FINANCIAL STATEMENTS

Notes to the consolidated financial statements

for the year ended 31 December 2020

Basis of preparation

These financial statements are denominated in US dollars ("US$"), which is the presentational currency of Centamin plc. All companies in the Group use the US$ as their functional currency. All financial statements presented in US$ have been rounded to the nearest thousand dollars, unless otherwise stated.

These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use by the European Union ("EU") and interpretations issued from time to time by the IFRS Interpretations Committee ("IFRS IC") both as adopted by the EU and which are mandatory for EU reporting as at 31 December 2020 and the Companies (Jersey) Law 1991. The Group has not early adopted any other amendments, standards or interpretations that have been issued but are not yet mandatory.

The consolidated financial statements have been prepared on a going concern basis and under the historical cost convention, as modified by financial assets and financial liabilities (including derivative) instruments at fair value through profit or loss.

The consolidated financial statements for the year ended 31 December 2020 were authorised by the Board of Directors of the Company for issue on 22 March 2020.

Accounting policies

Accounting policies are selected and applied in a manner which ensures that the resulting financial statements satisfy the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported. These policies have been consistently applied to all the years presented, unless otherwise stated.

1. Current reporting period amendments

1.1 Changes in critical judgments and estimates

There were no material updates and/or changes to critical accounting judgments and estimates that management have made in the year in applying the Group's accounting policies, that have the most significant effect on the amounts recognised and the disclosure of such amounts in the financial statements.

1.2 Changes in policies and estimates

The Group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 January 2020:

• Definition of Material - Amendments to IAS 1 and IAS 8;

The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.

For a detailed discussion about the Group's performance and financial position, please refer to the financial review.

1.3 Critical judgments and estimates in applying the entity's accounting policies

The following are the critical judgments and estimates that management have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

Management has discussed its critical accounting judgments and estimates and associated disclosures with the Company's Audit and Risk Committee.

The critical accounting judgments are as follows:

1.3.1 Judgment: Control

Principles of consolidation

The consolidated financial statements are prepared by combining the financial statements of all the entities that comprise the consolidated entity, being the Company (the parent entity) and its subsidiaries. Subsidiaries are all entities (including structured entities) over which the Group has control, as defined in IFRS 10 'Consolidated financial statements'. Consistent accounting policies are employed in the preparation and presentation of the consolidated financial statements.

The consolidated financial statements include the information and results of each subsidiary and controlled entity from the date on which the Company obtains control and until such time as the Company ceases to control such entity. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

In preparing the consolidated financial statements, all intercompany balances and transactions, and unrealised profits arising within the consolidated entity, are eliminated in full.

1.3.1.1 Judgment: Accounting treatment of the Sukari Gold Mining Company ("SGM")

Pharaoh Gold Mines NL (the holder of an Egyptian branch) ("PGM") and EMRA are 50:50 partners in SGM. However, SGM is fully consolidated within the Group as if it were a subsidiary due to it being a controlled entity, reflecting the substance and economic reality of the Concession Agreement ("CA") (see note 4.1 and note 4.2 to the financial statements).

IFRS 10 'Consolidated financial statements' defines control as encompassing three distinct principles, which, if present, identify the existence of control by an investor over an investee, hence forming a parent-subsidiary relationship. The principles are:

1.     power over the investee;

2.     exposure, or rights, to variable returns from its involvement with the investee; and

3.     the ability to use its power over the investee to affect the amount of the investor's returns.

An investor has power over an investee when the investor has existing rights that give it the current ability to direct the relevant activities (i.e. the activities that significantly affect the investee's returns).

The Company's control, through PGM, of SGM

PGM is a 100% owned subsidiary of the Company. The Company, through PGM, has the right to appoint or remove the managing director of SGM under the terms of the CA and in doing so controls the activities in relation to the operation of SGM that most significantly affect the returns of SGM. These are all illustrated in the sections that follow:

a)    The duties of PGM

·      PGM controls the appointment of the General Manager ("GM") at the Sukari Gold Mine;

o  By controlling the appointment of the GM and directing their activities, the GM will make all day-to-day decisions to allow the mine to operate in a manner that aligns with the Company's objectives which involve:

§  preparing SGM's work programmes through determination of the daily and longer-term mine plans, the budgets covering the operations to be carried out throughout the life of the mine ("LOM") and approval of the same;

§  managing capital expenditure, procurement, cost control and treasury;

§  conducting exploration, development, production and marketing operations;

§  co-ordinating SGM operations and activities, including its dealings with all contractors and subcontractors;

§  bearing ultimate responsibility for all costs and expenses required in carrying out any and all operations under the CA;

§  funding the operations of SGM and recovering costs and expenses throughout the LOM (i.e. exploration, development and production phases);

§  funding additional exploration and expansion programmes within the mine during the production phase;

§  taking custody of SGM's stock and management of its funds;

§  selling and shipping of all gold and associated metals produced; and

§  entering into and managing gold sales or hedging contracts and forward sale agreements.

b)    The duties of EMRA

·      EMRA must, under the terms of the CA, provide the required approvals to allow the mine to operate.

c)    The duties, role, and function of the board of SGM:

·      The board of SGM has six board members:

o  three of which are appointed by the Company, through PGM; and

o  three of which are appointed by EMRA:

§  the executive chairman, as one of the three EMRA appointed board members, is a representative of EMRA and is appointed by the Egyptian Ministry of Finance.

·      The board of SGM convenes at least twice a year to:

o  facilitate a forum for sharing information between the owners of SGM;

o  provide a mechanism to scrutinise the timing and amounts of expenses; rather than as a decision-making body over SGM's most significant relevant activities;

o  consider, review, and approve all the following in relation to SGM:

§  the budget;

§  the annual financial statements;

§  the cost recovery position; and

§  other compliance matters.

o  The board of SGM is not allowed to unreasonably withhold approval of any of the above.

