit share of US$10.6 million paid to EMRA, resulting in a US$62.7 million YTD direct financial contribution to Egypt;

·      Sustaining capital expenditure of US$21.8 million, a 24% decrease QoQ; YTD capital expenditure of US$75.7 million;

·      Negative Group free cash flow(1) of US$1.0 million, largely driven by timing of gold sales resulting in increased bullion inventory and the phased Sukari profit share mechanism, referred to above;

·      Group free cash flow generated YTD is US$35.1 million;

·      Cash and liquid assets(1,3) of US$292.2 million, at 30 September 2018, after payment of the interim dividend of US$28.9 million (2.5 US cents per share) on 28 September 2018; and

·      The Company remains debt-free and unhedged.

 

 

 

Quarter on quarter comparative

 

Year on year comparative

 

9 months ended 30 Sept. 2018

 

units

 

Q3 2018

Q2 2018

% change

 

Q3 2017

% change

 

YTD 2018

Gold produced

oz

 

 117,720

92,803

27

 

156,533

(25)

 

 334,819

Gold sold

oz

 

 106,798

97,628

9

 

150,273

(29)

 

 335,470

Cash cost of production (1,2)

US$'000

 

 70,874

64,630

10

 

75,658

(6)

 

 206,816

Unit cash cost of production

US$/oz produced

 

 619

714

(13)

 

483

28

 

 631

AISC (1,2)

US$'000

 

 92,056

102,211

(10)

 

109,952

(16)

 

 301,206

Unit AISC (1,2)

US$/oz sold

 

 889

1,073

(17)

 

732

21

 

 917

Average realised gold price

US$/oz

 

 1,206

1,298

(7)

 

1,283

(6)

 

 1,281

Revenue

US$'000

 

 125,127

123,929

1

 

193,092

(35)

 

 421,518

EBITDA (1,2)

US$'000

 

 48,746

45,774

6

 

98,155

(50)

 

 178,474

Profit before tax(4)

US$'000

 

 21,836

21,977

(1)

 

70,003

(69)

 

 102,212

Basic EPS (2) (4)

US cents

 

 0.93

1.32

(29)

 

2.96

(69)

 

 4.80

Sustaining capex incl. Sukari exploration(4)

US$'000

 

 21,812

28,798

(24)

 

24,296

(10)

 

 75,689

Operating cash flow(4)

US$'000

 

 27,303

37,247

(27)

 

104,737

(74)

 

 149,963

Free cash flow (1) (4)

US$'000

 

 (989)

1,594

(162)

 

45,625

(102)

 

 35,085

                       

 

Operational Highlights(1,2)

Q3 2018 compared with Q2 2018

·      Group Lost Time Injury Frequency Rate ("LTIFR") of 0.13 per 200,000 man hours, with one lost-time injury in Q3, a reflection of our ongoing focus and commitment on health and safety;

·      Sukari Gold Mine ("Sukari") produced 117,720 ounces, a 27% improvement QoQ, resulting from month on month operational improvements in the open pit and underground; September was a significant improvement on July and August, producing 48,511 ounces, driven by good underground grades and reduction in stope dilution; Underground operational improvements have taken longer than planned to materialise and are expected to continue to flow through in Q4;

·      Group production for the first nine months, year-to-date ("YTD") is 334,819 ounces;

·      Cash costs of production(1,2) of US$70.9 million, a 10% increase QoQ, primarily driven by increased volumes of material movement, in particular the combined mining stockpile build-up of US$32.7 million, due to increased material mined from the open pit, offsetting a collective stores inventory reduction of US$10.9 million;

·      Unit cash cost (1,2) reduced by 13% QoQ to US$619 per ounce produced, driven by increased production; Unit cash costs YTD are US$631 per ounce produced;

·      AISC (1,2) of US$92.1 million, a 10% decrease QoQ driven by an increase in inventory (stockpiles and bullion in safe) and scheduled reduction in sustaining capital expenditure over the period. Maintenance and equipment rebuild programmes are on schedule;

·      Unit All-in sustaining costs ("AISC" (1,2)) reduced 17% QoQ to US$889 per ounce sold; Unit AISC YTD are US$917 per ounce sold;

·      Record open pit material movement of 19.9Mt, an 8% increase QoQ, totalling 56.8Mt YTD, including record open pit ore mined of 6.6Mt, a 19% increase QoQ, totalling 18.1Mt YTD as mining of the Stage 4 transitional zone was completed and progressed into the higher-grade sulphide material, the predominant source of ore from the open pit for the next three years.

·      Open pit average milled grade was 0.81g/t, a 37% increase QoQ, and lifting the average milled grade YTD to 0.70g/t;

·      The run of mine ("ROM") ore stockpile increased from 6.45Mt (at 0.44 g/t) at the end of Q2, to 10.13Mt (at 0.47g/t) at the end of Q3, a 57% increase in tonnes QoQ, with 8.0Mt at 0.42g/t now classified as longer term stockpiles;

·      Total underground ore mining of 327kt, a 13% increase QoQ, at an average mined grade of 5.18 g/t, a 12% increase QoQ due to the successful ongoing implementation of changes initiated in Q2, in particular the reduction in tonnes impacted by dilution from cascade stoping; YTD 928kt ore mined at an average mined grade of 5.52gt;

·      There has been no underground equipment utilisation or availability disruptions; the backup long-haul drill rig ("LHDR") is in transit and expected to arrive on site in Q4; and

·      Plant throughput of 3.1Mt, a 1% reduction QoQ, at a head grade of 1.29g/t, a 31% increase QoQ.

 

Exploration Highlights(4)

The Group exploration programme has delivered strong results across the portfolio in Q3.

·      A comprehensive drilling programme at the Sukari underground continues to return excellent results;

·      These results, whilst outside the existing Mineral Resource, are largely near to existing development and infrastructure thereby expanding the structural architecture of the orebody and in turn, supporting increased mine life potential. Drill highlights include:

Ptah:                       3m @ 428 g/t

43m @ 8.2 g/t, including 15m @ 12 g/t

22m @ 8.5 g/t

21m @ 8.1 g/t

3.9m @ 20.4 g/t

0.8m @ 106 g/t

10.7m @ 9.26g/t

4.2m @ 9.9 g/t, including 3.8m @ 10.5 g/t

Amun:                    8m @ 180 g/t, including 1m @ 259 g/t

                                                                9m @ 51.9 g/t

                                                                9.2m @ 25.8 g/t, including 2.7m @ 20 g/t

                                                                0.7m @ 15.9 g/t, including 1.2m @ 563 g/t

                                                                4m @ 18.9 g/t, including 0.9m @ 287.2 g/t

Top of Horus:        0.7m @ 213 g/t

6m @ 26 g/t

0.8 m @ 25.8 g/t

 

·      Cleopatra exploration continued to return solid results, as further drilling systematically tested the contacts and internal geological structures during the quarter. Drill highlights include:    

1m @ 110.94g/t

2m @ 6.3g/t, including 0.7m @ 9.3g/t

1.4m @ 12.8 g/t

1m @ 11.5 g/t

0.9m @ 9.5 g/t

10m @ 3.9 g/t

4m @ 5.4 g/t

15m @ 3 g/t

10m @ 3.9 g/t

 

Total spend of US$2.8 million on Cleopatra exploration and development has generated pre-production revenue of US$2.7 million;

·      West Africa exploration expenditure(4) was US$4.7 million, progressing the Doropo Preliminary Economic Assessment ("PEA") study, which is on schedule for H1 2019, and further drilling at ABC Project targeting a maiden resource; and

Doropo Project, Côte d'Ivoire, resource extension and infill drilling returned positive results. Drill highlights include:

Nopka deposit:      37m @ 6.4 g/t

40m @ 2.7 g/t

12m @ 6.5 g/t

10m @ 6.4 g/t

6m @ 9.4 g/t

Chegue South deposit:        

15m @ 8.4 g/t

9m @ 9.7 g/t

11m @ 5.5 g/t

5m @ 10.7 g/t

Kekeda, Enioda, Hinda, Tchouahinin deposits:

13m @ 11.2 g/t

3m @ 30.5 g/t

4m @ 16.1 g/t

10m @ 5.8 g/t

7m @ 8.1 g/t

2m @ 19 g/t

 

ABC Project, Côte d'Ivoire, early stage reconnaissance exploration has identified some very encouraging mineralised zones. Drill highlights include:

Kona Project:         44m @ 2.5 g/t

100m @ 0.8 g/t

60m @ 1.2 g/t

36m @ 1.4 g/t

30m @ 1.5 g/t

83m @ 0.8 g/t

 

Q4 Update and 2018 Guidance

·      To date, in Q4, operational sections are performing in line with the plan and the Company remains on track to produce 145,000 ounces;

·      Whilst the Company continues to realise further improvements from the underground, production guidance for 2018 has been revised to 480,000 ounces;

·      Notwithstanding the reduced annual production profile, the cash cost of production guidance remains unchanged with unit cash cost of production on track to deliver between US$625-US$640 per ounce produced, resulting from a positive impact from increased inventory;

·      The Company expects AISC per ounce sold to continue to trend downwards in Q4 and expects to be at the top end of the guidance range of US$875-US$890 per ounce sold, and benefitting from the unsold ounces at the end of Q3 and therefore we expect gold sales to exceed gold produced;

·      Reduced total 2018 capital expenditure to US$125 million; and

·      Updated Sukari Mineral Reserve and Resource estimates scheduled to be published with year-end results.

_________________________________________________________________________________________________________

(1)       Cash cost of production, AISC, EBITDA and cash, bullion on hand, gold sales receivables, financial assets at fair value through other comprehensive income and free cash flow are non-GAAP measures and are defined at the end of the Financial Review section. 

(2)       Basic EPS, EBITDA, cash cost of production and AISC reflect a provision against prepayments to reflect the removal of fuel subsidies which occurred in January 2012 (refer to note 8 of the financial statements for further details).

(3)       Cash and cash equivalents, bullion on hand, gold sales receivables and financial assets at fair value through other comprehensive income.

(4)       The Group accounting policy for Greenfield exploration expenditure, has been updated in line with market practice. This has resulted in prior period results being restated. Accordingly, YoY comparatives are on a consistent basis. For full details, please refer to Note 1 of the Financial Statements.

 

 

Conference Call

A conference call will be hosted by the Company at 08.30 GMT (UK) today to discuss the results with investors and analysts. Please find below the required dial-in details. Where possible, please dial in 10 minutes before. The Results Presentation can be found on the Company website: www.centamin.com/investors/presentations/2018 ahead of the call.

 

Participant code:   72669053#             

UK Toll:                  +44 (0)203 428 1542

UK Toll-Free:         0808 237 0040                       

 

A replay will be made available on the Company website from 12.00 GMT (UK) today for 30 days.

 

For further information, please visit the website www.centamin.com or contact:

 

Centamin plc

Andrew Pardey, Chief Executive Officer

Alexandra Carse, Investor Relations

alexandra.carse@centamin.je

 

Buchanan

Bobby Morse

Chris Judd

centamin@buchanan.uk.com

                     CHIEF EXECUTIVE OFFICER’S REVIEW

These results demonstrate a material operational improvement on Q2. We are extremely pleased with the operational performance from the open pit and were pleased to see the underground returning towards expected production levels. The open pit, following another record quarter for material moved, is now through the transitional ore, grades are improving and are expected to continue to improve throughout Q4. The underground has shown month on month improvements throughout Q3, with production contribution from cascading stopes declining from 49% in Q2 to 34% in Q3 as stopes in upper Amun levels were progressively completed. By September, cascade stopes contributed less than 20% of production ore as higher-grade stopes were commenced in the Amun zone along the western contact. There are additional modifications underway as we return operations to their steady state.

We are committed to maintaining a tight cost base, with costs remaining firmly in the bottom half of the global gold producing cost curve with unit cash costs of production of US$619/oz and all-in sustaining costs of US$889/oz, down 13% and 17% QoQ, respectively, despite sector wide supply chain pressures. This has underpinned what is a profitable business, generating US$21.8 million for Q3 (US$102.2 million 2018 YTD) in what has been a sustained weak gold market.

The build-up in stockpiles has helped to reduce costs which have been further contained by improvements to fleet scheduling and utilisation, resulting in less trucks per unit moved, ongoing improvements in working capital, negotiation of improved commercial terms on some key supply contracts and deferral of non-critical sustaining capex items. Of note, fuel costs have been stable for the quarter.

The Company maintains a strong financial position, with cash and liquid assets of US$292.2 million as at 30 September 2018, after paying out US$28.9m for the interim dividend. Group free cash flow was negative US$1m for the quarter, after generating US$27.3m in operating activities, investing US$17.7 million in sustaining and exploration capex and distributing US$10.6 million to our local partners, EMRA, in profit share. We expect Q4 to be highly cash flow generative, including the benefit from the unsold ounces produced in Q3, where we expect gold sales to exceed gold produced.

The exploration programme has returned another quarter of strong results. Sukari is a world class asset with untapped growth potential as demonstrated by the continued excellent high-grade underground drill results in Q3. The underground drill results largely sit outside of the existing Sukari resource, yet are near to current underground development. Some of the results are also from less well understood extensions to the orebody, generating ample drill targets for Q4 and beyond. We look forward to providing our updated reserve and resource numbers with year-end results.

At Doropo in Côte d'Ivoire, the Preliminary Economic Assessment is on track for H1 2019. Geotechnical and hydrological studies are complete with the full metallurgical studies scheduled for completion in Q4. Environmental and community studies are underway and are scheduled for completion in H1 2019 along with the updated resource estimation. Based on ongoing drilling and work done to date, the Doropo Project is demonstrating increasing potential to be Centamin's next development project.

During the quarter, we were delighted to welcome Dr Ibrahim Fawzy to our Board as Independent Non-Executive Director and Raitt Marshall as General Manager of Sukari Gold Mines. Raitt brings a wealth of experience and joins us from Kinross Gold, where he was the General Manager of Tasiast Gold Mine, Mauritania.

Centamin's corporate strategy remains focused on the delivery of low cost operations at our world class Sukari Gold Mine; from this solid foundation we are able to generate significant cash flow, driving shareholder returns whilst simultaneously progressing multiple stages of future potential growth within our exploration and development pipeline.

                   OPERATING REVIEW  

 

 

 

 

Quarter on quarter comparative

 

Year on year comparative

 

9 months ended 30 Sept. 2018

 

units

 

Q3 2018

Q2 2018

% change

 

Q3 2017

% change

 

YTD 2018

Open pit mining

 

 

 

 

 

 

 

 

 

 

Total material mined

kt

 

 19,891

18,415

8

 

18,602

7

 

 56,802

Ore mined

kt

 

 6,562

5,532

19

 

4,825

36

 

 18,141

Ore grade mined

g/t Au

 

 0.64

0.51

25

 

0.76

(16)

 

 0.55

Ore grade milled

g/t Au

 

 0.81

0.59

37

 

1.11

(27)

 

 0.70

Strip ratio

waste/ore

 

 2.03

2.33

(13)

 

2.86

(29)

 

 2.13

Underground mining - Amun/Ptah

 

 

 

 

 

 

 

 

 

 

Ore mined from stoping

kt

 

 199

180

11

 

189

5

 

 539

Ore mined from development

kt

 

 128

109

17

 

113

13

 

 389

Ore grade mined

g/t Au

 

 5.18

4.62

12

 

7.97

(35)

 

 5.52

Processing

 

 

 

 

 

 

 

 

 

 

Ore processed

kt

 

3,129

3,172

(1)

 

2,996

4

 

9,370

Head grade

g/t Au

 

1.29

0.99

30

 

1.82

(29)

 

1.20

Gold recovery

%

 

88.7

87.3

2

 

88.3

0

 

88.6

Gold produced - dump leach

oz

 

3,894

3,028

29

 

1,692

130

 

9,077

Total gold production(1)

oz

 

117,720

92,803

27

 

156,533

(25)

 

334,819

Cash cost of production(2,3)

US$'000

 

70,874

64,630

10

 

75,658

(6)

 

206,816

Unit Cash cost of production(2,3)

US$/oz

 

619

714

(13)

 

483

28

 

631

AISC(3)

US$'000

 

92,056

102,211

(10)

 

109,952

(16)

 

301,206

Unit AISC(3)

US$/oz

 

889

1,073

(17)

 

732

21

 

917

Gold sold

oz

 

106,798

97,628

9

 

150,273

(29)

 

335,470

Average realised sales price

US$/oz

 

1,206

1,298

(7)

 

1,283

(6)

 

1,281

                       

(1)       Gold produced is gold poured and does not include gold-in-circuit at period end.

(2)       Cash cost of production exclude royalties, exploration and corporate administration expenditure. Cash costs of production reflect a provision against prepayments to reflect the removal of fuel subsidies which occurred in January 2012 (refer to note 8 of the financial statements for further details).

(3)       Cash cost of production and all-in sustaining costs are non-GAAP financial performance measures with no standard meaning under GAAP. Please see the financial review for details of non-GAAP measures.

 

Health and safety

The Group Lost Time Injury Frequency Rate ("LTIFR") for Q3 was 0.13, with one lost-time injury over a total of 1,590,855 man hours worked. The Company remains committed to further improving this health and safety measure towards our zeroharm target with details of the safety initiatives and employee welfare set out in the CSR report, which can be found on our website www.centamin.com.

 

Sukari Gold Mine, Egypt

 

Overview

Sukari had one lost-time injury over 1,441,307 man hours worked in Q3, resulting in an LTIFR of 0.14. The site continues to focus on leading indicators such as hazard reporting and regular routine training.

 

Sukari produced 117,720 ounces in Q3, a 27% increase on the previous quarter, reflecting operational improvements across all sections of the mine. Significant month on month improvements delivered total production for September of 48,511 ounces, more than a 50% increase compared to July production. This was due to mining of the high-grade stopes along the western contact in the Amun zone and some small high-grade stopes in the Ptah sediments.

 

Whilst many of the changes implemented in Q2 successfully resulted in improved performance, focus firmly remains on realising further improvements and ensuring consistency of performance.

 

Open pit mining of the transitional zone was completed in the quarter, with mined grades improving month on month, slightly ahead of expectations. Underground operations delivered the most improved month on month performance, with September production of 23,601 ounces greater than 70% increase compared to July production.

 

Underground stope production continued to improve during the quarter, although slower than expected, as cascade stopes in the upper levels were completed and progressively replaced with higher grade stopes with lower dilution. In addition to completing a number of cascade stopes in July and August, there were some issues opening up new stopes in August which were resolved by the end of the month, enabling September to record a much-improved performance.

Open pit

The open pit delivered a total material movement of 19.9Mt. A total of 6.6Mt of ore was mined at 0.64g/t, of which 2.7Mt was milled at an average head grade of 0.81 g/t; 189kt at 0.35 g/t was delivered to the dump leach pad; the balance of approximately 3.7Mt at 0.52g/t was delivered to the stockpiles. The run of mine ("ROM") ore stockpile at the end of Q3 was 10.1Mt at 0.47g/t, with 8.0Mt at 0.42g/t now classified as longer term stockpiles;

 

The open pit achieved another record quarter for ore mined and material moved. Additional ore tonnes were mined at medium grade slightly ahead of expectations. More ore tonnes were delineated from the grade control drilling, as we mined into the sulphide material.

 

Open pit mined grade for Q3 was 0.64 g/t, a 25% improvement QoQ, with September grade of 0.74 g/t, a 29% increase on July. In line with the mine plan, ore mining reduced in September with 17% less ore tonnes mined than in July.

 

Stage 4 mining is now into the higher-grade sulphide material, which will be the primary source of ore for at least the next three years. In Q4, the mine plan forecasts lower tonnage at higher grades of ore mined, as mining in the sulphides progresses at depth.

 

Underground

The underground delivered ore mined of 327kt, at an average grade of 5.18 g/t for the quarter; of which 199kt at 6.16 g/t was from stoping and 128kt at 3.65g/t was from development. The ratio of stoping-to-development ore for the period was 60:40. There have been no material equipment utilisation or availability issues and the backup LHDR is in transit and expected on site in Q4.

 

During Q3, the total tonnes mined from cascade stoping reduced from 49% to 34%, as mining commenced in the lower levels of the Amun zone where conventional open stoping is the suitable mining method for that section of the orebody.

 

Stope production in Amun amounted to 155kt at 6.71g/t, whilst development was 47kt at 3.18g/t. In the Ptah zone, stope production amounted to 44kt at 4.37g/t, whilst development was 81kt at 3.94g/t.  

 

In Q4, approximately 15% of total stoping tonnage scheduled is exposed to increased dilution due to cascading material. The underground mine plan schedules for stoping to development in a split of 60:40.

 

Total underground development was 1,759m, a 2% decrease QoQ. Decline development contributed 88m, with the remainder ore drive and cross-cut development in the Amun (593m) between 590 and 695 levels and Ptah (1,078m) on the P615 to P700 levels. Development in Q4 is forecast at 2,000m, of which 450m is waste in the Ptah and Horus (below Amun) declines.

 

Processing

The plant processed 3.1Mt of ore at a head grade of 1.29g/t, a 31% increase QoQ, in line with annual budget expectations. Metallurgical recovery averaged 88.7%, a 1.6% improvement on the prior quarter.

 

Cleopatra decline development in mineralised material produced 3,223 ounces. The dump leach operations produced 3,894 ounces.

 

 

Sukari Exploration

Exploration primarily focused within the mine site, to further unlocking underground resource potential at Amun, Ptah, Cleopatra and Top of Horus. A total of 9,286 diamond drill metres were completed, targeting Amun near development reserve and resource extensions, Cleopatra and Ptah resource drilling and Top of Horus extensions. A further 10,000 metre drill programme is underway for Q4.

 

Amun / Ptah

During Q3, exploration within the Amun zone was focussed on resource extension along the southern strike of the mine. A total of 1,783 metres were drilled from the Amun 650 level, targeting reserve and resource extensions within the Osiris flat structure and resource extensions to the south of the Top of Horus zone.

 

The Osiris zone is characterised by a major, low-angle thrust rotating the major W-WNW gently dipping porphyry block. The main high-grade veins occur on the upper and lower contacts of the porphyry with high-angle steeper dipping secondary veins ramping up, linking through to the western porphyry contact. The Top of Horus, forms on the contacts and develops within the steeply dipping Horus porphyry. The Top of Horus high grade veins are typically high-angle dipping towards the Northwest. This structural setting, where the low-angle Osiris thrust caps and possibly shifts laterally the top of the sub-vertical Horus porphyry, is open up and down plunge along strike.

 

Results confirmed the high-grade consistency along the southern and western extension of the Osiris zone. This is proximal to the current decline development drives and outside the existing reserve and resource. Top of Horus zone is still open to the south with higher grade located at the brecciated contact. More drilling is required but this is an area of high potential for reserve and resource growth.

 

 

 OPERATING REVIEW

 

Table 1. Amun Underground Exploration Significant Drill Intercepts - Q3 2018 Highlights

 

TENEMENT ID

PROSPECT ID

HOLE ID

Level   (mRL)

Interval    (m)

Grade       (Au g/t)

SUKARI GOLD MINE

AMUN

UGRSD0843

 

641.7

4.0

18.9

SUKARI GOLD MINE

AMUN

 

including

635.9

0.9

287.2

SUKARI GOLD MINE

AMUN

UGRSD0844

 

648.85

8.0

180.1

SUKARI GOLD MINE

AMUN

 

including

640.4

1.0

259.0

SUKARI GOLD MINE

AMUN

UGRSD0845

 

640.37

9.0

51.9

SUKARI GOLD MINE

AMUN

UGRSD0849

 

634.04

9.2

25.8

SUKARI GOLD MINE

AMUN

 

including

629.45

2.7

20.0

SUKARI GOLD MINE

AMUN

UGRSD0850

 

655.68

0.7

15.9

SUKARI GOLD MINE

AMUN

 

 

637.01

1.2

563.0

SUKARI GOLD MINE

AMUN

UGRSD0843

 

539.24

0.7

213.2

SUKARI GOLD MINE

AMUN

 

 

520.81

2.0

5.4

SUKARI GOLD MINE

AMUN

UGRSD0844

 

525.54

0.8

25.8

SUKARI GOLD MINE

AMUN

 

 

500.57

6.0

26.0

SUKARI GOLD MINE

AMUN

 

 

492.96

3.0

5.8

 

During Q3, the Company completed more than 3,800m of drilling in the Ptah zone with the focus on resource definition drilling and infill drilling on the Ptah Keel as well as the ongoing exploration drilling to support the current underground development in front of and below P605/P615 at Western contact and below P660 at Eastern contact. Drilling from Ptah 660 level, and later in September from Ptah 735 level, where a second rig commenced drilling, targeted the Ptah East Contact Stockworks Zone, Ptah West Contact Stockworks Zone, Ptah Western Contact High-grade Quartz-Veins and the Ptah Keel.

 

Results demonstrated grade continuity along the North-South strike of the ore zones on both the Eastern and Western Contacts. The quartz lodes on the Western contact remain a very prospective high-grade zone where the interaction between Hapi structure with western contact shear. Porphyry Keel drill results confirm resource extension potential at depth towards the north.

 

Table 2. Ptah Underground Exploration Significant Drill Intercepts - Q3 2018 Highlights

 

TENEMENT ID

PROSPECT ID

HOLE ID

Level   (mRL)

Interval    (m)

Grade       (Au g/t)

SUKARI GOLD MINE

PTAH

UGRSD0951

 

587.57

2.0

6.8

SUKARI GOLD MINE

PTAH

UGRSD0952

 

602.6

3.6

8.7

SUKARI GOLD MINE

PTAH

 

including

 

1.0

17.2

SUKARI GOLD MINE

PTAH

UGRSD0955

 

592.37

0.8

106.0

SUKARI GOLD MINE

PTAH

UGRSD0956

 

600.29

3.0

428.0

SUKARI GOLD MINE

PTAH

UGRSD0957

 

590.81

2.4

12.0

SUKARI GOLD MINE

PTAH

UGRSD0958

 

587.23

0.6

27.0

SUKARI GOLD MINE

PTAH

UGRSD0929

 

447.1

2.0

5.1

SUKARI GOLD MINE

PTAH

 

 

429.5

2.3

9.8

SUKARI GOLD MINE

PTAH

 

 

416.4

43.0

8.2

SUKARI GOLD MINE

PTAH

 

including

400.6

15.0

12.0

SUKARI GOLD MINE

PTAH

 

 

354.8

1.8

5.2

SUKARI GOLD MINE

PTAH

UGRSD0930

 

468.9

23.0

4.2

SUKARI GOLD MINE

PTAH

 

 

441.1

1.0

5.3

SUKARI GOLD MINE

PTAH

 

 

434.9

1.0

5.9

SUKARI GOLD MINE

PTAH

UGRSD0929

 

586.7

1.0

18.8

SUKARI GOLD MINE

PTAH

UGRSD0935

 

625

2.0

9.2

SUKARI GOLD MINE

PTAH

 

 

617.3

0.6

34.9

SUKARI GOLD MINE

PTAH

 

 

562.7

1.5

9.4

SUKARI GOLD MINE

PTAH

 

 

557.7

3.3

6.1

SUKARI GOLD MINE

PTAH

UGRSD0926

 

590.4

2.0

26.1

SUKARI GOLD MINE

PTAH

PUD7800

 

665.08

10.7

9.3

SUKARI GOLD MINE

PTAH

PUD7801

 

671.49

13.0

6.5

SUKARI GOLD MINE

PTAH

UGRSD0951

 

610.14

2.0

13.9

SUKARI GOLD MINE

PTAH

UGRSD0956

 

616.06

2.0

4.9

SUKARI GOLD MINE

PTAH

PUD7772

 

673.56

7.0

9.6

SUKARI GOLD MINE

PTAH

PUD7773

 

655.99

42.0

6.1

SUKARI GOLD MINE

PTAH

PUD7774

 

660.22

23.5

5.1

SUKARI GOLD MINE

PTAH

PUD7775

 

661

3.9

20.4

SUKARI GOLD MINE

PTAH

PUD7791

 

652.7

21.0

8.1

SUKARI GOLD MINE

PTAH

PUD7792

 

639

22.0

8.5

SUKARI GOLD MINE

PTAH

PUD7795

 

659.4

4.2

9.9

SUKARI GOLD MINE

PTAH

 

 

638.7

3.8

10.5

 

The drilling from the Ptah P660 and P735 levels is currently targeting the Eastern and Western contacts in Ptah to convert and extend our reserves to the North and South. The Porphyry-keel remains a potential target for resource growth with further infill drilling planned for the North extension. Amun exploration remains focussed on resource growth and testing extensions along the southern strike of the mine. In Q4, drilling will focus along the structural contacts at Osiris and top of Horus zones, with the aim to unlock the underground resource potential to South.

 

EXPLORATION REVIEW

 

Cleopatra Exploration Decline

The Cleopatra Zone consists of a set of three stacked, northwest dipping mineralised zones in the northern section of Sukari, named from surface as Cleopatra, Antony and Julius. Exploration continues to focus on the development and exploration of the Upper Cleopatra Zone to provide more detailed geological information and establish drill platforms targeting the Lower Cleopatra, Antony, Julius, Ptah Keel and Ptah Deeps ore zones.

 

During Q3, Cleopatra exploration completed 865m of development extracting 70,897 tonnes of mineralised development ore at an average grade of 1.6 g/t, producing 3,223 ounces. Cleopatra exploration drilling continues to test the contact zones and at depth.

 

One LM90 rig operated full-time drilling Cleopatra, completing 3,683 metres from the C 1150RL S2 platform. The principle focus of the Q3 program was targeting the high-grade mineralisation on the eastern contact ahead of the Antony Decline along the southern strike and the high-grade extension of the northern end of the Keel spine expressed there as the Ptah Deeps.

 

Results received from the Antony infill drilling show medium-grade near the eastern contact along the North-South strike of the zone. Other intercepts show both Cleopatra zone and Antony zone extensions are open down dip to the west.

 

Table 3. Cleopatra Exploration Decline - Underground Exploration Significant Drill Intercepts - Q3 2018 Highlights

 

TENEMENT ID

PROSPECT ID

HOLE ID

Level   (mRL)

Interval    (m)

Grade       (Au g/t)

SUKARI GOLD MINE

CLEO

CRSD112

908.07

1.0

110.9

SUKARI GOLD MINE

CLEO

CRSD108

982.84

15.1

3.0

SUKARI GOLD MINE

CLEO

CRSD124

1010.7

10.0

3.9

SUKARI GOLD MINE

CLEO

 

1004.6

4.0

5.4

SUKARI GOLD MINE

CLEO

CRSD095

1008.21

3.7

5.1

SUKARI GOLD MINE

CLEO

CRSD115

597.2

1.4

12.8

SUKARI GOLD MINE

CLEO

 

943.55

3.2

5.5

SUKARI GOLD MINE

CLEO

CRSD113

927.62

3.0

4.8

SUKARI GOLD MINE

CLEO

CRSD120

849.64

3.4

4.0

SUKARI GOLD MINE

CLEO

CRSD102

1064.65

2.0

6.3

SUKARI GOLD MINE

CLEO

 

936.49

3.0

4.0

SUKARI GOLD MINE

CLEO

CRSD114

650.23

1.0

11.5

SUKARI GOLD MINE

CLEO

 

961.94

2.0

5.5

SUKARI GOLD MINE

CLEO

CRSD121

527.2

1.3

7.5

SUKARI GOLD MINE

CLEO

 

910.47

2.3

3.8

SUKARI GOLD MINE

CLEO

CRSD114

1059.17

0.9

9.5

SUKARI GOLD MINE

CLEO

 

553.5

2.0

4.2

SUKARI GOLD MINE

CLEO

 

1034.48

0.7

9.3

SUKARI GOLD MINE

CLEO

CRSD114

932.76

2.0

3.2

SUKARI GOLD MINE

CLEO

CRSD107

968.32

1.3

4.3

SUKARI GOLD MINE

CLEO

 

544.32

1.0

4.7

SUKARI GOLD MINE

CLEO

 

931.72

1.4

3.3

SUKARI GOLD MINE

CLEO

 

558.28

1.0

4.0

SUKARI GOLD MINE

CLEO

 

925.98

1.0

3.9

 

Sukari Tenement Area

Sukari is a gold deposit hosted on a major Arabian Nubian Shield terrane boundary. The Sukari Resources are currently drill defined around the 2.7km long by 0.6km deep Sukari porphyry that sits axially within a much wider 17km long by 3.7km ophiolite shear zone. There are 7 surface prospects hosted along this trend within the license. All surface prospects are within trucking distance to the existing processing plant and infrastructure,

 

In Q2 initial work commenced to construct a robust district 3D geo-seismic architecture of the license area to depths greater than 1.5km, targeting potential new Sukari-style porphyries.

 

During Q3, detailed preliminary work was completed to calibrate the technology with the ground conditions and Sukari core. This is to be followed by further down the hole ("DTH") geophysics in Q4 and to then begin 2D seismic sections in Q1 2019.

 

 

 

Cote d'Ivoire

The Company has eleven exploration permits, covering circa 3,472km2 land holding and a further ten permits under application. During the quarter, the exploration team achieved zero lost-time injuries over a total of 135,090 man-hours worked during Q3. The overall exploration work focussed on resource growth as well as on extending the surface detailed geochemistry coverage at both the Doropo Project and the ABC Project.

Doropo Project

At Doropo drilling focused on the end of year resource upgrade targeting the shallow mineralisation along the Enioda, Tchouahinin, Hinda and Chegue structures and elevating the classification in the core of the two main reserve blocks at Nokpa and Souwa to support the forthcoming PEA study in H1 2019.

A total of 15,970m of RC and 6,543m of auger drilling was completed. The RC drilling was conducted on the Kalamon and Danoa permits and the auger drilling on the Tehini 1 and Tehini 2 permits.

Following encouraging preliminary test work on the oxide material, full laboratory metallurgical results will be received in Q4.

The Nokpa deposit is one of the key deposits in the 2017 resource update. The drilling completed in Q3 focused on resource expansion. Some of the intercepts include 10m at 6.4 g/t (from 26m downhole depth), 12m at 6.5 g/t (from 69m downhole depth), 40m at 2.7 g/t (from 71m downhole depth) and 37m at 6.4 g/t (from 70m downhole depth).

The Chegue South resource was extended southward during the quarter, with the discovery of several new mineralised shoots of high grade hidden under a thin veneer of barren, transported alluvium, that masked the original surface signature. The mineralisation extends from surface and includes intercepts up to 15m at 8.4 g/t (from 12m downhole depth) and 9m at 9.7 g/t (from 13m downhole depth).

The 2017 Chegue Main resource was composed of two main mineralised shoots plunging off a 2 km section of a regional 060o trending shear zone. In 2018, a further three new mineralised shoots have been identified between the existing mineralised shoots which the shoots into one continuous, coherent deposit. The shoots are stacked parallel, plunging shallowly towards 330o WNW and extend from surface. Representative intercepts include 15m at 1.9 g/t (from 50m downhole depth), 7m at 2.2 g/t (from 43m downhole depth) and 11m at 5.5 g/t (from 46m downhole depth).