·      If there is a disputed matter or deadlock position at an SGM board level, it is resolved as follows:

o  through open discussion at board level;

o  the executive chairman does not have a veto or casting vote;

o  where matters cannot be agreed upon, an ad-hoc committee is appointed with each party having equal representation. This committee will then recommend an appropriate course of action to the board with the best interest of all shareholders in mind; and

o  should the board still not agree on a course of action, there is a provision for arbitration and ultimately matters can be presented to the International Court of Arbitration at The Hague;

·      the board of SGM cannot appoint or remove the GM, this right belongs solely to the Company, through PGM, under the terms of the CA;

EMRA and/or the Egyptian government have no downside risk in their share of SGM. If SGM were to become loss making or insolvent, these costs are absorbed in its entirety by the Company, through PGM, in accordance with the CA.

The Company, through PGM, is therefore exposed to the variable returns of SGM, has the ability to affect the amount of those returns, has power over SGM through its ability to direct its relevant activities and therefore meets all the criteria of control to consolidate SGM's results within the Group to reflect the substance and economic reality of the CA.

As the Company, through PGM, is determined to be the controlling party, it should consolidate SGM, and should apply consolidation procedures, combining balance sheet and profit and loss items line by line as well as applying the rest of the consolidation procedures set out in IFRS 10 App B para B86. The Group therefore prepares consolidated financial statements on this basis.

1.3.1.2 Judgment: Treatment and disclosure of EMRA profit share

EMRA holds 50% of the shares in the Group controlled entity, SGM, which are not attributable to the Company, and it is entitled to receive net proceeds from the operations of SGM on a residual basis in accordance with their specified shareholding per the CA (this distribution is in accordance with the profit share mechanism and not as a consequence of accumulated profits as defined by accounting standards). Therefore, the Group recognises a Non-Controlling Interest("NCI") in SGM to represent EMRA's participation.

In terms of the CA, the NCI's rights to any profit share payments (dividend distributions) is only triggered after the cost recovery of all amounts invested (or spent during operations) during the exploration, construction and development stages have been repaid to PGM. The profit share mechanism was only triggered in November 2016 (after all amounts due to be cost recovered were complete). Until that time the NCI had no rights to claim any distribution of accumulated profits or profit share.

It is important to note that the availability of cash in SGM for distribution to its shareholders as profit share is under the control of the Company, through PGM, by the decisions made on SGM's strategic direction and day-to-day operational requirements of running the mine. This is regarded as discretionary and exposes the Company to variable returns.

Distributions to shareholders in SGM:

·      once all expenditure requirements, including current cost recovery payments due, have been met, excess cash reserves, if any, are distributed to both SGM shareholders:

o  distributions are always made simultaneously to both shareholders;

o  the split of the distribution is in accordance with the ratchet mechanism (i.e. the standard profit share ratios of 60/40 (first two years from 1 July 2016), 55/45 (second two years from 1 July 2018) and 50/50 (from 1 July 2020) to PGM and EMRA respectively through time) as governed by the CA; but:

§  distributions are not mandatory, entirely discretionary and there are only distributions if there are excess funds;

§  distributions are paid in advance on a weekly or fortnightly basis by mutual agreement between shareholders;

·      at end of the SGM reporting period, final profits are determined, externally audited and then approved by the board of SGM:

o  final profit distributions become payable within 60 days of the financial year end, SGM is unable to avoid payment at this point and the amount payable is recorded as equity attributable to the NCI until paid;

·      the CA is merely a shareholder agreement specifying how and when profits from SGM will be distributed to shareholders and is typical of a minority shareholder protection mechanism.

The Group should attribute the profit or loss for the year after tax and each component of other comprehensive income for the year to the owners of the parent and to the NCI in SGM. The entity shall also attribute total comprehensive income for the year to the owners of the parent and to NCI even if this results in the NCI having a deficit balance (IFRS 10 App B para B94). The CA only contemplates the distribution of profit to shareholders. The NCI would only have a deficit balance where advance distributions paid during the year have exceeded final distributions payable after year-end financial statements have been prepared and audited. This deficit would be entirely funded by the Company, through PGM, and would first be redeemed from future excess cash before regular distributions to both parties resume. SGM has no claw back provision for advance profits paid to the NCI. We note that annual dividend payments, after approval of audited financial statements, is a standard feature of transactions with an NCI and that such payments are not normally treated as non‑discretionary payments triggering a liability in the consolidated statement of financial position of the parent.

Any losses generated by SGM will be entirely funded by the Company, through PGM, but attributed to both shareholders. These losses will first be recovered before further profit share distributions commence.

In the Group statement of financial position, all the accumulated profits of SGM are attributable to the Company as EMRA have already received their share through the advance profit distribution payments made, therefore NCI is usually disclosed in the financial statements as nil unless there is an outstanding distribution payable to or deficit from EMRA due to timing differences of the cash sweep. Please refer to note 2.4 for further information.

1.3.2 Judgment: Impairment trigger assessment

IFRS requires management to test for impairment if events or changes in circumstances indicate that the carrying amount of a finite life asset may not be recoverable.

Considering the requirements of IAS36 an impairment trigger assessment has been performed.

Group operating assets

As part of the impairment trigger assessment, management have also considered movements in the key assumptions which have historically been used in impairment assessments and are satisfied that there have not been any changes that would constitute an impairment trigger. These include changes to:

·      forecast gold prices;

·      discount rates;

·      production volumes;

·      reserves and resources report; and

·      costs, taking into consideration the impact of the solar plant on those costs and emissions targets; and

·      recovery rates.

On review, no impairment triggers were identified.

Exploration and evaluation assets

The Group's accounting policy for exploration and evaluation expenditure results in brownfield exploration and evaluation expenditure being capitalised to the balance sheet for those projects where such expenditure is considered likely to be recoverable through future extraction activity or sale or where the exploration activities have not reached a stage which permits a reasonable assessment of the existence of reserves.