The Enioda resource continues to grow and consolidate with a number of significant mineralised intercepts being reported in Q3, including 13m at 3.6 g/t (from 70m downhole depth),11m at 3.3 g/t (from 17m downhole depth) and 4m at 16.1g/t (from 21m downhole depth).

Q4 drilling will focus on completing the resource upgrade on Souwa and Nokpa. All the results will be submitted for the 2018 resource estimation and optimisation studies.

Below is a table of significant Doropo drill intercepts reported during the quarter.

 

Table 4. Doropo Project - Exploration Significant Drill Intercepts (0.5 g/t cut off) - Q3 2018 Highlights

 

TENEMENT ID

PROSPECT ID

HOLE ID

From

To

Interval   (m)

Grade        (Au g/t)

DANOA

Enioda

DPRC2156

21

25

4

16.1

DANOA

Enioda

DPRC2159

17

28

11

3.3

DANOA

Enioda

DPRC2160

28

34

6

3.8

DANOA

Enioda

DPRC2162

77

83

6

1.7

DANOA

Enioda

DPRC2171

19

30

11

1.4

DANOA

Enioda

DPRC2172

45

57

12

1.5

DANOA

Enioda

DPRC2173

74

80

6

2.2

DANOA

Enioda

DPRC2174

24

32

8

1.4

DANOA

Enioda

DPRC2175

7

16

9

2.8

DANOA

Enioda

DPRC2177

70

83

13

3.6

DANOA

Enioda

DPRC2178

104

110

6

7.0

DANOA

Enioda

DPRC2183

67

76

9

1.2

KALAMON

Chegue Main

DPRC2062

50

65

15

1.9

KALAMON

Chegue Main

DPRC2066

23

36

13

1.4

KALAMON

Chegue Main

DPRC2068

107

123

16

1.3

KALAMON

Chegue Main

DPRC2069

93

97

4

6.3

KALAMON

Chegue Main

DPRC2120

43

50

7

2.2

KALAMON

Chegue Main

DPRC2120

93

95

2

7.1

KALAMON

Chegue Main

DPRC2125

123

134

11

1.5

KALAMON

Chegue Main

DPRC2131

84

93

9

4.3

KALAMON

Chegue Main

DPRC2135

82

89

7

2.4

KALAMON

Chegue Main

DPRC2136

9

17

8

1.8

KALAMON

Chegue Main

DPRC2138

72

89

17

1.1

KALAMON

Chegue Main

DPRC2139

46

57

11

5.5

KALAMON

Chegue Main

DPRC2140

16

22

6

2.0

KALAMON

Chegue Main

DPRC2147

85

93

8

2.3

KALAMON

Chegue South

DPRC2103

12

27

15

8.4

KALAMON

Chegue South

DPRC2105

13

22

9

9.7

KALAMON

Chegue South

DPRC2106

45

52

7

2.5

KALAMON

Chegue South

DPRC2106

57

62

5

2.4

KALAMON

Chegue South

DPRC2110

21

30

9

1.7

KALAMON

Chegue South

DPRC2112

112

115

3

3.5

KALAMON

Chegue South

DPRC2116

66

71

5

10.7

KALAMON

Hinda

DPRC2204

71

73

2

6.5

KALAMON

Hinda

DPRC2208

37

41

4

2.6

KALAMON

Hinda

DPRC2209

58

64

6

1.7

KALAMON

Hinda

DPRC2213

13

23

10

5.8

KALAMON

Kekeda

DPDD1438

59.6

74

14

1.0

KALAMON

Kekeda

DPDD1439

44.6

58

13

11.2

KALAMON

Kekeda

DPRC2272

17

26

9

4.4

KALAMON

Kekeda

DPRC2275

107

110

3

7.0

KALAMON

Nokpa

DPRC2241

26

36

10

6.4

KALAMON

Nokpa

DPRC2242

24

26

2

11.4

KALAMON

Nokpa

DPRC2242

69

81

12

6.5

KALAMON

Nokpa

DPRC2243

9

16

7

6.7

KALAMON

Nokpa

DPRC2245

51

55

4

3.8

KALAMON

Nokpa

DPRC2246

67

75

8

2.1

KALAMON

Nokpa

DPRC2248

114

120

6

9.4

KALAMON

Nokpa

DPRC2252

20

23

3

3.9

KALAMON

Nokpa

DPRC2252

76

81

5

2.0

KALAMON

Nokpa

DPRC2254

110

114

4

8.8

KALAMON

Nokpa

DPRC2255

2

11

9

1.3

KALAMON

Nokpa

DPRC2258

104

106

2

19.0

KALAMON

Nokpa

DPRC2260

15

19

4

3.5

KALAMON

Nokpa

DPRC2261

12

18

6

3.5

KALAMON

Nokpa

DPRC2262

46

67

21

0.9

KALAMON

Nokpa

DPRC2262

79

89

10

1.7

KALAMON

Nokpa

DPRC2263

71

111

40

2.7

KALAMON

Nokpa

DPRC2265

70

107

37

6.4

KALAMON

Nokpa

DPRC2266

86

92

6

2.1

KALAMON

Nokpa

DPRC2266

114

120

6

7.4

KALAMON

Souwa

DPRC2078

95

105

10

1.2

KALAMON

Souwa

DPRC2084

15

21

6

4.2

KALAMON

Souwa

DPRC2086

27

46

19

1.6

KALAMON

Souwa North

DPRC2089

8

11

3

30.5

KALAMON

Souwa North

DPRC2090

81

86

5

2.2

KALAMON

Souwa North

DPRC2097

17

22

5

2.4

KALAMON

Tchouahinin

DPRC2216

41

48

7

8.1

 

At the regional scale, the auger program completed on the Tehini 1 and Tehini 2 permits has confirmed the in situ mineralised structure, along approximately 8km of strike. This anomaly is well correlated with a strong magnetic feature and is scheduled drill tested by RC in Q4.

 

The detailed surface geochemical program will continue in Q4 into the Kalamon and Danoa permits.

 

PEA Update

The PEA remains on schedule for completion by H1 2019.The geotechnical and hydrogeology studies were completed in Q3 and did not raise any areas of concern. The metallurgical study is awaiting the final reporting of the 10kg Bottle Rolls and Column Leach test work on the upper and lower oxide material from the deposits. Centamin is working with Digby Wells Environmental ("Digby Wells"), to assist with the PEA study and assist in the execution of wider social initiatives throughout the Group.  

 

 

ABC "Archaean-Birimian Contact" Project

We have defined two priority prospects on the Lolosso corridor for resource drilling the "Central Zone" and the "Southern Zone". Both outcrop at surface. Work has subsequently infilled the rest of the structure with soils in the residual regolith and auger drilling in the areas of transported alluvium. The Southern Zone hosts a 2km by 100m wide mineralised, west dipping shear package, which has produced the majority of the better intercepts reported in 2018 from the ABC Project. The Central Zone is currently drill defined over a similar strike length of 2km but is nominally wider at an average width of 200m and is generally lower grade. The mineralisation in both areas is open and the strike length between the two prospects is geochemically anomalous but currently undrilled.

 

A total of 4,589m of RC and 2,177m of diamond drilling was completed for the quarter.

 

The drilling completed until the end of Q3 covers the majority of the Southern zone with 100m spaced sections (that will be infilled in Q4). The mineralisation is hosted by psammitic facies, sandwiched between calc-silicates to the West in the hanging wall and a progressively gneissified foot wall to the east. Some of the representative intercepts include 30m at 1.5 g/t, 100m at 0.8 g/t and 44m at 2.5 g/t.

 

The Central zone is currently drill tested on 200m and 400m spaced drill sections. The lithological profile is similar to the Southern zone with calc-silicate hanging wall and gneiss footwall with a further interbedded quartzitic facies that also hosts mineralisation.

 

One sample of the Fresh ABC ore was composited from drill core from the Southern Zone and sent to AMMTEC for metallurgical characterisation in Q2. Results received in Q3 indicate the fresh material is non-refractory with the total gold extraction, following a simple gravity-direct feed CIL process, of 88.9%. The QEMSCAN report indicates the gold deportment is primarily free and structurally hosted within micro-fractures in the arsenopyrite and pyrite. No significant gold is locked in the sulphides or quartz.

 

Below is a table of significant ABC drill intercepts reported during the quarter.

 

Table 5. ABC Project - Exploration Significant Drill Intercepts (0.3 g/t cut off) - Q3 2018 Highlights

 

TENEMENT ID

PROSPECT ID

HOLE ID

From

To

Interval     (m)

Grade       (Au g/t)

KONA

Lolosso

KNDD0006

155

164

9

1.4

KONA

Lolosso

KNDD0006

171

177

6

2.4

KONA

Lolosso

KNDD0007

30

66

36

1.4

KONA

Lolosso

KNDD0007

84

104

20

0.7

KONA

Lolosso

KNDD0007

124

163

39

0.6

KONA

Lolosso

KNDD0007

168

184

16

0.9

KONA

Lolosso

KNDD0009

102

149

47

0.6

KONA

Lolosso

KNDD0009

178

195

17

1.3

KONA

Lolosso

KNDD0013

172

180.5

9

2.7

KONA

Lolosso

KNDD0013

182.75

209

26

1.5

KONA

Lolosso

KNRC0073

1

26

25

1.5

KONA

Lolosso

KNRC0074

1

30

29

1.5

KONA

Lolosso

KNRC0076

62

87

25

1.1

KONA

Lolosso

KNRC0077

122

153

31

1.4

KONA

Lolosso

KNRC0078

128

158

30

1.5

KONA

Lolosso

KNRC0079

16

76

60

1.2

KONA

Lolosso

KNRC0081

5

88

83

0.8

KONA

Lolosso

KNRC0082

20

120

100

0.8

KONA

Lolosso

KNRC0083

14

38

24

1.2

KONA

Lolosso

KNRC0084

41

66

25

0.8

KONA

Lolosso

KNRC0084

69

90

21

1.2

KONA

Lolosso

KNRC0089

88

126

38

1.0

KONA

Lolosso

KNRC0091

39

83

44

2.5

KONA

Lolosso

KNRC0092

23

50

27

1.1

KONA

Lolosso

KNRC0093

103

127

24

1.2

 

After the first pass auger reconnaissance drilling completed in Q2, we commenced to infill the auger starting in the south in Q3. The auger drilling was stopped in August due to the wet season. The auger program will resume at the end of Q4. Results received highlight the strike continuity between the prospects and beyond. The auger drilling and soils sampling has defined a coherent anomalous corridor with targets located on each of the gneissic contacts and on, what are interpreted from the coincident GAIP to be, an anastomosing array of intervening facies-shear contacts. A significant number of new targets are expected to be developed with the on-going surface geochemical program.

 

Drilling will continue in Q4 with a focus on delivering a maiden ABC resource by end of year.

 

Burkina Faso

The Group's Batie West project in south-west Burkina Faso comprises one exploitation (mining) licence and nine exploration permits (including one permit for which notification of grant has been received) which cover a total of approximately 1,100km2. The 64km2 Konkera exploitation permit holds a NI43-101 compliant Indicated resource of 1.9Moz at a grade of 1.7g/t in addition to Inferred resources of 1.3Moz at a grade of 1.7g/t. Beyond Konkera, the Group's drill programmes have identified significant additional potential resources across the exploration areas, most notably at Napelapera (ca.10km south of Konkera), and Wadarado (ca. 35km north of Konkera).

 

There were zero lost-time injuries across all project areas in Burkina Faso during Q3. The Group undergoes regular routine training and a focus on leading indicators to maintain the highest standards of health and safety.

 

No material operational updates for the quarter.

 

 

 

The condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use by the European Union and in accordance with the Companies (Jersey) Law 1991.

 

Now in its ninth year of production, Sukari remains cash generative and this is reflected in the Group's financial results for the nine months ended 30 September 2018:

 

·     Revenue of US$421.5 million, a 13% decrease compared to the nine months ended 30 September 2017 ("YoY") (nine months ended 30 September 2017: US$485.1 million); Gold sales of 328,433 ounces (excl. 7,038 ounces attributable to Cleopatra), a 15% decrease YoY. Average realised gold price of US$1,281 per ounce approximately 2% increase YoY;

·     EBITDA(1,2,4) of US$178.5 million, a 15% decrease YoY as a result of lower revenue, lower cash costs of production lower other operating costs offset by an increase of 8% in exploration and evaluation costs, please note the change in accounting policy where all greenfield exploration costs are now being expensed as incurred;

·     In line with the Group's updated accounting policy, operating costs include greenfield exploration expenses of US$16.5 million (2017 figures have been restated to include US$15.3 million of exploration expenditure);

·     Profit before tax(4) of US$102.2 million, a 21% decrease YoY, due to the factors outlined above;

·     Basic earnings per share after profit share(2) ("EPS") of 4.80 US cents, a 5% increase YoY, due to lower revenue, lower cost of sales, lower other operating costs and lower profit share partially offset by an increase in exploration and evaluation costs (nine months ended 30 September 2017: 4.60 US cents);

·     Operational cash flow of US$150.0 million, a 35% decrease YoY, due to decreased revenues and higher cash operating costs per ounce sold;

·     Free cash flow(1) of US$35.1 million generated, down 64% YoY (nine months ended 30 September 2017: US$96.5 million) due to the impact of the factors outlined above;

·     Cash costs of production(1,2) of US$206.8 million, a 11% decrease in cost profile YoY, resulting in a unit cost of US$631 per ounce produced, a 6% increase YoY;

·     AISC(1,2) of US$301.2 million, a 4% decrease YoY, resulting in a unit cost of US$917 per ounce sold, a 13% increase YoY, mainly due to higher unit production costs, higher sustaining capital costs resulting from the scheduled fleet rebuild programme and underground mine development and lower gold ounces sold YoY;

·     Royalties of US$12.9 million to Arab Republic of Egypt ("ARE") and profit share(1) of US$49.8 million paid to Egyptian Minerals Resources Authority ("EMRA"), our state partners;

·     Gross capital expenditure of US$75.7 million, a 29% increase YoY, in line with the US$103 million(4) expected for the full year;

·     Cash and liquid assets(1,3) of US$292.2 million at 30 September 2018, the Company remains debt-free and unhedged; and

·     Consistent with the dividend policy, the Board paid an interim dividend of 2.5 US cents per share ("Interim Dividend") on 28 September 2018, US$28.9 million, equivalent to returning 80% of free cash flow generated in H1.

____________________________________________________________________________________________________________

(1)       Cash cost of production, AISC, EBITDA and cash, bullion on hand, gold sales receivables, financial assets at fair value through other comprehensive income and free cash flow are non-GAAP measures, please refer to pages 16-18. 

(2)       Basic EPS, EBITDA, cash cost of production and AISC reflect a provision against prepayments to reflect the removal of fuel subsidies which occurred in January 2012 (refer to note 8 of the financial statements for further details).

(3)       Cash and cash equivalents, bullion on hand, gold sales receivables and financial assets at fair value through other comprehensive income.

(4)       The Group accounting policy for greenfield exploration expenditure, has been updated in line with market practice. For full details, please refer to Note 1 of the Financial Statements.

 

Centamin remains committed to its policy of being 100% exposed to the gold price through its unhedged position, and maintained a healthy cash, bullion on hand, gold sales receivables and availableforsale financial assets balance of US$292.2 million, as at 30 September 2018, after the interim dividend pay out of 2.5 US cents per share which equates to US$28.9 million on 28 September 2018.

 

Revenue

Revenue from gold and silver sales for the period decreased by 13% to US$421.5 million (US$485.1 million in nine months ended 30 September 2017), with a 2% increase in the average realised gold sales price to US$1,281 per ounce (US$1,254 per ounce for the nine months ended 30 September 2017) and a 13% decrease in gold sold to 335,470 ounces, including 7,038 ounces attributable to Cleopatra (386,237 ounces in the nine months ended 30 September 2017).

 

Cost of sales

Cost of sales represents the cost of mining, processing, refining, transport, site administration, depreciation, amortisation and movement in production inventories. Cost of sales is inclusive of US$33.1 million categorised as fuel pre-payments (refer to Note 8 of the financial statements for further information) and is down 9% compared with the nine months ended 30 September 2017 to US$285.2 million, mainly as a result of:

 

·     A positive movement in inventory adjustment of US$32.7 million compared to negative movement in inventory adjustment of US$1.4 million in the nine months ended 30 September 2017 reflecting the significant increase in ore stockpiles over the year to date;

·     3% increase in total mine production costs from US$232.3 million to US$238.3 million, due to a 7% increase in mined tonnes combined with a 5% increase in processed tonnes and an increase in unit costs mainly due to increased fuel and reagent costs;

·     2% decrease in depreciation and amortisation charges from US$81.5 million in the nine months ended 30 September 2017 to US$79.6 million at 30 September 2018 due to lower production effecting amortisation rates and US$44.5 million of additions (excl. capital work in progress) which increased the associated amortisation charges; and

·     The positive impact on unit costs of production has been predominantly driven by the increase in ore stockpiles. As per Note 7, the processing of ore in stockpiles occurs in accordance with the Life of Mine (LoM) processing plan based on the known mineral reserves, current plant capacity and mine design. Ore tonnes contained in the stockpile which exceed the annual tonnes to be milled as per the mine plan in the following year, are classified as non-current in the statement of financial position.