This policy requires management to make certain judgements and assumptions as to future events and circumstances, in particular whether the Group will proceed with development based on existence of reserves or whether an economically viable extraction operation can be established. Such judgements and assumptions may change from period to period as new information becomes available. If, subsequent to the brownfield exploration and evaluation expenditure being capitalised, a judgement is made that recovery of the expenditure is unlikely or the project is to be abandoned, this would constitute an impairment trigger which requires an impairment assessment to be performed. The result of that impairment assessment could be that the relevant capitalised amount will be written off to the income statement.

·      On review, no impairment triggers were identified.

1.3.3 Judgment: Litigation

The Group exercises judgment in measuring and recognising provisions and the exposures to contingent liabilities related to pending litigation, as well as other contingent liabilities (see note 5.1 to the financial statements). Judgment is necessary in assessing the likelihood that a pending claim will succeed, or a liability will arise, and to quantify the possible range of any financial settlement.

The Group is currently a party to two significant legal actions in Egypt, both of which could adversely affect its profitability and, in the case of one of them, may affect its ability to operate the mine at Sukari in the manner in which it is currently operated. The details of this litigation, which relate to the loss of the Egyptian national subsidy for Diesel Fuel Oil and the Concession Agreement under which Sukari operates, are given in note 5.1 to the financial statements. Although it is possible to quantify the effects of the loss of the national fuel subsidy, it is not currently possible to quantify with sufficient precision the impact of any restrictions placed on the terms of the Group's operations under the Concession Agreement.

Every action is being taken to contest these decisions, including the making of formal legal appeals and, although their resolution may still take some time, management remains confident that a satisfactory outcome will ultimately be achieved. In the meantime, however, the Group continued to pay international prices for Diesel Fuel Oil until 2020, when the domestic subsidy on Diesel Fuel Oil was withdrawn. Consequently, there is no longer a distinction between domestic and international prices for Diesel Fuel Oil, and the Group is liable to pay the price announced quarterly by the Egyptian Ministry of Petroleum which is generally applicable.

With respect to the Administrative Court ruling in the Concession Agreement case (discussed in note 5.1 below), on 20 March 2013 the Supreme Administrative Court upheld the Company's application to suspend this decision until the merits of the Company's appeal are considered and ruled on, thus providing assurance that normal operations will be able to continue during this process. In 2016, the Company's appeal was indefinitely stayed by the Supreme Administrative Court, pending judgment in a case currently before the Supreme Constitutional Court, the outcome of which may affect the Concession Agreement case. Further details are provided in note 5.1 below.

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 management's belief that the Group will be able to continue as going concern. The Group is in regular contact with its Egyptian lawyers, who are monitoring developments in the litigation cases on a day-to-day basis and is therefore in a position to react swiftly if and when action is required.

The changes to critical accounting estimates and assumptions are disclosed in notes 1.2 and 1.3 above. The other critical estimates and assumptions are as follows:

1.3.4 Estimate: Mineral Reserve and Mineral Resource statement impact on ore reserves

The Group Mineral Reserve and Resource statement for SGM with an effective date of 31 December 2020 has been published on the same day as this report, 22 March 2021. The Mineral Reserve estimation has used an assumed gold price of US$1,450 per ounce as a basis of preparation. The information on the Mineral Resources and Reserves was prepared by Qualified Persons as defined by the National Instrument 43-101 of the Canadian Securities Administrators.

There are numerous uncertainties inherent in estimating Mineral Resources and Mineral Reserves. Assumptions that are valid at the time of estimation may change significantly when new information becomes available.

Estimates of recoverable quantities of reserves include assumptions on commodity prices, exchange rates, discount rates and production costs for future cash flows. It also involves assessment and judgment of complex geological models. The economic, geological and technical factors used to estimate ore reserves may change from period to period. Changes in ore reserves affect the carrying values of mine properties, property, plant and equipment, provision for rehabilitation assets and deferred taxes. Ore reserves are integral to the amount of depreciation and amortisation charged to the consolidated statement of comprehensive income and the calculation in the valuation of inventory.

Production forecasts from the underground mine at Sukari are partly based on estimates regarding future resource and reserve growth. It should be specifically noted that the potential quantity and grade from the Sukari underground mine is conceptual in nature and that it is uncertain if exploration will result in further targets being delineated as a Mineral Resource. Please refer to the Mineral Reserve and Resource statement impact on ore reserves sensitivity note 3.1.1(i).

1.3.5 Estimate: Going concern

Under guidelines set out by the FRC, the Directors of UK listed companies are required to consider whether the going concern basis is the appropriate basis of preparation of financial statements.

COVID-19

The FRC has released updated guidelines regarding disclosure of "material uncertainties" related to going concern in current circumstances. Material uncertainties refers to uncertainties related to events or conditions that may cast significant doubt upon the entity's ability to continue as a going concern. In other words, if boards identify possible events or scenarios (other than those with a remote possibility of occurring) that could lead to corporate failure, then these should be disclosed. When assessing whether material uncertainties exist, boards should consider both the uncertainty and the likely success of any realistically possible response to mitigate this uncertainty.

The economic impact of the COVID-19 pandemic has and will continue to have its effect, but currently there are no material financial implications to our operations, Sukari continues to operate with confirmed cases on site, gold sales are still commencing on a weekly basis. Weekly cash flow forecasts continue to be performed and distributions to EMRA and PGM are continuing at the moment, however these can be halted should cash be required locally. To date there has been no significant impact to critical stock on site and additional stock has been purchased where required, this is continuously being assessed and further backup plans are in place. Due to the current travel restrictions, the expatriates and Egyptian nationals on site are working longer shifts and are being compensated accordingly when this occurs, however everything possible is being done to assist them to meet their rotation schedules.

Management have performed detailed analyses and forecasts to assess the economic impact of COVID-19 from a going concern and viability perspective. The Group continues to benefit from a strong balance sheet with large cash balances and no debt. At 31 December 2020 the Group had cash and cash equivalents of US$291 million and therefore it is very likely that liquidity security for the Group is given for at least 12 months after the date of approval of these financial statements. As part of assessing the Group's ability to continue as a going concern, management performed various stress testing scenarios on the Group's balance sheet and the 2021 budget to assess the potential downturn this pandemic could have on its business, the scenarios addressed were:

·      Open pit 30% reduction in ore and waste;

·      Underground 30% reduction in stoping and development;

·      Processing 20% reduction in ore processed;

·      Processing 50% reduction in ore processed; and

·      A combination of the first three reduction scenarios above.

The sensitivities applied were informed by internal and external data sources, including a review of the Group's most recent production levels with reductions in production levels to various stages of slowdown and suspension. Consultations have also been had both with our critical suppliers and refiners. The Group doesn't engage in any hedging activities and as such all gold sales are exposed to movements in market prices.

In each scenario, sufficient liquidity was demonstrated, and we have no information that a combination of the first three reduction scenarios above is likely to occur. In the event of such further deterioration of market conditions as a result of the COVID-19 outbreak, and implementation of the mitigating actions identified by the Board, the Group will have sufficient liquidity to meet obligations when they fall due for a period of at least 12 months after 22 March 2021.

In order to secure the health and safety of our employees and the production capabilities of Sukari, the Group established a CV-19 Executive Committee and support team which meets and provides daily updates on CV-19 globally to site, production, supply chain and HSE activities. Sukari is operating a very strict three-point check for all people movements to prevent the spread of the disease, all corporate offices are currently open with strict CV-19 protocols for the employees that choose to work from there, however most employees are still working from home. The Group is continuously evaluating further potential actions to mitigate risk due to the COVID-19 crisis. As a result, and even though globally everyone is confronted with a high level of uncertainty, it is not expected that the coronavirus COVID-19 will have a material negative impact on the ability of the Group to operate as going concern.

Based on a detailed cash flow forecast prepared by management, in which it included any reasonably possible change in the key assumptions on which the cash flow forecast is based and assessed various scenarios related to COVID-19, the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for twelve months from 22 March 2021 and that at this point in time there are no material uncertainties regarding going concern. Key assumptions underpinning this forecast include:

·      available cash balances;

·      favourable litigation outcomes, for current litigation refer to note 5.1 to the financial statements;

·      gold price of US$1,450/oz.; and

·      production volumes in line with 2021 guidance.

These financial statements for the year ended 31 December 2020 have therefore been prepared on a going concern basis, which contemplate the realisation of assets and liquidation of liabilities during the normal course of operations, in preparing these financial statements.

1.3.6 Estimate: Long-term gold price used in the non-current stockpiles NRV assessment

All inventories are stated at the lower of cost and net realisable value. Management and Directors believe that the estimates used regarding long-term gold prices in the non-current stockpiles NRV assessment are critical estimates and are realistic based on current information. Please refer to inventories, note 2.11.

1.3.7 Estimate: Restoration and rehabilitation provision unit rates

Key management estimates are the unit costs used in calculating the nominal provision amount, for various activities, namely ripping and grading, hauling and application, regrading slopes, construction of bunds and demolition of buildings, as well as certain fixed costs, including labour and dismantling of equipment. Unit costs range between $0.33/m2 to $6.62/m2. A 10% change in these unit and fixed costs would have a US$1.8 million impact on the provision and corresponding asset amounts, with a highly insignificant effect on the consolidated statement of comprehensive income. Please refer to note 2.13.

2. How numbers are calculated

2.1 Segment reporting

The Group is engaged in the business of exploration for 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 'Operating segments'. 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 separately the performance in 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 the sale of gold while the West African entities are currently only engaged in precious metal exploration and do not 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.

Non-current assets other than financial instruments by country:

	31 December 2020 US$'000	31 December 2019 US$'000
Egypt	921,427	888,681
Burkina Faso	35,766	35,845
Côte d'Ivoire	467	524
Corporate	898	556
	958,558	925,606

 

Additions to non-current assets mainly relate to Egypt and are disclosed in note 2.9.

Statement of financial position by operating segment:

31 December 2020	Total US$'000	Egypt US$'000	Burkina Faso US$'000	Côte d'Ivoire US$'000	Corporate US$'000
Statement of financial position
Total assets	1,395,876	1,077,949	37,001	1,087	279,839
Total liabilities	(106,424)	(101,096)	(635)	(390)	(4,303)
Net assets/total equity	1,289,452	976,853	36,366	697	275,536

 

 

31 December 2019	Total US$'000	Egypt US$'000	Burkina Faso US$'000	Côte d'Ivoire US$'000	Corporate US$'000
Statement of financial position
Total assets	1,372,439	1,048,764	36,904	1,282	285,489
Total liabilities	(80,802)	(69,002)	(426)	(704)	(10,670)
Net assets/total equity	1,291,637	979,762	36,478	578	274,819

 

Statement of comprehensive income by operating segment:

For the year ended 31 December 2020	Total US$'000	Egypt US$'000	Burkina Faso US$'000	Côte d'Ivoire US$'000	Corporate US$'000
Statement of comprehensive income
Revenue	828,737	828,737	-	-	-
Cost of sales	(449,441)	(449,441)	-	-	-
Gross profit	379,296	379,296	-	-	-
Exploration and evaluation costs	(17,391)	-	(2,803)	(14,588)	-
Other operating (costs)/income	(56,392)	(30,760)	307	(197)	(25,742)
Other income	6,972	4,820	54	35	2,063
Profit on financial assets at fair value through profit or loss	960	-	-	-	960
Finance income	1,554	77	-	-	1,477
Profit/(loss) for the year before tax	314,999	353,433	(2,442)	(14,750)	(21,242)
Tax	(50)	(50)	-	-	-
Profit/(loss) for the year after tax	314,949	353,383	(2,442)	(14,750)	(21,242)
Profit/(loss) for the year after tax attributable to:
- the owners of the parent(1)	155,979	194,413	(2,442)	(14,750)	(21,242)
- non-controlling interest in SGM(1)	158,970	158,970	-	-	-

(1) Please note that the cost recovery model on which profit share is based under the Concession Agreement is different to the accounting results presented above due to various adjustments and as such the share of profit disclosed above is not reflective of the 55%:45% split that was in place from 1 July 2018 to 30 June 2020 and 50%:50% split from 1 July 2020 onwards that occurs in practice, refer to the statement of cash flows by operating segment below for further information.