 

Other operating costs

Other operating costs comprise expenditure incurred for communications, consultants, directors' fees, stock exchange listing fees, share registry fees, employee entitlements, general office administration expenses, the unwinding of the restoration and rehabilitation provision, foreign exchange movements and the 3% production royalty payable to the ARE. Other operating costs decreased by US$5.7 million or 21% from US$27.0 million in the nine months ended 30 September 2017 to US$21.2 million in the nine months ended 30 September 2018, mainly as a result of:

 

·     US$3.4 million increase in net foreign exchange gains (-ve);

·     US$1.6 million decrease in royalty paid to the government of the ARE in line with the decrease in gold sales revenue (-ve);

·     US$3.7 million decrease in inventory obsolescence costs (-ve);

·     US$2.7 million increase in corporate and other costs (+ve) mainly due to increased payroll and compliance costs; and

·     US$0.3 million increase in other expenses (+ve).

 

Exploration and evaluation expenditure

Exploration and evaluation expenditure comprise expenditure incurred for exploration activities in Côte d'Ivoire and Burkina Faso. Exploration and evaluation costs increased by US$1.2 million or 8% from US$15.3 million in the nine months ended 30 September 2017 to US$16.5 million in the nine months ended 30 September 2018. These expenses are now shown on the income statement after the change in accounting policy regarding the treatment of Greenfield exploration and evaluation costs, please refer to note 1 of the financial statements for the change in accounting policy regarding exploration and evaluation expenditure.

 

Finance income

Finance income comprises interest income applicable on the Company's available cash and term deposit amounts. The movements in finance income are in line with the movements in the Company's available cash and term deposit amounts.

 

Profit before tax

As a result of the factors outlined above, Centamin recorded a profit before tax for the nine months ended 30 September 2018 of US$102.2 million (nine months ended 30 September 2017: US$130.0 million).

 

Tax

The group operates in several countries and, accordingly, it is subject to the various tax regimes in the countries in which it operates. The tax expense of US$0.01 million for the nine months ended 30 September 2018 was associated with timings in income taxes provisions and charges.

 

EMRA profit share

During the nine months ended 30 September 2018, US$49.8 million was paid as profit share payments to the Egyptian Mineral Resources Authority ("EMRA").

 

Profit share payments made to EMRA, pursuant to the provisions of the Concession Agreement, are recognised as a variable charge in the income statement (below profit after tax) of Centamin, resulting in a reduction in earnings per share. The profit share payments during the year will be reconciled against SGM's audited June financial statements. Any variation between payments made during the year (which are based on the Company's estimates) and the audited financial statements, may result in a balance due and payable to EMRA or advances to be offset against future distributions.

 

Earnings per share

Earnings per share (after profit share) of 4.80 US cents for the nine months ended 30 September 2018 increased by 5% when compared with the same period in 2017 of 4.60 US cents. The increase was driven by the factors outlined above.

 

Comprehensive income

Other comprehensive income movement was the result of the revaluation of financial assets at fair value through other comprehensive income to US$nil.

 

Financial position

Centamin has a strong and flexible financial position with no debt, no hedging and cash, bullion on hand, gold sales receivables and financial assets of US$292.2 million at 30 September 2018 (30 September 2017: US$345.8 million).

 

As at

As at

As at 

 

30 September 

30 June 

30 September

 

2018

2018

2017

 

US$'000

US$'000

US$'000

Cash and cash equivalents (note 20)

 254,094

 282,764

 313,003

Bullion on hand (valued at the period-end spot price)

 23,948

 11,565

 14,858

Gold and silver sales debtor (note 6)

 14,184

 8,926

 17,803

Financial assets at fair value through other comprehensive income (note 11)

-  

 -  

 125

Cash and cash equivalents, bullion on hand, gold sales receivables
and availableforsale financial assets

 292,226

 303,255

 345,789

 

The majority of funds have been invested in international rolling short-term interest money market deposits.

 

Current assets have decreased by US$127.1 million or 25% from US$502.6 million at 31 December 2017 to US$375.5 million at 30 September 2018, as a result of:

 

·     US$0.9 million decrease (-ve) in inventory driven by a US$10.9 million decrease (-ve) in collective stores inventory (due to cost reduction and minimisation initiatives), a US$8.8 million increase (+ve) in overall combined mining stockpiles and gold in circuit levels and a US$1.2 million decrease in the provision for obsolete stores inventory (+ve);

·     US$15.2 million decrease in trade and other receivables (including gold sale receivables) (-ve);

·     US$5.3 million decrease in prepayments (-ve);

·     US$0.1 million decrease in the financial assets at fair value through other comprehensive income (-ve); and

·     US$105.6 million decrease in net cash (net of foreign exchange movements) (-ve) driven by the profit for the period less the payment of the 2017 final dividend of US$115.6 million, payment of the 2018 interim dividend of US$28.9 million and a US$49.8 million payment to EMRA as profit share for the year to date.

 

Noncurrent assets have increased by US$12.9 million or 1.4% to US$934.4 million from US$921.7 million at 31 December 2017, as a result of:

 

·     US$65.9 million increase in the cost of property, plant and equipment (+ve);

·     US$79.6 million charge for depreciation and amortisation (-ve);

·     US$23.9 million increase in mining stockpiles that will not be processed in the next 12 months (+ve), refer to Note 7; and

·     US$2.7 million increase in exploration and evaluation assets, as a result of the drilling programmes in Sukari Hill (+ve). With the change in accounting policies all Greenfield exploration is no longer capitalised to the balance sheet and this has been retrospectively restated.

 

Current liabilities have decreased by US$28.3 million or 43% to US$38.1 million, as a result of:

 

·     US$17.2 million decrease in trade payables and a US$9.3 million decrease in accruals (-ve);

·     US$0.5 million decrease in tax liabilities accrued during the period (-ve); and

·     US$1.3 million decrease in current provisions primarily driven by a US$5.1 million increase in the fuel provision, a US$4.3 million decrease in withholding tax, customs and rebate provisions and a US$2.1 million decrease in employee benefit provisions held at period end (-ve).

 

Noncurrent liabilities have increased by US$1.1 million to US$12.1 million as a result of an increase in the rehabilitation provision.

 

There has been a 2.615 million increase in the number of issued shares over the period due to share-based payment awards vesting.

 

Share option reserves reported have increased by US$0.5 million to US$4.8 million as result of the vesting of the 2015 RSP awards on 4 June 2018 offset by the recognition of the sharebased payment expenses for the period and new share-based payment awards granted in 2018.

 

Accumulated profits decreased by US$89.3 million to US$584.6 million as a result of:

 

·     US$102.2 million profit for the period after tax (+ve); offset by

·     US$46.8 million profit share charge to EMRA in the period (-ve);

·     US$115.6 million 2017 shareholder approved final dividend (-ve) and US$28.9 million 2018 interim dividend (-ve); and

·     US$0.2 million decrease in the value of the financial asset held at fair value through other comprehensive income (-ve).

 

Cash flow

Net cash flows generated by operating activities comprise receipts from gold and silver sales and interest income, offset by operating and corporate administration costs. Cash flows from operating activities decreased by US$80.6 million to US$150.0 million for the nine months ended 30 September 2018 compared to the nine months ended 30 September 2017, primarily attributable to the decrease in revenue, driven by a large decrease in ounces sold marginally offset by a higher average realised price, as well as a decrease in costs as explained above.

 

Net cash flows used in investing activities comprise exploration expenditure and capital development expenditures including the acquisition of financial and mineral assets. Cash outflows have increased by US$7.5 million for the nine months ended 30 September 2018 to US$65.0 million from US$57.5 million in the nine months ended 30 September 2017. The primary use of the funds in the period was for purchase of property, plant and equipment and investment in underground development at the Sukari site in Egypt.

 

Net cash flows used in financing activities decreased by US$66.6 million in the nine months ended 30 September 2018 to US$194.4 million (from US$261.0 million in the nine months ended 30 September 2017) due to US$39.8 million decrease in dividends being paid in 2018 relating to the 2017 final dividend, and a US$26.7 million decrease in payments to EMRA as profit share.

 

Effects of exchange rate changes have increased by US$2.9 million as a result of movements of the currencies used across the operations in the year.

 

Capital expenditure

The following table provides a breakdown of the total capital expenditure of the group during Q3 2018:

 

 

Quarter

ended

30 September

Quarter

ended

30 September

Nine months ended

30 September

Nine months ended

30 September

 

2018

2017

2018

2017

 

 

US$'000

Restated

US$'000

 

US$'000

Restated

US$'000

Underground exploration

 1,077

 1,837

 4,460

 4,189

Underground mine development

 9,091

 8,318

 28,241

 23,769

Other sustaining capital expenditure

 8,820

 13,531

 37,671

 26,521

Total sustaining capital expenditure

 18,988

 23,686

 70,372

 54,479

Non-sustaining exploration capitalised(1) (2)

 2,824

 610

 5,317

 4,266

(1)  Only includes US$2.8 million of Sukari expenditure relating to Cleopatra in non-sustaining capital expenditure.

(2) Please refer to note 1 of the financial statements for the change in accounting policy regarding exploration and evaluation expenditure.

 

Cumulative exploration expenditure capitalised for Cleopatra at Sukari is US$12.9 million (project to date) offset by pre-production net revenues of US$11.9 million (refer to notes 2 and 3 to the financial statements for further details) resulting in US$1.0 million remaining on the statement of financial position at 30 September 2018.

 

Exploration expenditure

The following table provides a breakdown of the total exploration expenditure of the group during Q3 2018:

 

 

Quarter

ended

30 September

Quarter

ended

30 September

Nine months ended

30 September

Nine months ended

30 September

 

2018

2017

2018

2017

 

 

US$'000

Restated

US$'000

 

US$'000

Restated

US$'000

Burkina Faso

 475

 1,402

 4,139

 4,811

Côte d'Ivoire

 4,196

 4,041

 12,364

 10,454

Sukari Tenement

 1,077

 1,837

 4,460

 4,189

Cleopatra

 2,824

 610

 5,317

 4,266

Total exploration expenditure

 8,572

  7,890

 26,280

  23,720

 

Exploration and evaluation assets - impairment considerations

As discussed in note 10 to the financial statements, in consideration of the requirements of IFRS 6, management is not aware of any information that would otherwise suggest that an impairment trigger has occurred which would require a full impairment test to be carried out at 30 September 2018.

 

Exchange rates

Foreign exchange gains/(losses) have increased from a US$1.3 million gain to a US$4.7 million gain, resulting in a US$3.4 million increase on the nine months ended 30 September 2017.

 

NonGAAP financial measures

Four nonGAAP financial measures are used in this report:

 

1) EBITDA

EBITDA is a nonGAAP financial measure, which excludes the following from profit before tax:

 

·     Finance costs;

·     Finance income; and

·     Depreciation and amortisation.

 

Management believes that EBITDA is a valuable indicator of the group's ability to generate liquidity by producing operating cash flow to fund working capital needs and fund capital expenditures. EBITDA is also frequently used by investors and analysts for valuation purposes whereby EBITDA is multiplied by a factor or "EBITDA multiple" that is based on an observed or inferred relationship between EBITDA and market values to determine the approximate total enterprise value of a company. EBITDA is intended to provide additional information to investors and analysts and does not have any standardised definition under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. EBITDA excludes the impact of cash cost of production and income of financing activities and taxes, and therefore is not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate EBITDA differently. The following table provides a reconciliation of EBITDA to profit for the period before tax.

 

Reconciliation of profit before tax to EBITDA:

 

Quarter

ended

Quarter

ended 

Nine months ended

Nine months ended 

 

30 September

30 September 

30 September

30 September 

 

2018(1)

2017(1) 

2018(1)

2017(1) 

 

 

US$'000

Restated

US$'000

 

US$'000

Restated

US$'000

Profit before tax

 21,836

 70,003

 102,212

 88,224

Finance income

 (1,336)

 (607)

 (3,582)

 (2,250)

Depreciation and amortisation

 28,246

 28,759

 79,844

 60,807

EBITDA

 48,746

 98,155

 178,474

 146,781

(1)    Profit before tax, depreciation and amortisation and EBITDA includes a charge to reflect the removal of fuel subsidies (refer to note 8 to the financial statements for further details).

 

2) Cash cost of production per ounce produced and sold and all-in sustaining costs per ounce sold calculation

Cash cost of production and AISC are non-GAAP financial measures. Cash cost of production per ounce is a measure of the average cost of producing an ounce of gold, calculated by dividing the operating costs in a period by the total gold production over the same period. Operating costs represent total operating costs less administrative expenses, royalties, depreciation and amortisation. Management uses this measure internally to better assess performance trends for the Company as a whole. The Company believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors use such non-GAAP information to evaluate the Company's performance and ability to generate cash flow. The Company believes that these measures provide an alternative reflection of the group's performance for the current period and are an alternative indication of its expected performance in future periods. Cash cost of production is intended to provide additional information, does not have any standardised meaning prescribed by GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. This measure is not necessarily indicative of operating profit or cash flow from operations as determined under GAAP. Other companies may calculate these measures differently.

 

During June 2013 the World Gold Council ("WGC"), an industry body, published a Guidance Note on the 'all in sustaining costs' metric, which gold mining companies can use to supplement their overall non-GAAP disclosure. AISC is an extension of the existing 'cash cost' metric and incorporates all costs related to sustaining production and in particular recognising the sustaining capital expenditure associated with developing and maintaining gold mines. In addition, this metric includes the cost associated with developing and maintaining gold mines. In addition, this metric includes the cost associated with corporate office structures that support these operations, the community and rehabilitation costs attendant with responsible mining and any exploration and evaluation costs associated with sustaining current operations. AISC US$/oz is arrived at by dividing the dollar value of the sum of these cost metrics, by the ounces of gold sold (as compared to using ounces produced which is used in the cash cost of production calculation).

 

 

 

 

 

 

 

FINANCIAL REVIEW

 

 

 

 

 

Reconciliation of cash cost of production per ounce produced:

 

 

Quarter

ended

Quarter

ended 

Nine months ended

Nine months ended 

 

 

 

30 September

30 September 

30 September

30 September 

 

 

2018(1)

2017(1) 

2018(1)

2017(1) 

Mine production costs (note 3)

US$'000

 81,540

 80,653

 238,279

 232,293

Less: Refinery and transport

US$'000

 (358)

 (445)

 (1,095)

 (1,142)

Movement of inventory(1)

US$'000

 (10,308)

 (4,550)

 (30,368)

 590

Cash cost of production - gold produced

US$'000

 70,874

 75,658

 206,816

 231,741

 

 

 

 

 

 

Gold produced - Total (oz.) (Excluding Cleopatra)

oz

 114,497

 156,534

 327,781

 390,361

Cash cost of production per ounce produced

US$/oz

 619

 483

 631

 594

(1)    The movement in inventory on ounces produced is only the movement on mining stockpiles and ore in circuit while the movement on ounces sold is the net movement on mining stockpiles, ore in circuit and gold in safe inventory.

 

A reconciliation has been included below to show the cash cost of production metric should gold sold ounces be used as a denominator.

 

Reconciliation of cash cost of production per ounce sold:

 

 

 

Quarter

ended

Quarter

ended 

Nine months ended

Nine months ended 

 

 

30 September

30 September 

30 September

30 September 

 

 

2018(1)

2017(1) 

2018(1)

2017(1) 

Mine production costs (note 3)(1)

US$'000

 81,540

 80,653

 238,279

 232,293

Royalties

US$'000

 3,858

 5,779

 12,885

 14,519

Movement in inventory(2)

US$'000

 (16,409)

 (3,900)

 (32,717)

 1,365

Cash cost of production - gold sold(1)

US$'000

 68,989

 82,532

 218,447

 248,177

 

 

 

 

 

 

Gold sold - Total (oz.) (Excluding Cleopatra)

oz

 103,575

 150,273

 328,433

 386,237

Cash cost of production per ounce sold

US$/oz

 666

549

 665

643

                 

(1)    Mine production costs and cash cost of production includes a charge to reflect the removal of fuel subsidies (refer to note 8 to the financial statements for further details).

(2)    The movement in inventory on ounces produced is only the movement on mining stockpiles and ore in circuit while the movement on ounces sold is the net movement on mining stockpiles, ore in circuit and gold in safe inventory.

 

Reconciliation of AISC per ounce sold:

 

 

Quarter

ended

Quarter

ended 

Nine months ended

Nine months ended 

 

 

30 September

30 September 

30 September

30 September 

 

 

2018(1)

2017(1) 

2018(1)

2017(1) 

Mine production costs (note 3)(1)

US$'000

 81,540

 80,653

 238,279

 232,293

Movement in inventory

US$'000

 (16,409)

 (3,900)

 (32,717)

 1,365

Royalties

US$'000

 3,858

 5,779

 12,885

 14,519

Corporate administration costs

US$'000

 4,056

 3,836

 12,519

 9,889

Rehabilitation costs

US$'000

 218

 157

 653

 471

Sustaining underground development and exploration

US$'000

10,168

10,155

32,701

27,959

Other sustaining capital expenditure

US$'000

 8,820

 13,531

 37,671

 26,521

Byproduct credit

US$'000

 (195)

 (259)

 (785)

 (798)

Allin sustaining costs(1)(2)

US$'000

 92,056

 109,952

 301,206

 312,219

 

 

 

 

 

 

Gold sold - Total (oz.) (Excluding Cleopatra sales capitalised)

oz

 103,575

 150,273

 328,433

 386,237

AISC per ounce sold(1)

US$/oz

 889

 732

 917

 808

(1)    Mine production costs, cash cost of production, cash cost of production per ounce, AISC and AISC per ounce sold includes prepayments recorded since Q4 2012 to reflect the removal of fuel subsidies (refer to note 8 to the financial statements for further details).

(2)    Includes refinery and transport.