For the year ended 31 December 2019	Total US$'000	Egypt US$'000	Burkina Faso US$'000	Côte d'Ivoire US$'000	Corporate US$'000
Statement of comprehensive income
Revenue	652,344	652,344	-	-	-
Cost of sales	(439,285)	(439,285)	-	-	-
Gross profit	213,059	213,059	-	-	-
Exploration and evaluation costs	(16,883)	-	(2,715)	(14,168)	-
Other operating costs	(38,709)	(18,492)	(159)	(205)	(19,852)
Other income	5,856	6,105	(55)	(299)	105
Profit on financial assets at fair value through profit or loss	3,889	-	-	-	3,889
Finance income	5,817	42	-	-	5,775
Profit/(loss) for the year before tax	173,029	200,714	(2,929)	(14,672)	(10,083)
Tax	(112)	(282)	-	-	170
Profit/(loss) for the year after tax	172,917	200,432	(2,929)	(14,672)	(9,913)
Profit/(loss) for the year after tax attributable to:
- the owners of the parent(1)	87,463	114,978	(2,929)	(14,672)	(9,913)
- non-controlling interest in SGM(1)	85,454	85,454	-	-	-

(1) Please note that the cost recovery model on which profit share is based under the Concession Agreement is different to the accounting results presented above due to various adjustments and as such the share of profit disclosed above is not reflective of the 55%:45% split that was in place from 1 July 2018 to 30 June 2020 and 50%:50% split from 1 July 2020 onwards that occurs in practice, refer to the statement of cash flows by operating segment below for further information.

Statement of cash flows by operating segment:

For the year ended 31 December 2020	Total US$'000	Egypt US$'000	Burkina Faso US$'000	Côte d'Ivoire US$'000	Corporate US$'000
Statement of cash flows
Net cash generated by/(used in) operating activities(1)	453,305	517,341	343	(41)	(64,338)
Net cash (used in)/generated by investing activities	(129,848)	(138,722)	(3)	(65)	8,942
Net cash (used in)/generated by financing activities
Own shares acquired	(3,298)	-	-	-	(3,298)
Dividend paid - non-controlling interest in SGM	(174,275)	(174,275)	-	-	-
Dividend paid - controlling interest in SGM	-	(196,725)	-	-	196,725
Dividend paid - owners of the parent	(138,725)	-	-	-	(138,725)
Net increase/(decrease) in cash and cash equivalents	7,159	7,619	340	(106)	(694)
Cash and cash equivalents at the beginning of the year	278,229	5,882	16	562	271,769
Effect of foreign exchange rate changes	5,893	(3,608)	(351)	-	9,852
Cash and cash equivalents at the end of the year	291,281	9,893	5	456	280,927

(1) Please note that the cash generated by operating activities for Burkina Faso and Côte d'Ivoire are affected by the movements in working capital, specifically intercompany loans, with its direct parent entity Centamin West Africa Holdings Limited which is included within the corporate segment.

For the year ended 31 December 2019	Total US$'000	Egypt US$'000	Burkina Faso US$'000	Côte d'Ivoire US$'000	Corporate US$'000
Statement of cash flows
Net cash generated by/(used in) operating activities(1)	249,004	285,534	(282)	777	(37,025)
Net cash (used in)/generated by investing activities	(90,153)	(92,571)	(4)	(160)	2,582
Net cash (used in)/generated by financing activities
Dividend paid - non-controlling interest in SGM	(87,075)	(87,075)	-	-	-
Dividend (paid)/received - controlling interest in SGM	-	(106,425)	-	-	106,425
Dividend paid - owners of the parent	(81,029)	-	-	-	(81,029)
Net (decrease)/increase in cash and cash equivalents	(9,253)	(537)	(286)	617	(9,047)
Cash and cash equivalents at the beginning of the year	282,627	3,714	28	241	278,644
Effect of foreign exchange rate changes	4,855	2,704	274	(296)	2,173
Cash and cash equivalents at the end of the year	278,229	5,881	16	562	271,770

(1) Please note that the cash generated by operating activities for Burkina Faso and Côte d'Ivoire are affected by the movements in working capital, specifically intercompany loans, with its direct parent entity Centamin West Africa Holdings Limited which is included within the corporate segment.

 

 

 

 

 

Exploration expenditure by operating segment:

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

	For the year ended 31 December 2020 US$'000	For the year ended 31 December 2019 US$'000
Burkina Faso	2,803	2,715
Côte d'Ivoire	14,588	14,168
Egypt (Sukari tenement including Cleopatra excluding pre-production gold sales adjustment)	11,717	16,478
Total exploration expenditure	29,108	33,361

 

ACCOUNTING POLICY: SEGMENT REPORTING

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors.

2.2 Revenue

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

	For the year ended 31 December 2020 US$'000	For the year ended 31 December 2019 US$'000
Gold sales (Including pre-production gold sales related to Cleopatra)	827,622	657,124
Less: Pre-production gold sales related to Cleopatra - transferred to exploration and evaluation asset	-	(5,767)
Gold sales (Excluding pre-production gold sales related to Cleopatra)	827,622	651,357
Silver sales	1,115	987
	828,737	652,344

 

All gold and silver sales during the year were made to a single customer in North America, Asahi Refining Canada Ltd.

ACCOUNTING POLICY: REVENUE

Revenue is measured at the fair value of the consideration received or receivable for goods in the normal course of business.

Sale of goods

Under IFRS 15, revenue from the sale of mineral production is recognised when the Group has passed control of the mineral production to the buyer, it is probable that economic benefits associated with the transaction will flow to the Group, the sales price can be measured reliably, and the Group has no significant continuing involvement and the costs incurred or to be incurred in respect of the transaction can be measured reliably. This is when insurance risk has passed to the buyer and the goods have been collected at the agreed location.

The performance obligation is satisfied when the doré bars are packaged and delivered to the approved carrier with the appropriate required documentation at the gold room and the approved carrier accepts control of the shipment by signature. 98% of the payable gold and silver content of the refined gold bars will be priced and paid within one working day after receipt of the shipment at the refinery with the balance being priced and paid five working days after receipt. There are no significant judgments applied to the determination of revenue.

Where the terms of the executed sales agreement allow for an adjustment to the sales price based on a survey of the mineral production by the buyer (for instance an assay for gold content), recognition of the revenue from the sale of mineral production is based on the most recently determined estimate of product specifications.

Pre-production revenues

Income derived by the entity prior to the date of commercial production is offset against the expenditure capitalised and carried in the consolidated statement of financial position. All revenues recognised after commencement of commercial production are recognised in accordance with the revenue policy stated above. The commencement date of commercial production is determined when stable and sustained production capacity has been achieved.

Royalty

The Arab Republic of Egypt ("ARE") is entitled to a royalty of 3% of net sales revenue (revenue net of freight and refining costs) as defined from the sale of gold and associated minerals from SGM. This royalty is calculated and recognised on receipt of the final certificate of analysis document received from the refinery. Due to its nature, this royalty is not recognised in cost of sales but rather in other operating costs.

2.3 Profit before tax

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

	For the year ended 31 December 2020 US$'000	For the year ended 31 December 2019 US$'000
Other income
Net foreign exchange gains	6,922	5,806
Other income	50	50
	6,972	5,856
Finance income
Interest received	1,554	5,817
Expenses
Cost of sales
Mine production costs (Including costs related to gold produced from Cleopatra)	(339,012)	(353,232)
Mine production costs related to gold produced from Cleopatra
- transferred to exploration and evaluation asset	-	1,487
Mine production costs	(339,012)	(351,745)
Movement in inventory	13,704	28,254
Depreciation and amortisation	(124,133)	(115,794)
	(449,441)	(439,285)

 

	For the year ended 31 December 2020 US$'000	For the year ended 31 December 2019 US$'000
Other operating costs
Corporate compliance	(3,049)	(3,158)
Fees payable to the external auditors	(924)	(847)
Corporate consultants	(4,033)	(7,380)
Communications and IT	(430)	(295)
Salaries and wages	(7,262)	(5,004)
Travel, accommodation, and entertainment	(397)	(726)
Short term leases	(146)	(99)
Other administration expenses	(1,270)	(933)
Insurances	(897)	(630)
Other taxes	(7)	151
Employee equity settled share-based payments	836	(7)
Corporate costs (sub-total)	(17,579)	(18,928)
Other provisions	(10,309)	-
Net movement on provision for stock obsolescence	(958)	1,500
Inventory written off	(29)	(594)
Prepayments written off	(986)	-
Office related depreciation	(379)	(393)
Royalty - attributable to the ARE government	(24,792)	(19,701)
Bank charges	(179)	(161)
Finance charges	(558)	(569)
(Loss)/gain on disposal of asset	(623)	137
	(56,392)	(38,709)

 

ACCOUNTING POLICY: OTHER INCOME AND FOREIGN CURRENCIES

Finance income

Finance income is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Finance income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

Foreign currencies

The individual financial statements of each Group entity are presented in its functional currency being the currency of the primary economic environment in which the entity operates. For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in US dollars, which is the functional currency of all companies in the Group and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined.

Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognised in profit or loss in the period in which they arise.

2.4 Non-controlling interest in SGM

EMRA is a 50% shareholder in SGM and 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 the ARE and recoverable costs'.

Earnings attributable to the non-controlling interest in SGM (i.e. EMRA) are pursuant to the provisions of the CA and are recognised as profit attributable to the non-controlling interest in SGM in the attribution of profit section of the statement of comprehensive income of the Group. 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 2020 have not been signed off at the date of this report and are in the process of being audited.

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

(a) Statement of comprehensive income and statement of financial position impact

	For the year ended 31 December 2020 US$'000	For the year ended 31 December 2019 US$'000
Statement of comprehensive income
Profit for the year after tax attributable to the non-controlling interest in SGM(1)	158,970	85,454
Statement of financial position
Total equity attributable to non-controlling interest in SGM(1) (opening)	(1,891)	(270)
Profit for the year after tax attributable to the non-controlling interest in SGM(1)	158,970	85,454
Dividend paid - non-controlling interest in SGM	(174,275)	(87,075)
Total equity attributable to non-controlling interest in SGM(1) (closing)	(17,196)	(1,891)

(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 have been 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 amount attributable to the non-controlling interest in SGM on the statement of financial position and statement of changes in equity.

(b) Statement of cash flows impact

	For the year ended 31 December 2020 US$'000	For the year ended 31 December 2019 US$'000
Statement of cash flows
Dividend paid - non-controlling interest in SGM(1)	(174,275)	(87,075)

(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 will be split 50:50.

EMRA and PGM benefit from advance distributions of profit share which are made on a weekly or fortnightly basis and proportionately in accordance with the terms of the CA. 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.

2.5 Tax

The Group operates in several countries and, accordingly, it is subject to the various tax regimes in the countries in which it operates. From time to time the Group is subject to a review of its related tax filings and in connection with such reviews, disputes can arise with the taxing authorities over the interpretation or application of certain rules to the Group's business conducted within the country involved. If the Group is unable to resolve any of these matters favourably, there may be an adverse impact on the Group's financial performance, cash flows or results of operations. If management's estimate of the future resolution of these matters' changes, the Group will recognise the effects of the changes in its consolidated financial statements in the period that such changes occur.