 

 

 

 

 

 

 

 

 

3) Cash and cash equivalents, bullion on hand, gold sales receivables and financial assets at fair value through other comprehensive income

Cash and cash equivalents, bullion on hand, gold sales receivables and financial assets at fair value through other comprehensive income is a non-GAAP financial measures. Cash and cash equivalents, bullion on hand, gold sales receivables and financial assets at fair value through other comprehensive income is a measure of the available cash and liquid assets at a point in time. Management uses this measure internally to better assess performance trends for the Company as a whole. The Company believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors use such non-GAAP information to evaluate the Company's performance and ability to generate cash flow. The Company believes that these measures provide an alternative reflection of the group's performance for the current period and are an alternative indication of its expected performance in future periods. Cash and cash equivalents, bullion on hand, gold sales receivables and financial assets at fair value through other comprehensive income is intended to provide additional information, does not have any standardised meaning prescribed by GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. This measure is not necessarily indicative of cash and cash equivalents as determined under GAAP. This is a nonGAAP financial measure and other companies may calculate these measures differently.

 

Reconciliation to cash and cash equivalents, bullion on hand, gold sales receivables and financial assets at fair value through other comprehensive income:

 

 

As at

As at 

 

30 September 2018 

30 September 2017

 

US$'000

US$'000

Cash and cash equivalents (note 20)

       254,094

 313,003

Bullion on hand (valued at the period end spot price)

         23,948

 14,858

Gold sales receivable (note 6)

         14,184

 17,803

Financial assets at fair value through other comprehensive income (note 11)

-  

 125

Cash and cash equivalents, bullion on hand, gold sales receivables
and financial assets at fair value through other comprehensive income

 292,226

 345,789

 

4) Free cash flow

Free cash flow is a non-GAAP financial measure. Free cash flow is a measure of the available cash after EMRA profit share payments that the group has at its disposal to use for capital reinvestment and to distribute to shareholders as dividends in accordance with the Company's dividend policy. Management uses this measure internally to better assess performance trends for the Company as a whole. The Company believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors use such non-GAAP information to evaluate the Company's performance and ability to generate cash flow. The Company believes that these measures provide an alternative reflection of the group's performance for the current period and are an alternative indication of its expected performance in future periods. Free cash flow is intended to provide additional information, does not have any standardised meaning prescribed by GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. This measure is not necessarily indicative of operating profit or cash flow from operations as determined under GAAP. This is a non-GAAP financial measure and other companies may calculate these measures differently.

 

 

Quarter

ended

Quarter

ended 

Nine months

 ended

Nine months

ended 

 

30 September 

30 September

30 September 

30 September

 

2018

2017

Restated

2018

2017

Restated

 

US$'000

US$'000

US$'000

US$'000

Net cash generated from operating activities

 27,303

 104,737

 149,963

 230,529

Less:

 

 

 

 

Net cash used in investing activities

 (17,717)

 (23,688)

 (65,037)

 (57,459)

EMRA profit share payments

 (10,575)

 (35,424)

 (49,841)

 (76,577)

Free cash flow

 (989)

 45,625

 35,085

 96,493

 

Legal Developments in Egypt

Concession Agreement Appeal

All material has been submitted by the Company to the courts. The appeal has been stayed pending the decision on Law No. 32 as referred to below. Consequently, there will be no further hearings on the Concession Agreement Appeal until a judgment is given on the Law No. 32 Appeal in the Supreme Constitutional Court. Note. The Law No. 32 Appeal is independent from the Group and neither Pharaoh Gold Mine ("PGM") nor Sukari Gold Mine ("SGM") are a party.

The Law No. 32 Appeal is awaiting the State Commissioner to submit their report to the Supreme Constitutional Court. This is expected in H1 2019 but subject to change.

Law No. 32 is legislation, enforced and ratified by Parliament in 2014. The law is designed to protect and encourage foreign investment in the Arab Republic of Egypt ("ARE") by restricting the capacity for third parties to challenge contractual agreements between the Egyptian government and an investor.

Diesel Fuel Oil Litigation

All required documentation has been submitted by the Company to the courts. EGPC, the counterparty, has the opportunity to submit the requested documentation before the Court can deliver a judgment.

 

Andrew Pardey

Chief Executive Officer

1 November 2018

 

Set out below are the unaudited consolidated Financial Statements for the Group, including notes thereto, for the quarter and nine months ended 30 September 2018.

 

                    DIRECTORS’ RESPONSIBILITY STATEMENT

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE QUARTER AND NINE MONTHS ENDED 30 SEPTEMBER 2018 FINANCIAL REPORT

We confirm that to the best of our knowledge:

(a)     the condensed set of interim consolidated financial statements for the quarter and nine months ended 30 September 2018 has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union;

(b)     the condensed set of interim consolidated financial statements, which has been prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer, or the undertakings included in the consolidation as a whole as required by DTR 4.2.4;

(c)     the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first nine months and description of principal risks and uncertainties for the remaining three months of the year); and

(d)     the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

The board of directors that served during all or part of the quarter and nine month period ended on 30 September 2018 and their respective responsibilities can be found on pages 82 to 93 of the 2017 annual report of Centamin plc.

By order of the Board,

 

                                                               

 

Chief Executive Officer                                                         Chief Financial Officer

Andrew Pardey                                                                      Ross Jerrard

1 November 2018                                                                   1 November 2018

 

 

 

 

 

 

 

 

 

 

 

 

UNAUDITED INTERIM CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

FOR THE QUARTER AND NINE MONTHS ENDED

30 SEPTEMBER 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                  Unaudited condensed consolidated statement of comprehensive income

                  for the quarter and nine months ended 30 September 2018

 

 

Quarter

ended

30 September

Quarter

ended

30 September

Nine months ended

30 September

Nine months ended

30 September

 

 

2018

 

(Unaudited)

2017

Restated(1)

(Unaudited)

2018

 

(Unaudited)

2017

Restated(1)

(Unaudited)

 

Notes

US$'000

US$'000

US$'000

US$'000

Revenue

2

125,127

193,093

421,518

485,097

Cost of sales

3

(93,300)

(105,499)

(285,179)

(315,105)

Gross profit

 

31,827

87,594

136,339

169,992

Other income

 

13

242

37

667

Finance income

3

1,336

607

3,582

1,603

Other operating costs

3

(6,669)

(12,997)

(21,243)

(26,980)

Exploration and evaluation expenditure

 

(4,671)

(5,443)

(16,503)

(15,265)

Profit for the period before tax

 

21,836

70,003

102,212

130,017

Tax

 

(33)

(566)

(43)

(1,580)

Profit for the period after tax

 

21,803

69,437

102,169

128,437

EMRA profit share

4

(11,075)

(35,424)

(46,841)

(75,577)

Profit for the period after EMRA profit share

 

10,728

34,013

55,328

52,860

Profit for the period attributable to:

 

 

 

 

 

- the owners of the parent

 

10,728

34,013

55,328

52,860

Other comprehensive income/(loss)

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

 

 

 

Profit/(loss) on financial assets at fair value through other comprehensive income (net of tax)

11

-

-

(125)

(91)

Other comprehensive income/(loss) for the period

 

-

-

(125)

(91)

Total comprehensive income attributable to:

 

 

 

 

 

- the owners of the parent

 

10,728

35,013

55,203

52,769

Earnings per share after profit share:

 

 

 

 

 

Basic (cents per share)

19

0.930

2.956

4.805

4.596

Diluted (cents per share)

19

0.820

2.928

4.768

4.561

(1)   Restated due to the change in accounting policy, refer to note 1 for further information.

 

The above unaudited interim condensed consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

                   Unaudited condensed consolidated statement of financial position

                   as at 30 September 2018

 

 

30 September

31 December

1 January

 

 

2018

 

(Unaudited)

2017

Restated(1)

(Unaudited)

2017

Restated(1)

(Unaudited)

 

Notes

US$'000

US$'000

US$'000

Noncurrent assets

 

 

 

 

Property, plant and equipment

9

837,425

851,099

868,926

Exploration and evaluation asset

10

66,593

63,885

65,700

Inventories

7

30,548

6,651

-

Prepayments

 

-

-

295

Other receivables

 

90

96

81

Total noncurrent assets

 

934,380

921,731

935,002

Current assets

 

 

 

 

Inventories

7

97,660

98,559

128,582

Financial assets at fair value through other comprehensive income

11

-

125

130

Trade and other receivables

6

19,253

34,467

24,870

Prepayments

8

4,504

9,793

7,508

Cash and cash equivalents

20(a)

254,094

359,680

399,873

Total current assets

 

375,787

502,624

560,963

Total assets

 

1,310,167

1,424,355

1,495,965

Noncurrent liabilities

 

 

 

 

Provisions

13

12,054

10,961

7,697

Total noncurrent liabilities

 

12,054

10,961

7,697

Current liabilities

 

 

 

 

Trade and other payables

12

30,124

56,585

47,991

Tax liabilities

 

3

469

-

Provisions

13

7,991

9,311

3,976

Total current liabilities

 

38,118

66,365

51,967

Total liabilities

 

50,172

77,326

59,664

Net assets

 

1,259,995

1,347,029

1,436,301

Equity

 

 

 

 

Issued capital

14

670,589

668,732

667,472

Share option reserve

15

4,796

4,323

3,048

Accumulated profits

 

584,610

673,974

765,781

Total equity attributable to:

 

 

 

 

- owners of the parent

 

1,259,995

1,347,029

1,436,301

Total equity

 

1,259,995

1,347,029

1,436,301

           

(1)    Restated due to the change in accounting policy, refer to note 1 for further information.

 

The above unaudited interim condensed consolidated statement of financial position should be read in conjunction with the accompanying notes.

 

The unaudited interim condensed consolidated financial statements were approved by the board of directors on 1 November 2018 and signed on its behalf by:

 

Andrew Pardey                                     Ross Jerrard

Chief executive officer                          Chief financial officer

 

1 November 2018                                   1 November 2018

             

                 Unaudited condensed consolidated statement of changes in equity

                 for the nine months ended 30 September 2018

 

 

Issued

Share option

Accumulated

Total

 

capital

(Unaudited)

reserve

(Unaudited)

profits (Unaudited)

equity

(Unaudited)

 

Notes

US$'000

US$'000

US$'000

US$'000

Balance as at 1 January 2018

 

668,732

4,323

778,921

1,451,976

Impact of change in accounting policy

1

-

-

(104,947)

(104,947)

Restated balance as at 1 January 2018

 

668,732

4,323

673,974

1,347,029

Profit for the period after tax

 

-

-

 102,169

 102,169

EMRA profit share

 

-

-

(46,841)

(46,841)

Other comprehensive (loss) for the period

 

-

-

 (125)

 (125)

Total comprehensive income for the period

 

-

-

55,203

55,203

Recognition of share based payments

 

-

2,330

-

2,330

Transfer of share based payments

 

1,857

(1,857)

-

-

Dividend paid - shareholders

 

-

-

(144,567)

(144,567)

Balance as at 30 September 2018

 

 670,589

 4,796

584,610

 1,259,995

             

 

 

 

Issued

Share option

Accumulated

Total

 

 

capital

(Unaudited)

reserve

(Unaudited)

profits

(Unaudited)

equity

(Unaudited)

 

Notes

US$'000

US$'000

US$'000

US$'000

Balance as at 1 January 2017

 

667,472

3,048

853,999

1,524,519

Impact of change in accounting policy

1

-

-

(88,218)

(88,218)

Restated balance as at 1 January 2017

 

667,472

3,048

765,781

1,436,301

Profit for the period after tax

 

-

-

128,437

128,437

EMRA profit share

 

-

-

(75,577)

(75,577)

Other comprehensive (loss) for the period

 

-

-

(91)

(91)

Total comprehensive income for the period

 

-

-

52,769

52,769

Recognition of share based payments

 

-

1,731

-

1,731

Transfer of share based payments

 

1,272

(1,272)

-

-

Dividend paid - shareholders

 

-

-

(184,389)

(184,389)

Balance as at 30 September 2017

 

668,744

3,507

634,161

1,306,412

             

 

The above unaudited interim condensed consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

                   Unaudited condensed consolidated statement of cash flows

                   for the quarter and nine months ended 30 September 2018

 

 

Quarter

ended

30 September

Quarter

ended

30 September

Nine months ended

30 September

Nine months ended

30 September

 

 

2018

 

(Unaudited)

2017

Restated(1) (Unaudited)

2018

 

(Unaudited)

2017

Restated(1) (Unaudited)

 

Notes

US$'000

US$'000

US$'000

US$'000

Cash flows from operating activities

 

 

 

 

 

Cash generated in operating activities

20(b)

27,085

104,737

150,245

231,520

Income tax refund received

 

-

-

-

107

Income tax paid

 

(218)

-

(282)

(1,098)

Net cash generated by operating activities

 

27,303

104,737

149,963

230,529

Cash flows from investing activities

 

 

 

 

 

Acquisition of property, plant and equipment

 

(17,911)

(21,849)

(65,912)

(50,606)

Exploration and evaluation expenditure

 

(1,142)

(2,446)

(2,707)

(8,456)

Finance income

3

1,336

607

3,582

1,603

Net cash used in investing activities

 

(17,717)

(23,688)

(65,037)

(57,459)

Cash flows from financing activities

 

 

 

 

 

Dividend paid

 

(28,938)

(28,952)

(144,567)

(184,389)

EMRA profit share paid

4

(10,575)

(35,424)

(49,841)

(76,577)

Net cash used in financing activities

 

(39,513)

(64,376)

(194,408)

(260,966)

Net (decrease)/increase in cash and cash equivalents

 

(29,927)

16,673

(109,482)

(87,896)

Cash and cash equivalents at the beginning of the period

 

282,765

296,981

359,680

399,873

Effect of foreign exchange rate changes

 

1,256

(651)

3,896

1,026

Cash and cash equivalents at the end of the period

20(a)

254,094

313,003

254,094

313,003

(1)    Restated due to the change in accounting policy, refer to note 1 for further information.

 

The above unaudited interim condensed consolidated statement of cash flows should be read in conjunction with the accompanying notes

NOTE 1: ACCOUNTING POLICIES

 

Basis of preparation

 

These unaudited condensed consolidated financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting" (IAS 34) as adopted by the European Union and the requirements of the Disclosure and Transparency Rule sourcebook (DTR) of the Financial Conduct Authority (FCA) in the United Kingdom as applicable to interim financial reporting. These unaudited interim condensed consolidated financial statements are not affected by seasonality.

 

The unaudited condensed consolidated financial statements represent a 'condensed set of financial statements' as referred to in the DTR issued by the FCA. Accordingly, they do not include all of the information required for a full annual financial report and are to be read in conjunction with the Group's financial statements for the year ended 31 December 2017, which were prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use by the European Union. The financial statements for the year ended 31 December 2017 have been filed with the Jersey Financial Services Commission. The financial information contained in this report does not constitute statutory accounts under the Companies (Jersey) Law 1991, as amended. The financial information for the year ended 31 December 2017 is based on the statutory accounts for the year ended 31 December 2017. Readers are referred to the auditor's report to the Group financial statements as at 31 December 2017 (available at www.centamin.com).

 

The accounting policies applied in these interim financial statements are consistent with those used in the annual consolidated financial statements for the year ended 31 December 2017 except for the change in accounting policies regarding the treatment of greenfield exploration costs, see below, and adoption of new standards and endorsed by the EU which apply for the first time in 2018 as referred to in the 31 December 2017 Annual Report. The new pronouncements, IFRS 9 and IFRS 15, do not have a significant impact on the accounting policies, methods of computation or presentation applied by the Group, however the change in accounting policy does have a significant impact and therefore the prior period consolidated financial statements have been restated. IFRS 16 is only effective from 1 January 2019 and its impact on the financial statements is currently being assessed. The Group has not early adopted any amendments, standards or interpretations that have been issued but are not yet effective.

 

The preparation of these interim condensed consolidated financial statements requires the use of certain significant accounting estimates and judgements by management in applying the Group's accounting policies. There have been no changes to the areas involving significant judgement and estimates that have been set out in Note 4 of the Group's annual audited consolidated financial statements for the year ended 31 December 2017.

 

Change in accounting policy - Exploration and evaluation asset

 

On 1 January 2006 the Group adopted IFRS 6 Exploration for and Evaluation of Mineral Resources and in accordance with the standard applied the policy of capitalising all Exploration Expenditure (both Greenfield and Brownfield Exploration and Evaluation expenditure).

 

The Greenfield and Brownfield terms are generally used in the minerals sector and have been adopted to differentiate high risk remote exploration activity from near-mine exploration activity.

 

a)     Greenfield exploration refers to territory, where mineral deposits are not already developed and has the goal of establishing a new mine requiring new infrastructure, regardless of it being in an established mining field or in a remote location. Greenfield exploration projects can be subdivided into grassroots and advanced projects embracing prospecting, geoscientific surveys, drilling, sample collection and testing, but excludes work of brownfields nature, pit and shaft sinking and bulk sampling.

 

b)     Brownfield exploration, also known as near-mine exploration, refers to areas where mineral deposits were previously developed. In brownfield exploration, geologists look for deposits near or adjacent to an already operating mine with the objective of extending its operating life and taking advantage of the established infrastructure.

 

On review of the accounting policies and to make the financial statements more relevant to the economic decision-making needs of users no less reliable and comparable to other companies, it has been determined that the exploration and evaluation assets previously recognised for Greenfield exploration is not attributed any value by the users when assessing the Group, as due to the early stage of the projects there is a greater risk that the projects will ultimately become viable and hence economic benefits will flow to the Group.

 

To align the financial statements with the needs of the users, management have decided to change the accounting policy as regards to Greenfield exploration where all costs will be expensed as incurred and will not be capitalised to the balance sheet until a decision is made to pursue a commercially viable project. Brownfield exploration costs will continue to be capitalised to the statement of financial position

 

In accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors this revised accounting policy has to be applied retrospectively. Please also refer to note 10 Exploration and evaluation asset.

 

The following table summarises the adjustments made to the statement of financial position on implementation of the change in accounting policy.

 

Exploration and evaluation asset (Unaudited)

Accumulated profits (Unaudited)

 

US$'000

US$'000

Balance at 1 January 2017 as previously reported

153,918

853,999

Impact of change in accounting policy

(88,218)

(88,218)

Restated balanced at 1 January 2017

65,700

765,781

 

 

Exploration and evaluation asset (Unaudited)

Accumulated profits (Unaudited)

 

US$'000

US$'000

Balance at 31 December 2017 as previously reported

168,832

778,921

Impact of change in accounting policy at 1 January 2017

(88,218)

(88,218)

Impact of change in accounting policy during 2017

(16,729)

(16,729)

Restated balanced at 31 December 2017

63,885

673,974

 

The effects on the statement of comprehensive income and earnings per share were as follows:

 

 

 

Quarter

ended

30 September

Quarter

ended

30 September

Nine months ended

30 September

Nine months ended

30 September

 

 

2018

 

(Unaudited)

2017

Restated

(Unaudited)

2018

 

(Unaudited)

2017

Restated

(Unaudited)

 

Notes

US$'000

US$'000

US$'000

US$'000

(Increase) in exploration and evaluation costs

3

(4,671)

(5,443)

(16,503)

(15,265)

Decrease in impairment of exploration and evaluation assets

 

-

-

-

2,550

(Decrease) in profit for the period before tax

 

(4,671)

(5,443)

(16,503)

(12,715)

 

 

 

 

 

 

Earnings per share before profit share as previously reported:

 

 

 

 

 

Basic (cents per share)

 

2.295

6.507

10.306

12.273

Diluted (cents per share)

 

2.271

6.446

10.228

12.180

Earnings per share after profit share as previously reported:

 

 

 

 

 

Basic (cents per share)

 

1.335

3.429

6.238

5.702

Diluted (cents per share)

 

1.321

3.396

6.191

5.658

 

Restated earnings per share before profit share:

 

 

 

 

 

Basic (cents per share)

19

1.890

6.034

8.873

11.168

Diluted (cents per share)

19

1.870

5.977

8.805

11.083

Restated earnings per share after profit share:

 

 

 

 

 

Basic (cents per share)

19

0.930

2.956

4.805

4.596

Diluted (cents per share)

19

0.920

2.928

4.768

4.561

 

Comparative figures

 

Certain comparative figures have been reclassified to conform to the financial statement presentation adopted for the current year. These are categorisation changes for comparison purposes only and have no effect on results as previously reported. The changes included:

 

 

Nine months ended

Year

ended 

 

30 September 

31 December

 

2018

2017

 

US$'000

US$'000

Mine stockpile inventory reallocated from current asset inventories to non-current asset inventories(1)

 

 

(Decrease) in inventory (current assets)

(30,548)

(6,651)

Increase in inventory (non-current assets)

30,548

6,651

(1)    Per note 7 Inventories below, the processing of ore in stockpiles occurs in accordance with the Life of Mine (LoM) processing plan that has recently been optimised based on the known mineral reserves, current plant capacity and mine design. Ore tonnes contained in the stockpile which exceed the annual tonnes to be milled as per the mine plan in the following year, are classified as non-current in the statement of financial position. Currently at Sukari, low grade low-low (0.3 to 0.4g/t) and low grade low (0.4 to 0.5g/t) open pit stockpile material above the cut-off grade of 0.3g/t has been reclassified to non-current assets as these ore tonnes are not planned to be processed within the next 12 months.

 

Going concern

 

These financial statements for the period ended 30 September 2018 have been prepared on a going concern basis, which contemplate the realisation of assets and liquidation of liabilities during the normal course of operations.

As discussed in Note 18, during 2012 the operation of the mine was affected by two legal actions. The first of these followed from a decision taken by Egyptian General Petroleum Corporation ("EGPC") to charge international, not local (subsidised) prices for the supply of Diesel Fuel Oil ("DFO"), and the second arose as a result of a judgment of the Administrative Court in relation to, amongst other matters, the Company's 160km2 exploitation lease. In relation to the first decision, the Company remains confident that in the event that it is required to continue to pay international prices, the mine at Sukari will remain commercially viable. Similarly, the Company remains confident that the appeal it has lodged in relation to the decision of the Administrative Court will ultimately be successful, although final resolution of it may take some time.  On 20 March 2013 the Supreme Administrative Court upheld the Company's application to suspend the decision until the merits of the Company's appeal were considered and ruled on, thus providing assurance that normal operations will be able to continue during this process.

 

In the unlikely event that the Group is unsuccessful in either or both of its legal actions, and that the operating activities are restricted to a reduced area, it is the directors' belief that the Group will be able to continue as going concern.

The directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for twelve months from the date of approval of this report. Thus they continue to adopt the going concern basis of accounting in preparing these interim condensed consolidated financial statements.

 

2. Revenue

An analysis of the group's revenue for the period, from continuing operations, is as follows:

 

Quarter

ended

30 September

Quarter

ended

30 September

Nine months ended

30 September

Nine months ended

30 September

 

2018

(Unaudited)

2017

(Unaudited)

2018

(Unaudited)

2017

(Unaudited)

 

US$'000

US$'000

US$'000

US$'000

Gold sales (Including pre-production gold sales related to Cleopatra)

128,784

192,834

429,883

484,300

Less: Pre-production gold sales related to Cleopatra - transferred to exploration and evaluation asset

(3,852)

-

(9,150)

-

Gold sales (Excluding pre-production gold sales related to Cleopatra)

124,932

192,834

420,733

484,300

Silver sales

195

259

785

797

 

125,127

193,093

421,518

485,097

All gold and silver sales during the year were made to a single customer in North America.

 

3. Profit before tax

Profit for the period has been arrived at after crediting/(charging) the following gains/(losses) and income/(expenses):

 

Quarter

ended

30 September

Quarter

ended

30 September

Nine months ended

30 September

Nine months ended

30 September

 

2018

 

(Unaudited)

2017

Restated

(Unaudited)

2018

 

(Unaudited)

2017

Restated

(Unaudited)

 

US$'000

US$'000

US$'000

US$'000

Finance income

 

 

 

 

Interest received

1,336

607

3,582

2,250

 

 

 

 

 

Expenses

 

 

 

 

Cost of sales

 

 

 

 

Mine production costs (Including costs related to gold produced from Cleopatra)

 (82,633)

(80,653)

 (240,360)

(232,293)

Mine production costs related to gold produced from Cleopatra - transferred to exploration and evaluation asset

 1,093

-

 2,081

-

Mine production costs

 (81,540)

(80,653)

 (238,279)

(232,293)

Movement in inventory

 16,409

3,900

 32,717

(1,365)

Depreciation and amortisation

 (28,169)

(28,746)

 (79,617)

(81,447)

 

 (93,300)

(105,499)

 (285,179)

(315,105)

 

Other operating costs

 

 

 

 

Corporate costs

(4,056)

(3,836)

(12,519)

(9,889)

 

Other expenses

(183)

(160)

(833)

(574)

 

Office related depreciation

(77)

(13)

(227)

(38)

 

Fixed royalty - attributable to the ARE government

(3,858)

(5,779)

(12,885)

(14,519)

 

Inventory obsolescence

-

(2,517)

1,217

(2,517)

 

Foreign exchange gain/(loss), net

1,723

(535)

4,657

1,246

 

Impairment of financial assets at fair value through other comprehensive income

-

-

-

(218)

 

Provision for restoration and rehabilitation - unwinding of discount

(218)

(157)

(653)

(471)

 

 

(6,669)

(12,997)

(21,243)

(26,980)

 

                 

 

4. EMRA profit share

EMRA is entitled to a share of 50% of SGM's net production surplus which can be defined as 'revenue less payment of the fixed royalty to ARE and recoverable costs'. However, in accordance with the terms of the Concession Agreement, in the first and second years in which there is a profit share, PGM will be entitled to an additional 10% of net production surplus and an additional 5% in the third and fourth years.

 

Payments made to EMRA pursuant to the provisions of the Concession Agreement are recognised as a variable charge in the income statement (below profit after tax) of Centamin, which leads to a reduction in the earnings per share. The profit share payments during the year will be reconciled against SGM's audited financial statements. The SGM financial statements for the year ended 30 June 2018 are in the process of being audited.

 

Certain terms of the Concession Agreement and amounts in the cost recovery model may also vary depending on interpretation of management and the Board making various judgements and estimates that can affect the amounts recognised in the financial statements.

 

a)      Income statement and balance sheet impact

 

Quarter

ended

30 September

Quarter

ended

30 September

Nine months ended

30 September

Nine months

ended

30 September

 

2018

(Unaudited)

2017

(Unaudited)

2018

(Unaudited)

2017

(Unaudited)

 

US$'000

US$'000

US$'000

US$'000

Income statement

 

 

 

 

EMRA profit share(1)

(11,075)

(35,424)

(46,841)

(75,577)

Balance sheet

 

 

 

 

EMRA opening profit share accrual

1,500

3,000

5,000

4,000

EMRA profit share (release)/accrual

500

-

(3,000)

(1,000)

EMRA closing profit share accrual

2,000

3,000

2,000

3,000

(1)   Profit share commenced during the third quarter of 2016. The first two years was a 60:40 split of net production surplus to PGM and EMRA respectively, from 1 July 2018 this changed to a 55:45 split for the next two year period until 30 June 2020, after which all net production surpluses are split 50:50.

 

 

Quarter

ended

30 September

Quarter

ended

30 September

Nine months ended

30 September

Nine months

ended

30 September

 

2018

(Unaudited)

2017

(Unaudited)

2018

(Unaudited)

2017

(Unaudited)

 

US$'000

US$'000

US$'000

US$'000

EMRA profit share (per income statement)(1)

(11,075)

(35,424)

(46,841)

(75,577)

EMRA profit share (release)/accrual (per balance sheet)

500

-

(3,000)

(1,000)

EMRA cash payments during the period (per cash flow statement)(1)

(10,575)

(35,424)

(49,841)

(76,577)

(1)   Profit share commenced during the third quarter of 2016. The first two years was a 60:40 split of net production surplus to PGM and EMRA respectively, from 1 July 2018 this changed to a 55:45 split for the next two year period until 30 June 2020, after which all net production surpluses are split 50:50.

 

Any variation between payments made during the year (which are based on the Company's estimates) and the SGM audited financial statements, may result in a balance due and payable to EMRA or advances to be offset against future distributions. This will be reflected as an accrual or prepayment in each reporting period.

 

 

 

 

 

 

 

4. EMRA profit share (continued)

b)      Cash flow statement impact

 

Quarter

ended

30 September

Quarter

ended

30 September

Nine months ended

30 September

Nine months

ended

30 September

 

2018

(Unaudited)

2017

(Unaudited)

2018

(Unaudited)

2017

(Unaudited)

 

US$'000

US$'000

US$'000

US$'000

Cash flows

 

 

 

 

EMRA cash payments during the period(1)

10,575

35,424

49,841

76,577

(1) Profit share commenced during the third quarter of 2016. The first two years was a 60:40 split of net production surplus to PGM and EMRA respectively, from 1 July 2018 this changed to a 55:45 split for the next two year period until 30 June 2020, after which all net production surpluses are split 50:50.

 

EMRA and PGM benefit from advance distributions of profit share which are made on a weekly/fortnightly basis and proportionately in accordance with the terms of the Concession Agreement. Future distributions will take into account ongoing cash flows, historical costs that are still to be recovered and any future capital expenditure. All profit share payments will be reconciled against SGM's audited June financial statements for current and future periods.

 

5. Segment reporting

The group is engaged in the business of exploration and mining of precious metals, which represents three operating segments, two in the business of exploration and one in mining of precious metals. The board is the group's chief operating decision maker within the meaning of IFRS 8. Management has determined the operating segments based on the information reviewed by the board for the purposes of allocating resources and assessing performance.

 

The board considers the business from a geographic perspective and a mining of precious metals versus exploration for precious metals perspective. Geographically, management considers the performance in the Egypt, Burkina Faso, Côte d'Ivoire and Corporate (which includes Jersey, United Kingdom and Australia). From a mining of precious metals versus exploration for precious metals perspective, management separately considers the Egyptian mining of precious metals from the West African exploration for precious metals in these geographies. The Egyptian mining operations derive its revenue from sale of gold while the West African entities are currently only engaged in precious metal exploration and do not currently produce any revenue.

 

The board assesses the performance of the operating segments based on profits and expenditure incurred as well as exploration expenditure in each region. Egypt is the only operating segment mining precious metals and therefore has revenue and cost of sales whilst the remaining operating segments do not. All operating segments are reviewed by the board as presented and are key to the monitoring of ongoing performance and assessing plans of the Company.

 

Noncurrent assets other than financial instruments by country:

 

As at

30 September

As at

31 December

 

2018

 

(Unaudited)

 2017

Restated

(Unaudited)

 

US$'000

US$'000

Egypt

898,065

885,158

Burkina Faso

35,990

36,094

Côte d'Ivoire

579

451

Corporate

22

27

 

934,656

921,730

 

 

 

 

5. Segment reporting (continued)

Statement of financial position by operating segment:

 

 

As at

30 September

As at

30 September

As at

30 September

As at

30 September

As at

30 September

 

 2018

(Unaudited)

 2018

(Unaudited)

 2018

(Unaudited)

 2018

(Unaudited)

 2018

(Unaudited)

 

US$'000

US$'000

US$'000

US$'000

US$'000

 

Total

Egypt

Burkina Faso

Côte d'Ivoire

Corporate

Statement of Financial Position

 

 

 

 

 

Total assets

1,310,167

1,020,489

37,496

1,085

251,097

Total liabilities

(50,172)

(46,412)

(250)

(874)

(2,636)

Net assets / Total Equity

1,259,995

974,077

37,246

211

248,461

 

 

 

 

 

 

 

As at

31 December

As at

31 December

As at

31 December

As at

31 December

As at

31 December

 

 2017

Restated

(Unaudited)

 2017

Restated

(Unaudited)

 2017

Restated

(Unaudited)

 2017

Restated

(Unaudited)

 2017

Restated

(Unaudited)

 

US$'000

US$'000

US$'000

US$'000

US$'000

 

Total

Egypt

Burkina Faso

Côte d'Ivoire

Corporate

Statement of Financial Position

 

 

 

 

 

Total assets

1,424,355

1,028,927

37,621

888

356,919

Total liabilities

(77,326)

(73,655)

(787)

(307)

(2,577)

Net assets / Total Equity

1,347,029

955,272

36,834

581

354,342

 

Statement of comprehensive income by operating segment:

 

 

Quarter ended

30 September

Quarter ended

30 September

Quarter ended

30 September

Quarter ended

30 September

Quarter ended

30 September

 

2018

(Unaudited)

2018

(Unaudited)

2018

(Unaudited)

2018

(Unaudited)

2018

(Unaudited)

 

US$'000

US$'000

US$'000

US$'000

US$'000

 

Total

Egypt

Burkina Faso

Côte d'Ivoire

Corporate

Statement of Comprehensive Income

 

 

 

 

 

Revenue

125,127

125,127

-

-

-

Cost of sales

(93,300)

(93,300)

-

-

-

Gross profit

31,827

31,827

-

-

-

Other income

13

13

-

-

-

Finance income

1,336

10

-

-

1,326

Other operating costs

(6,669)

(2,807)

(92)

(53)

(3,717)

Exploration and evaluation costs

(4,671)

-

(475)

(4,196)

-

Profit/(loss) for the period before tax

21,836

29,043

(567)

(4,249)

(2,391)

Tax

(33)

(33)

-

-

-

Profit/(loss) for the period after tax

21,803

29,010

(567)

(4,249)

(2,391)

EMRA profit share

(11,075)

(11,075)

-

-

-

Profit/(loss) for the period after EMRA profit share

10,728

17,935

(567)

(4,249)

(2,391)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5. Segment reporting (continued)

 

Quarter ended

30 September

Quarter ended

30 September

Quarter ended

30 September

Quarter ended

30 September

Quarter ended

30 September

 

2017

Restated

(Unaudited)

2017

Restated

(Unaudited)

2017

Restated

(Unaudited)

2017

Restated

(Unaudited)

2017

Restated

(Unaudited)

 

US$'000

US$'000

US$'000

US$'000

US$'000

 

Total

Egypt

Burkina Faso

Côte d'Ivoire

Corporate

Statement of Comprehensive Income

 

 

 

 

 

Revenue

193,093

193,093

-

-

-

Cost of sales

(105,499)

(105,499)

-

-

-

Gross profit

87,594

87,594

-

-

-

Other income

242

1

-

-

241

Finance income

607

11

-

-

596

Other operating costs

(12,997)

(9,501)

3

40

(3,539)

Exploration and evaluation costs

(5,443)

-

(1,402)

(4,041)

-

Profit/(loss) for the period before tax

70,003

78,105

(1,399)

(4,001)

(2,702)

Tax

(566)

(566)

-

-

-

Profit/(loss) for the period after tax

69,437

77,539

(1,399)

(4,001)

(2,702)

EMRA profit share

(35,424)

(35,424)

-

-

-

Profit/(loss) for the period after EMRA profit share

34,013

42,115

(1,399)

(4,001)

(2,702)

 

 

Nine months ended

30 September

Nine months ended

30 September

Nine months ended

30 September

Nine months ended

30 September

Nine months ended

30 September

 