In Egypt, Pharaoh Gold Mines NL ("PGM") has entered into a Concession Agreement ("CA") that provides that the income generated by SGM's activities is granted a long-term tax exemption from all taxes imposed in Egypt, other than the fixed royalty attributable to the Egyptian government, rental income on property and interest income on cash and cash equivalents.

The CA grants certain tax exemptions, including the following:

·      from 1 April 2010, being the date of commercial production, SGM is entitled to a 15-year exemption from any taxes imposed by the Egyptian government on the revenues generated from SGM. PGM and EMRA intend that SGM will in due course file an application to extend the tax-free period for a further 15 years. The extension of the tax-free period requires that there have been no tax problems or disputes in the initial period and that certain activities in new remote areas have been planned and agreed by all parties;

·      PGM and SGM are exempt from custom taxes and duties with respect to the importation of machinery, equipment and consumable items required for the purpose of exploration and mining activities at SGM. The exemption shall only apply if there is no local substitution with the same or similar quality to the imported machinery, equipment or consumables. Such exemption will also be granted if the local substitution is more than 10% more expensive than the imported machinery, equipment or consumables after the addition of the insurance and transportation costs;

·      PGM, EMRA and SGM and their respective buyers will be exempt from any duties or taxes on the export of gold and associated minerals produced from SGM;

·      PGM at all times is free to transfer in US$ or other freely convertible foreign currency any cash of PGM representing its share of net proceeds and recovery of costs, without any Egyptian government limitation, tax or duty;

·      PGM's contractors and subcontractors are entitled to import machinery, equipment and consumable items under the "Temporary Release System" which provided exemption from Egyptian customs duty; and

·      legal title of all operating assets of PGM will pass to EMRA when cost recovery is completed. The right of use of all fixed and movable assets remains with PGM and SGM.

Relevance of tax consolidation to the consolidated entity

In Australia, Centamin Egypt Limited and Pharaoh Gold Mines NL, both wholly owned Australian resident entities within the Group, have elected to form a tax-consolidated group from 1 July 2003 and therefore are treated as a single entity for Australian income tax purposes. The head entity within the tax-consolidated group is Centamin Egypt Limited. Pharaoh Gold Mines NL, which has a registered Egyptian branch, benefits from the 'branch profits exemption' whereby foreign branch income will generally not be subject to Australian income tax. Ampella Mining Limited is a single entity for Australian income tax purposes.

Nature of tax funding arrangements and tax-sharing agreements

Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax-sharing agreement with the head entity. Under the terms of the tax-funding agreement, Centamin Egypt Limited and each of the entities in the tax-consolidated group have agreed to pay a tax-equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable from or payable to other entities in the tax-consolidated group.

The tax-sharing agreement entered between members of the tax-consolidated group provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement as payment of any amounts under the tax-sharing agreement is considered remote.

Tax recognised in profit is summarised as follows:

Tax expense

	For the year ended 31 December 2020 US$'000	For the year ended 31 December 2019 US$'000
Current tax
Current tax expense in respect of the current year	(50)	(112)
Deferred tax	-	-
Total tax expense	(50)	(112)

 

The tax expense for the year can be reconciled to the profit per the consolidated statement of comprehensive income as follows:

	For the year ended 31 December 2020 US$'000	For the year ended 31 December 2019 US$'000
Profit for the year before tax	314,999	173,029
Tax expense calculated at 0%(1) (2019: 0%)(1) of profit for the year before tax	-	-
Tax effect of amounts which are not deductible/taxable in calculating taxable income:
Effect of different tax rates of subsidiaries operating in other jurisdictions	(50)	(112)
Tax	(50)	(112)

(1) The tax rate used in the above reconciliation is the corporate tax rate of 0% payable by Jersey corporate entities under the Jersey tax law (2019: 0%). There has been no change in the underlying corporate tax rates when compared with the previous financial period.

Tax recognised in the balance sheet is summarised as follows:

	31 December 2020 US$'000	31 December 2019 US$'000
Current tax liabilities	267	227
Non-current tax liabilities	-	-

 

ACCOUNTING POLICY: TAXATION

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the consolidated statement of comprehensive income because of items of income or expense that are taxable or deductible in other periods and items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

2.6 Financial assets at fair value through profit or loss

	31 December 2020 US$'000	31 December 2019 US$'000
Balance at the beginning of the year	6,454	-
Additions at cost	-	9,364
Disposals at market value	(7,414)	(6,799)
Unrealised gain on fair value of investment - profit or loss	960	4,041
Unrealised loss on foreign exchange movement	-	(152)
	-	6,454

 

The financial assets at fair value through profit or loss at 31 December 2020 relates to an equity interest in a listed public company which has been disposed of in full.

ACCOUNTING POLICY: FINANCIAL INSTRUMENTS

Financial liabilities and equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement as defined below. Financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.

Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire.

Financial assets

Classification

The Group classifies its financial assets in the following measurement categories:

·      those to be measured subsequently at fair value (either through OCI or through profit or loss), and

·      those to be measured at amortised cost.

The classification depends on the entity's business model for managing the financial assets and the contractual terms of the
cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time
of initial recognition to account for the equity investment at Fair Value through other Comprehensive Income ("FVOCI").

Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade date, being the date on which the Group commits to purchase or sell the asset.

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at Fair Value through Profit or Loss ("FVPL"), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

Subsequent to initial recognition, investments in subsidiaries are measured at cost in the Company's financial statements. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Equity instruments

The Group subsequently measures all equity investments at fair value. Where the Group's management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the Group's right to receive payments is established.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Loans and receivables

Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest rate method less impairment. Interest is recognised by applying the effective interest rate except for short term receivables when the recognition of interest would be immaterial.

Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each reporting date. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after the initial recognition of the financial asset the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

With the exception of financial assets at fair value through other comprehensive income equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

In respect of FVOCI equity instruments, any subsequent increase in fair value after an impairment loss is recognised in other comprehensive income.