2018

(Unaudited)

2018

(Unaudited)

2018

(Unaudited)

2018

(Unaudited)

2018

(Unaudited)

 

US$'000

US$'000

US$'000

US$'000

US$'000

 

Total

Egypt

Burkina Faso

Côte d'Ivoire

Corporate

Statement of Comprehensive Income

 

 

 

 

 

Revenue

421,518

421,518

-

-

-

Cost of sales

(285,179)

(285,179)

-

-

-

Gross profit

136,339

136,339

-

-

-

Other income

37

37

-

-

-

Finance income

3,582

32

-

-

3,550

Other operating costs

(21,243)

(10,117)

(231)

(502)

(10,393)

Exploration and evaluation costs

(16,503)

-

(4,139)

(12,364)

-

Profit/(loss) for the period before tax

102,212

126,291

(4,370)

(12,866)

(6,843)

Tax

(43)

(43)

-

-

-

Profit/(loss) for the period after tax

102,169

126,248

(4,370)

(12,866)

(6,843)

EMRA profit share

(46,841)

(46,841)

-

-

-

Profit/(loss) for the period after EMRA profit share

55,328

79,407

(4,370)

(12,866)

(6,843)

 

 

 

 

5. Segment reporting (continued)

 

Nine months

ended

30 September

Nine months

 ended

30 September

Nine months ended

30 September

Nine months

ended

30 September

Nine months ended

30 September

 

2017

Restated

(Unaudited)

2017

Restated

(Unaudited)

2017

Restated

(Unaudited)

2017

Restated

(Unaudited)

2017

Restated

(Unaudited)

 

US$'000

US$'000

US$'000

US$'000

US$'000

 

Total

Egypt

Burkina Faso

Côte d'Ivoire

Corporate

Statement of Comprehensive Income

 

 

 

 

 

Revenue

485,097

485,097

-

-

-

Cost of sales

(315,105)

(315,105)

-

-

-

Gross profit

169,992

169,992

-

-

-

Other income

667

11

-

-

656

Finance income

1,603

32

-

-

1,571

Other operating costs

(26,980)

(18,344)

120

(27)

(8,729)

Exploration and evaluation costs

(15,265)

-

(4,811)

(10,454)

-

Profit/(loss) for the period before tax

130,017

151,691

(4,691)

(10,481)

(6,502)

Tax

(1,580)

(590)

-

-

(990)

Profit/(loss) for the period after tax

128,437

151,101

(4,691)

(10,481)

(7,492)

EMRA profit share

(75,577)

(75,577)

-

-

-

Profit/(loss) for the period after EMRA profit share

52,860

75,524

(4,691)

(10,481)

(7,492)

 

Exploration expenditure by operating segment

The following table provides a breakdown of the total exploration expenditure of the group by operating segment:

 

 

Quarter

ended

30 September

Quarter

ended 

30 September

Nine months ended

30 September

Nine months ended

30 September

 

2018

(Unaudited)

2017

(Unaudited)

2018

(Unaudited)

2017

(Unaudited)

 

US$'000

US$'000

US$'000

US$'000

Burkina Faso

 475

 1,402

 4,139

 4,811

Côte d'Ivoire

 4,196

 4,041

 12,364

 10,454

Egypt (Sukari tenement including Cleopatra)

 3,901

 2,447

 9,777

 8,455

Total exploration expenditure

 8,572

7,890

  26,280

 23,720

 

6. Trade and other receivables

 

As at

30 September

As at

31 December

 

2018

(Unaudited)

2017

(Unaudited)

 

US$'000

US$'000

Current

 

 

Gold and silver sales debtor

14,184

31,007

Other receivables

5,069

3,460

 

19,253

34,467

Trade and other receivables are classified as financial assets subsequently measured at amortised cost.

 

All gold and silver sales during the period were made to a single customer in North America and are neither past due nor impaired.

 

The average age of the receivables is eight days (2017: nine days). No interest is charged on the receivables. There are no trade receivables past due or impaired at the reporting date, and thus no allowance for doubtful debts has been recognised. Of the trade receivables balance, the gold and silver sales debtor is all receivable from Asahi Refining of Canada. The amount due has been received in full subsequent to period end. Other receivables represent GST and VAT amounts owing from the various jurisdictions that the group operates in and inventory returns to vendors where refunds are expected to occur.

 

The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.

 

 

 

 

 

7. Inventories

 

As at

30 September

As at

31 December

 

2018

(Unaudited)

2017

(Unaudited)

 

US$'000

US$'000

Non-current

 

 

Mining stockpiles

30,548

6,651

 

30,548

6,651

Non-current ore stockpiles reflect ore tonnes not planned to be processed within the next 12 months.

 

 

As at

30 September

As at

31 December

 

2018

(Unaudited)

2017

(Unaudited)

 

US$'000

US$'000

Current

 

 

Mining stockpiles and ore in circuit

 33,897

25,077

Stores inventory

 67,682

78,618

Provision for obsolete stores inventory

 (3,919)

(5,136)

 

97,660

98,559

Inventories are carried at the lower of costs and net realisable value.

 

Inventories include mining stockpiles, gold in process and dóre supplies, stores and materials, and are stated at the lower of cost or net realisable value. The cost of mining stockpiles and gold produced is determined principally by the weighted average cost method using related production costs.

 

Cost of mining stockpiles include costs incurred up to the point of stockpiling, such as mining and grade control costs, but exclude future costs of production. Ore extracted is allocated to stockpiles based on estimated grade, with grades below defined cut-off levels treated as waste and expensed. While held in physically separate stockpiles, the group blends the ore from each stockpile when feeding the processing plant to achieve the resultant gold content. In such circumstances, lower and higher grade ore stockpiles each represent a raw material, used in conjunction with each other, to deliver overall gold production, as supported by the relevant feed plan.

 

The processing of ore in stockpiles occurs in accordance with the Life of Mine (LoM) processing plan is currently being optimised based on the known mineral reserves, current plant capacity and mine design. Ore tonnes contained in the stockpile which exceed the annual tonnes to be milled as per the mine plan in the following year, are classified as non-current in the statement of financial position. Currently at Sukari, low grade low-low (0.3 to 0.4g/t) and low grade low (0.4 to 0.5g/t) open pit stockpile material above the cut-off grade of 0.3g/t has been reclassified to non-current assets as these ore tonnes are not planned to be processed within the next 12 months.

 

The net realisable value of mining stockpiles is determined with reference to estimated contained gold and market gold prices applicable. Mining stockpiles which are blended together or with future ore mined when fed to the plant are assessed as an input to the gold production process to ensure the combined stockpiles are carried at the lower of cost and net realisable value. Mining stockpiles which are not blended in production are assessed separately to ensure they are carried at the lower of cost and net realisable value, although no such stockpiles are currently held.

 

Costs of gold inventories include all costs incurred up until production of an ounce of gold such as milling costs, mining costs and directly attributable mine general and administration costs but exclude transport costs, refining costs and royalties. Net realisable value is determined with reference to estimated contained gold and market gold prices.

 

Stores and materials consist of consumable stores and are valued at weighted average cost after appropriate impairment of redundant and slow moving items. Consumable stock for which the group has substantially all the risks and rewards of ownership are brought onto the statement of financial position as current assets.

 

8. Prepayments

 

As at

30 September

As at

31 December

 

2018

(Unaudited)

2017

(Unaudited)

 

US$'000

US$'000

Current

 

 

Prepayments

4,504

7,546

Fuel prepayments

-

2,247

 

4,504

9,793

 

8. Prepayments (continued)

Movement in fuel prepayments

 

Nine months ended

30 September

Year ended

31 December

 

2018

(Unaudited)

2017

(Unaudited)

 

US$'000

US$'000

Balance at the beginning of the period

2,247

877

Fuel prepayment recognised

32,934

42,869

Less: Provision charged to:

 

 

Mine production costs

(33,849)

(39,030)

Property, plant and equipment

(4,338)

(2,761)

Inventories

(228)

292

Fuel advance down payment

3,234

-

Balance at the end of the period

-

2,247

 

Cumulative fuel prepayment and provision recognised

 

As at

30 September

As at

31 December

 

2018

(Unaudited)

2017

(Unaudited)

 

US$'000

US$'000

Fuel prepayment recognised

310,191

274,088

Less: Provision charged to:

 

 

Mine production costs

(290,879)

(257,030)

Property, plant and equipment

(21,218)

(16,880)

Inventories

(1,328)

(1,098)

Fuel advance down payment

3,234

3,167

 

Diesel Fuel Oil ("DFO") dispute

As more fully described in note 18 below, the Group is currently involved in court action concerning the price at which it is supplied with DFO. Since January 2012, the group has had to pay for DFO at the international price rather than the subsidised price which it believes it is entitled to. It is seeking recovery of the funds advanced since 2012 through court action. However, management recognises the practical difficulties associated with reclaiming the funds and for this reason has fully provided against the prepayment of US$310.2 million to 30 September 2018 of which US$32.9 million was provided for in the nine months ended 30 September 2018. In the event the appeal is successful a separate claim would then need to be brought in order to recover funds.

 

In order to allow a better understanding of the financial information presented within the consolidated financial statements, and specifically the group's underlying business performance, the effect of the Diesel Fuel Oil dispute is shown below.

 

This has resulted in a net charge of US$8.5 million in the profit and loss for the quarterly period and US$33.1 million for the year to date period.

 

 

Quarter ended 30 September 2018

Quarter ended 30 September 2017

 

Before

 

 

Before

 

 

 

Adjustment

(Unaudited)

Adjustment

(Unaudited)

Total

(Unaudited)

Adjustment

 (Unaudited)

Adjustment (Unaudited)

Total

(Unaudited)

 

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Expenses

 

 

 

 

 

 

Cost of sales

 

 

 

 

 

 

Mine production costs

(71,241)

(10,299)

(81,540)

(70,738)

(9,915)

(80,653)

Movement in inventory

14,560

1,849

16,409

6,213

(2,313)

3,900

Depreciation and amortisation

(28,169)

-

(28,169)

(28,746)

-

(28,746)

 

(84,850)

(8,450)

(93,300)

(93,271)

(12,228)

(105,499)

 

 

 

8. Prepayments (continued)

 

Nine months ended 30 September 2018

Nine months ended 30 September 2017

 

Before

 

 

Before

 

 

 

Adjustment

(Unaudited)

Adjustment

(Unaudited)

Total

(Unaudited)

Adjustment (Unaudited)

Adjustment (Unaudited)

Total

(Unaudited)

 

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Expenses

 

 

 

 

 

 

Cost of sales

 

 

 

 

 

 

Mine production costs

(204,430)

(33,849)

(238,279)

(199,942)

(32,351)

(232,293)

Movement in inventory

31,924

793

32,717

(1,954)

589

(1,365)

Depreciation and amortisation

(79,617)

-

(79,617)

(81,447)

-

(81,447)

 

(252,123)

(33,056)

(285,179)

(283,343)

(31,762)

(315,105)

                 

 

9. Property, plant and equipment

 

 

 

 

 

Capital

 

Nine months ended 30 September 2018 (Unaudited)

Office equipment

Buildings

Plant and equipment

Mining equipment

Development properties

work in progress

Total

 

 US$'000

US$'000

US$'000

 US$'000

US$'000

US$'000

US$'000

Cost

 

 

 

 

 

 

 

Balance at 31 December 2017

6,796

2,051

591,101

274,976

457,113

37,998

1,370,035

Transfers from capital work in progress

-

-

-

-

16,411

(16,411)

-

Additions

272

273

4,312

23,219

-

38,146

66,222

Disposals

-

-

(149)

(160)

-

-

(309)

Balance at 30 September 2018

7,068

2,324

595,264

298,035

473,524

59,733

1,435,948

Accumulated depreciation

 

 

 

 

 

 

 

Balance at 31 December 2017

(5,890)

(548)

(156,921)

(163,902)

(191,675)

-

(518,936)

Depreciation and amortisation

(357)

(108)

(21,086)

(29,862)

(28,432)

-

(79,845)

Disposals

-

-

98

160

-

-

258

Balance at 30 September 2018

(6,247)

(656)

(177,909)

(193,604)

(220,107)

-

(598,523)

Year ended 31 December 2017 (Unaudited)

Cost

 

 

 

 

 

 

 

Balance at 31 December 2016

6,052

2,019

584,113

249,491

365,902

75,775

1,283,352

Additions

744

32

7,304

25,485

3,186

40,122

76,873

Increase in rehabilitation asset

-

-

-

-

2,542

-

2,542

Transfers from capital work in progress

-

-

-

-

77,899

(77,899)

-

Transfers from exploration and evaluation asset

-

-

-

-

7,584

-

7,584

Disposals

-

-

(316)

-

-

-

(316)

Balance at 31 December 2017

6,796

2,051

591,101

274,976

457,113

37,998

1,370,035

Accumulated depreciation

 

 

 

 

 

 

 

Balance at 31 December 2016

(5,400)

(412)

(127,913)

(129,610)

(151,091)

-

(414,426)

Depreciation and amortisation

(490)

(136)

(29,060)

(34,292)

(40,584)

-

(104,562)

Disposals

-

-

52

-

-

-

52

Balance at 31 December 2017

(5,890)

(548)

(156,921)

(163,902)

(191,675)

-

(518,936)

Net book value

 

 

 

 

 

 

 

As at 31 December 2017

906

1,503

434,180

111,074

265,438

37,998

851,099

As at 30 September 2018

821

1,668

417,355

104,431

253,417

59,733

837,425

                     

 

The devaluation of the share price of the company has been considered, however it was concluded that this was not an impairment indicator. No impairment review has been performed in 2017 or 2018 as no impairment indicators were identified in each period.

 

Assets that have been cost recovered under the terms of the Concession Agreement in Egypt are included on the statement of financial position under property, plant and equipment due to the Company having right of use of these assets. These rights will expire together with the Concession Agreement and are for the life of the mine.

 

 

 

10. Exploration and evaluation asset

 

As at

30 September 2018

As at

31 December 2017

 

 

 (Unaudited)

Restated

(Unaudited)

 

US$'000

US$'000

Balance at the beginning of the period

63,885

65,700

Expenditure for the period

9,777

10,610

Net pre-production gold sales related to Cleopatra

(7,069)

(4,841)

Transfer to property, plant and equipment

-

(7,584)

Balance at the end of the period

66,593

63,885

 

The exploration and evaluation asset relates to the drilling, geological exploration and sampling of potential ore reserves and can be attributed to Egypt (US$31.4 million), Burkina Faso (US$35.2 million) and Côte d'Ivoire (US$0.0 million). Please refer to note 1 for the change in accounting policy regarding the treatment of Greenfield exploration expenditure.

 

In consideration of the requirements of IFRS 6 and IAS 36, management is not aware of any information that would otherwise suggest that an impairment trigger has occurred which would require a full impairment test to be carried out at 30 September 2018.

 

11. Financial assets at fair value through other comprehensive income

 

As at

30 September

As at

31 December

 

2018

(Unaudited)

2017

 (Unaudited)

 

US$'000

US$'000

Balance at the beginning of the period

125

130

Gain on foreign exchange movement

-

86

(Loss) on fair value of investment - other comprehensive income

(125)

(91)

Balance at the end of the period

-

125

 

The financial assets at fair value through other comprehensive income at period end relates to a 5.33% (2017: 5.33%) equity interest in Nyota Minerals Limited ("NYO"), a listed public company, as well as a 0.29% (2017: 0.53%) equity interest in KEFI Minerals plc ("KEFI"), an AIM listed company.

 

12. Trade and other payables

 

As at

30 September

As at

31 December

 

2018

(Unaudited)

2017

(Unaudited)

 

US$'000

US$'000

Trade payables

 15,356

32,540

Other creditors and accruals

 12,768

19,045

EMRA profit share accrual

 2,000

5,000

 

30,124

56,585

 

Trade payables principally comprise the amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 11 days (2017: 29 days). Trade payables are interest free for periods ranging from 30 to 180 days. Thereafter interest is charged at commercial rates. The group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.

 

The directors consider that the carrying amount of trade payables approximate their fair value.

 

 

 

13. Provisions

 

As at

30 September

As at

31 December

 

2018

(Unaudited)

2017

 (Unaudited)

 

US$'000

US$'000

Current

 

 

Employee benefits(1)

411

2,510

Fuel(2)

7,050

2,000

Customs, rebates and withholding tax

530

4,801

 

7,991

9,311

Noncurrent

 

 

Restoration and rehabilitation(3)

11,520

10,868

Other non-current provisions

534

93

 

12,054

10,961

Movement in restoration and rehabilitation provision

 

 

Balance at beginning of the year

10,868

7,697

Additional provision recognised/(provision derecognised)

-

2,542

Interest expense - unwinding of discount

652

629

Balance at end of the period

11,520

10,868

(1)    Employee benefits relate to annual, sick and long service leave entitlements and bonuses.

(2)    Fuel provision relates to a backdated fuel charge for Q3 of 2018.

(3) The provision for restoration and rehabilitation represents the present value of the directors' best estimate of the future outflow of economic benefits that will be required to remove the facilities and restore the affected areas at the group's sites discounted by 8.01% (2017: 8.01%). This restoration and rehabilitation estimate, which is reviewed on an annual basis, has been made on the basis of benchmark assessments of restoration works required following mine closure and after taking into account the projected area to be disturbed over the life of the mine, being 20 years. The annual review undertaken as at 31 December 2017 resulted in a US$2.542m increase in the provision.

 

14. Issued capital

 

As at

30 September 2018

(Unaudited)

As at

31 December 2017

(Unaudited)

 

Number

US$'000

Number

US$'000

Fully paid ordinary shares

 

 

 

 

Balance at beginning of the period

1,152,107,984

668,732

1,152,107,984

667,472

Employee share option scheme - Proceeds from shares issued

2,615,000

1,406

-

-

Transfer from share option reserve

-

451

-

1,260

Balance at end of the period

1,154,722,984

670,589

1,152,107,984

668,732

           

 

The authorised share capital is an unlimited number of no par value shares.

 

At 30 September 2018 the trustee of the deferred bonus share plan held 839,716 ordinary shares (2017: 939,716 ordinary shares) pursuant to the plan rules.

 

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

 

15. Share option reserve

 

As at

30 September

As at

31 December

 

2018

(Unaudited)

2017

(Unaudited)

 

US$'000

US$'000

Share option reserve

 

 

Balance at beginning of the period

4,323

3,048

Sharebased payments expense

2,330

3,156

Transfer to accumulated profits

-

(621)

Transfer to issued capital

(1,857)

(1,260)

Balance at the end of the period

4,796

4,323

 

The share option reserve arises on the grant of share options to employees under the employee share option plan. Amounts are transferred out of the reserve and into issued capital when the options and warrants are exercised/vested. Amounts are transferred out of the reserve into accumulated profits when the options and warrants are forfeited.

 

 

16. Sharebased payments

 

No share based payments were awarded or granted to Employees during the third quarter.

 

17. Commitments

 

The following is a summary of the Company's outstanding commitments as at 30 September 2018:

 

(a) Operating lease commitments

The future aggregate minimum lease payments under noncancellable operating leases are as follows:

 

As at

30 September

As at

31 December

 

2018

(Unaudited)

2017

(Unaudited)

 

US$'000

US$'000

Office premises

 

 

No longer than one year

111

115

Longer than one year and not longer than five years

445

459

Longer than five years

417

516

 

973

1,090

 

Operating lease commitments are limited to office premises in Jersey. IFRS 16 is only effective from 1 January 2019 and its impact on the financial statements is currently being assessed.

 

18. Contingent liabilities and contingent assets

Contingent liabilities

Fuel supply

 

As set out in note 8 above, in January 2012, the group received a letter from Chevron to the effect that Chevron would only be able to supply DFO (Diesel Fuel Oil) to the mine at Sukari at international prices rather than at local subsidised prices. It is understood that the reason that this letter was issued was that Chevron had received a letter instructing it to do so from the EGPC. It is further understood that EGPC itself issued this instruction because it had received legal advice from the Legal Advice Department of the Council of State (an internal government advisory department) that companies operating in the gold mining sector in Egypt were not entitled to such subsidies. In November 2012, the group received a further demand from Chevron for the repayment of fuel subsidies received during the period from late 2009 through to January 2012, for EGP403 million (approximately US$22.7 million at current exchange rates).

 

The group has taken detailed legal advice on this matter (and, in particular, on the opinion given by the Legal Advice Department of the Council of State) and in June 2012 lodged an appeal against EGPC's decision in the Administrative Courts. Again, the group believes that its grounds for appeal are strong and that there is a good prospect of success. However, as a practical matter, and in order to ensure the continuation of supply whilst the matter is resolved, the group has since January 2012 advanced funds to its fuel supplier, based on the international price for fuel.

 

As at the date of this document, no decision had been taken by the courts regarding this matter. The group has received an unfavourable State Commissioner's report in the case, however, the report is non-binding and the group's legal advisors remain of the view that the group has a strong case. The group remains of the view that an instant move to international fuel prices is not a reasonable outcome and will look to recover funds advanced thus far should the court action be successfully concluded. However, management recognises the practical difficulties associated with reclaiming the funds and for this reason has fully provided against the prepayment of US$310.2 million. In the event the appeal is successful a separate claim would then need to be brought in order to recover funds. Refer to Note 8 of these financial statements for further details on the impact of this provision on the group's results for 30 September 2018.

 

No provision has been made in respect of the historic subsidies prior to January 2012 as, based on legal advice, the Company believes that, notwithstanding the unfavourable State Commissioner's report, the prospects of a court finding in its favour in relation to this matter remain very strong.

 

Concession Agreement court case

On 30 October 2012, the Administrative Court in Egypt handed down a judgment in relation to a claim brought by, amongst others, an independent member of a previous parliament, in which he argued for the nullification of the agreement that confers on the group rights to operate in Egypt. This agreement, the Concession Agreement, was entered into between the Arab Republic of Egypt, the Egyptian Mineral Resources Authority and Centamin's wholly-owned subsidiary Pharaoh Gold Mines, and was approved by the People's Assembly as Law 222 of 1994.

 

In summary that judgment states that, although the Concession Agreement itself remains valid and in force, insufficient evidence had been submitted to Court in order to demonstrate that the 160km2 exploitation lease between PGM and EMRA had received approval from the relevant Minister as required by the terms of the Concession Agreement. Accordingly, the Court found that the exploitation lease in

18. Contingent liabilities and contingent assets (continued)

Contingent liabilities (continued)

Concession Agreement court case (continued)

 

respect of the area of 160km2 was not valid although it stated that there was in existence such a lease in respect of an area of 3km2. Centamin, however, is in possession of the executed original lease documentation which clearly shows that the 160km2 exploitation lease was approved by the Minister of Petroleum and Mineral Resources. It appears that an executed original document was not supplied to the Court in the first instance.

 

Upon notification of the judgment the group took various steps to protect its ability to continue to operate the mine at Sukari. These included lodging a formal appeal before the Supreme Administrative Court on 26 November 2012. In addition, in conjunction with the formal appeal the group applied to the Supreme Administrative Court to suspend the initial decision until such time as the court was able to consider and rule on the merits of the appeal. On 20 March 2013 the Court upheld this application thus suspending the initial decision and providing assurance that normal operations would be able to continue whilst the appeal process was under way.

 

EMRA lodged its own appeal in relation to this matter on 27 November 2012, the day after the Company's appeal was lodged, supporting the group's view in this matter. Furthermore, in late December 2012, the Minister of Petroleum lodged a supporting appeal and shortly thereafter publicly indicated that, in his view, the terms of the Concession Agreement were fair and that the exploitation lease was valid. The Minister of Petroleum also expressed support for the investment and expertise that Centamin brings to the country. The Company believes this demonstrates the government's commitment to the group's investment at Sukari and the government's desire to stimulate further investment in the Egyptian mining industry.

 

The Supreme Administrative Court has stayed the Concession Agreement appeal until the Supreme Constitutional Court has ruled on the validity of Law 32 of 2014. Law 32 of 2014 restricts the capacity for third parties to challenge contractual agreements between the Egyptian government and an investor. This law, whilst in force and ratified by the new parliament, is currently under review by the Supreme Constitutional Court (SCC). During Q2 2017, the SCC re-referred the case to the state commissioner to prepare a complementary report to an initial report provided by the state commissioner in Q1 2017 which found Law 32 to be unconstitutional. The state commissioner's report and complementary report are advisory and non-binding on the SCC. The Company continues to believe that it has a strong legal position and that in the event that the SCC rules that Law 32 is invalid, the group remains confident that its own appeal will be successful on the merits.

 

The Company does not yet know when the appeal will conclude, although it is aware of the potential for the process in Egypt to be lengthy. The Company has taken extensive legal advice on the merits of its appeal from a number of leading Egyptian law firms who have confirmed that the proper steps were followed with regard to the grant of the 160km² lease. It therefore remains of the view that the appeal is based on strong legal grounds and will ultimately be successful. In the event that the appellate court fails to be persuaded of the merits of the case put forward by the group, the operations at Sukari may be adversely affected to the extent that the group's operation exceeds the exploitation lease area of 3km² referred to in the original court decision.

 

The Company remains confident that normal operations at Sukari will be maintained whilst the appeal case is heard.

 

Contingent assets

 

There were no contingent assets at period end (31 December 2017: nil).

 

19. Earnings per share ("EPS")

 

Quarter

ended

30 September

Quarter

ended

30 September

Nine months ended

30 September

Nine months ended

30 September

 

2018

 

(Unaudited)

2017

Restated

(Unaudited)

2018

 

(Unaudited)

2017

Restated

(Unaudited)

 

US cents

US cents

US cents

US cents

 

per share

per share

per share

per share

Basic earnings per share(1)

1.890

6.034

8.873

11.168

Diluted earnings per share(1)

1.870

5.977

8.805

11.083

Basic earnings per share(2)

0.930

2.956

4.805

4.596

Diluted earnings per share(2)

0.920

2.928

4.768

4.561

(1)   Before profit share.

(2)   After profit share.

 

 

 

 

 

19. Earnings per share ("EPS") (continued)

Basic earnings per share

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:

 

 

Quarter

ended

30 September

Quarter

ended

 30 September

Nine months ended

30 September

Nine months ended

30 September

 

2018

 

(Unaudited)

2017

Restated

(Unaudited)

2018

 

(Unaudited)

2017

Restated

(Unaudited)

 

US$'000

US$'000

US$'000

US$'000

Earnings used in the calculation of basic EPS(1)

21,803

69,437

102,169

128,437

Earnings used in the calculation of basic EPS(2)

10,728

34,013

55,328

52,860

(1)   Before profit share.

(2)   After profit share.

 

Quarter

ended

30 September

Quarter

ended

30 September

Nine months ended

30 September

Nine months ended

30 September

 

2018

(Unaudited)

2017

(Unaudited)

2018

(Unaudited)

2017

 (Unaudited)

 

Number

Number

Number

Number

Weighted average number of ordinary shares for the purpose of basic EPS

1,153,663,269

1,150,714,936

1,151,506,466

1,150,054,939

 

Diluted earnings per share

The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows:

 

Quarter

ended

30 September

Quarter

ended

30 September

Nine months ended

30 September

Nine months ended

30 September

 

2018

 

(Unaudited)

2017

Restated

(Unaudited)

2018

 

(Unaudited)

2017

Restated

(Unaudited)

 

US$'000

US$'000

US$'000

US$'000

Earnings used in the calculation of diluted EPS(1)

21,803

69,437

102,169

128,437

Earnings used in the calculation of diluted EPS(2)

10,728

34,013

55,328

52,860

(1)   Before profit share.

(2)  After profit share.

 

Quarter

ended

30 September

Quarter

ended

30 September

Nine months ended

30 September

Nine months ended

30 September

 

2018

(Unaudited)

2017

 (Unaudited)

2018

(Unaudited)

2017

 (Unaudited)

 

Number

Number

Number

Number

Weighted average number of ordinary shares for the purpose of basic EPS

1,153,663,269

1,150,714,936

1,151,506,466

1,150,054,939

Shares deemed to be issued for no consideration in respect of employee options

11,990,334

10,959,667

8,809,807

8,825,436

Weighted average number of ordinary shares used in the calculation of diluted EPS

1,165,653,603

1,161,674,603

1,160,316,272

1,158,880,375

 

No potential ordinary shares were excluded from the calculation of weighted average number of ordinary shares for the purpose of diluted earnings per share.

 

 

 

 

 

 

20. Notes to the statements of cash flows

(a) Reconciliation of cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents includes cash on hand and at bank and deposits.

 

As at

30 September

As at

30 September

 

2018

(Unaudited)

2017

(Unaudited)

 

US$'000

US$'000

Cash and cash equivalents

254,094

313,003

 

(b) Reconciliation of profit for the year to cash flows from operating activities

 

Quarter

ended

30 September

Quarter

ended

30 September

Nine months ended

30 September

Nine months

ended

30 September

 

2018

 

(Unaudited)

2017

Restated

(Unaudited)

2018

 

(Unaudited)

2017

Restated

(Unaudited)

 

US$'000

US$'000

US$'000

US$'000

Profit for the period before tax

21,836

70,003

102,212

130,017

Add/(less) noncash items:

 

 

 

 

Depreciation/amortisation of property, plant and equipment

28,246

28,759

79,844

81,486

Inventory written off

154

121

451

135

Foreign exchange (gain)/loss

(1,723)

535

(4,657)

(1,246)

Sharebased payments expense

618

701

2,330

1,731

Finance income

(1,336)

(607)

(3,582)

(1,603)

Provision for obsolete stores inventory

-

3,000

(1,217)

8,685

Loss on disposal of property, plant and equipment

51

-

51

263

Changes in working capital during the period:

 

 

 

 

Decrease/(increase) in trade and other receivables

(6,925)

2,372

15,213

3,880

(Increase)/decrease in inventories

(14,371)

4,156

(21,781)

21,257

(Increase)/decrease in prepayments

6,629

(3,674)

5,295

(1,770)

Increase/(decrease) in trade and other payables

(6,241)

(3,520)

(23,461)

(8,953)

(Decrease) in provisions

147

2,891

(453)

(2,362)

Cash flows generated from operating activities

27,085

104,737

150,245

231,520

 

(c) Noncash financing and investing activities

During the period there have been no noncash financing and investing activities.

 

21. Financial instruments' fair value disclosures

 

The Group has no financial instruments with fair values that are determined by reference to significant unobservable inputs, i.e. those that would be classified as level 3 in the fair value hierarchy, nor have there been any transfers of assets or liabilities between levels of the fair value hierarchy.

 

The Group's interest in Nyota Minerals Limited and KEFI Minerals plc is classified as financial assets at fair value through other comprehensive income. The Group carries its interest in Nyota Minerals Limited and KEFI Minerals plc at fair value, and measures its interest using Level 1 unadjusted quoted prices.

 

The directors consider that the carrying amounts of financial assets and financial liabilities carried at amortised cost approximate their fair value.

 

The impact of IFRS 9 has been assessed and does not have a significant impact on the financial statements of the Group.

 

 

 

 

 

22. Related party transactions

The related party transactions for the three months ended 30 September 2018 is summarised below:

 

-       Salaries, superannuation contributions, bonuses, LTI's, consulting and directors' fees of Directors during the three months ended 30 September 2018 amounted to US$923,056 (30 September 2017: US$635,278).

 

-       Josef ElRaghy is a director and shareholder of ElRaghy Kriewaldt Pty Ltd ("ElRaghy Kriewaldt"). ElRaghy Kriewaldt provides office premises to the Company. All dealings with ElRaghy Kriewaldt are in the ordinary course of business and on normal terms and conditions. No rent and office outgoings to ElRaghy Kriewaldt during the three months ended 30 September 2018 (30 September 2017: AU$15,338 or US$12,157) as this lease ended in May 2018.

 

The related party transactions for the nine months ended 30 September 2018 is summarised below:

 

-       Salaries, superannuation contributions, bonuses, LTI's, consulting and directors' fees of Directors during the nine months ended 30 September 2018 amounted to US$2,862,607 (30 September 2017: US$1,837,548).

 

-       Josef ElRaghy is a director and shareholder of ElRaghy Kriewaldt Pty Ltd ("ElRaghy Kriewaldt"). ElRaghy Kriewaldt provides office premises to the Company. All dealings with ElRaghy Kriewaldt are in the ordinary course of business and on normal terms and conditions. Rent and office outgoings to ElRaghy Kriewaldt during the nine months ended 30 September 2018 were AU$26,100 or US$21,013 (30 September 2017: AU$46,013 or US$35,388), this lease ended in May 2018.

 

Gold sales agreement

On 20 December 2016, SGM entered into a contract with the Central Bank of Egypt ("CBE"). The agreement provides that the parties may elect, on a monthly basis, for the CBE to supply SGM with its local Egyptian currency requirements for that month (to a maximum value of EGP50 million). In return, SGM facilitates the purchase of refined gold bullion for the CBE from SGM's refiner, Asahi Refining. This transaction has been entered into as SGM requires local currency for its operations in Egypt (it receives its revenue for gold sales in US dollars). Twelve transactions have been entered into at the date of this report, ten in 2018 and two in 2017 to a total value of US$33.9 million.

 

23. Subsequent events

There were no other significant events occurring after the reporting date requiring disclosure in the financial statements.

 

This report contains certain forwardlooking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forwardlooking information.

 

QUALIFIED PERSON AND QUALITY CONTROL

Please refer to the technical report entitled "Mineral Resource and Reserve Estimate for the Sukari Gold Project, Egypt" effective on 30 June 2015 and issued on 23 October 2015 and filed on SEDAR at www.sedar.com, for further discussion of the extent to which the estimate of mineral resources/reserves may be materially affected by any known environmental, permitting, legal, title, taxation, sociopolitical, or other relevant issues as well as details of the qualified persons and quality control.

 

Investors should be aware that the reserve and resource estimate dated 30 June 2017, and announced on 10 January 2018 does not constitute a material change on the prior reserve and resource estimate and an updated NI 43-101 resource and reserve report was not required to be prepared.

 

Information of a scientific or technical nature in this document was prepared under the supervision of Quinton De Klerk of Cube Consulting Pty Ltd, Australia, a qualified person under the Canadian National Instrument 43-101.

 

The total mineral resource was prepared by Norman Bailie of Centamin plc.  The open pit mineral reserve and underground mineral reserve were prepared by Quinton De Klerk of Cube Consulting Pty Ltd, Australia. The underground mineral resource was prepared by Mark Zammit of Cube Consulting Pty Ltd, Australia. Mr Bailie, Mr Zammit and Mr De Klerk are Qualified Persons under the Canadian National Instrument 43-101.

 

Such qualified persons have verified the data disclosed, including sampling, analytical, and test data underlying the information or opinions contained in this announcement in accordance with standards appropriate to their qualifications.

 

Cautionary note regarding forwardlooking 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 announcement 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 Project), 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 the Sukari Project.

 

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.

 

This announcement contains periodic regulated information.

LEI: 213800PDI9G7OUKLPV84

Company No: 109180

 


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