2.7 Trade and other receivables

	31 December 2020 US$'000	31 December 2019 US$'000
Non-current
Other receivables - deposits	103	93
	103	93

 

	31 December 2020 US$'000	31 December 2019 US$'000
Current
Gold and silver sales debtors	12,492	34,695
Other receivables	5,932	12,366
	18,424	47,061

 

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

All gold and silver sales during the year were made to a single customer in North America, Asahi Refining Canada Ltd, and are neither past due nor impaired.

The average age of the receivables is eight days (2019: nine days) and expected credit losses are highly immaterial. No interest is charged on the receivables. There are no trade receivables past due and 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 a receivable from Asahi Refining Canada Ltd. The amount due has been received in full subsequent to year end. Other receivables represent GST and VAT owing from the various jurisdictions that the Group operates in and amounts receivable from the sale of shares in a listed public company.

The Directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value, therefore no expected credit loss is recognised within this note, see note 3.1.1 for the risk assessment related to trade receivables.

2.8 Prepayments

	31 December 2020 US$'000	31 December 2019 US$'000
Current
Prepayments	8,908	4,776
Fuel prepayments	-	1,356
	8,908	6,132

 

Diesel Fuel Oil ("DFO") dispute

As more fully described in note 5.1, the Group is currently involved in court action concerning the price at which it is supplied with DFO. Since January 2012, the Group has had to pay for DFO at the international price rather than the subsidised price which it believes it is entitled to. It is seeking recovery of the funds advanced since 2012 through court action. However, management recognises the practical difficulties associated with reclaiming funds from the Egyptian government and for this reason has fully provided against the prepayment of US$367.2 million to 31 December 2020, of which US$4.3 million relates to and was provided for during 2020. All fuel subsidies provided by the Egyptian Government were removed in 2020.

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

Movement in fuel prepayments

	31 December 2020 US$'000	31 December 2019 US$'000
Balance at the beginning of the year	1,356	1,547
Fuel prepayment recognised	4,342	35,922
Less: Provision charged to:
Mine production costs	(2,126)	(31,058)
Property, plant and equipment	(4,231)	(5,712)
Inventories	659	657
Balance at the end of the year	-	1,356

 

Cumulative fuel prepayment and provision recognised

	31 December 2020 US$'000	31 December 2019 US$'000
Fuel prepayment recognised	367,228	362,885
Less: provision charged to:
Mine production costs	(335,231)	(333,104)
Property, plant and equipment	(31,997)	(27,766)
Inventories	-	(659)

 

This has resulted in a net charge of US$11 million in the profit and loss for the year.

	For the year ended 31 December 2020			For the year ended 31 December 2019
	Before adjustment US$'000	Adjustment US$'000	Total US$'000	Before adjustment US$'000	Adjustment US$'000	Total US$'000
Expenses
Cost of sales
Mine production costs	(336,886)	(2,126)	(339,012)	(320,687)	(31,058)	(351,745)
Movement in inventory	22,397	(8,693)	13,704	25,159	3,095	28,254
Depreciation and amortisation	(124,133)	-	(124,133)	(115,794)	-	(115,794)
	(438,622)	(10,819)	(449,441)	(411,322)	(27,963)	(439,285)

 

2.9 Property, plant and equipment ("PPE")

	Office equipment US$'000	Buildings US$'000	Plant and equipment US$'000	Mining equipment US$'000	Mine development properties US$'000	Capital work in progress US$'000	Total US$'000
Year ended 31 December 2020 Cost
Balance at 1 January 2020	7,789	3,533	613,792	334,119	561,780	28,584	1,549,597
Additions	73	203	141	153	-	126,529	127,099
Additions: IFRS16 right of use assets	-	1,604	-	47	-	-	1,651
Increase in rehabilitation asset	-	-	-	-	5,574	-	5,574
Transfers from capital work in progress	930	480	3,784	25,787	78,988	(109,969)	-
Transfers from exploration and evaluation asset	-	-	-	-	16,154	-	16,154
Disposals	-	-	(110)	(1,097)	-	(590)	(1,797)
Disposals: IFRS16 right of use assets	-	(130)	(142)	-	-	-	(272)
Balance at 31 December 2020	8,792	5,690	617,465	359,009	662,496	44,554	1,698,006
Accumulated depreciation and amortisation
Balance at 1 January 2020	(6,974)	(1,097)	(213,681)	(250,519)	(272,609)	-	(744,880)
Depreciation and amortisation	(568)	(609)	(29,303)	(49,127)	(44,905)	-	(124,512)
Disposals	-	65	131	1,074	-	-	1,270
Balance at 31 December 2020	(7,542)	(1,641)	(242,853)	(298,572)	(317,514)	-	(868,122)
Year ended 31 December 2019 Cost
Balance at 1 January 2019	7,307	2,347	604,158	309,788	517,629	23,482	1,464,711
Additions	73	-	59	10,069	689	68,695	79,586
Additions: IFRS16 right of use assets	-	1,229	298	95	-	-	1,622
Increase in rehabilitation asset	-	-	-	-	570	-	570
Transfers from capital work in progress	409	25	9,292	14,189	39,678	(63,593)	-
Transfers from exploration and evaluation asset	-	-	-	-	3,214	-	3,214
Disposals	-	-	(15)	(22)	-	-	(37)
Disposals: IFRS16 right of use assets	-	(68)	-	-	-	-	(68)
Balance at 31 December 2019	7,789	3,533	613,792	334,119	561,780	28,584	1,549,597
Accumulated depreciation and amortisation
Balance at 1 January 2019	(6,384)	(695)	(185,075)	(205,103)	(231,467)	-	(628,724)
Depreciation and amortisation	(590)	(403)	(28,613)	(45,438)	(41,142)	-	(116,186)
Disposals	-	1	7	22	-	-	30
Balance at 31 December 2019	(6,974)	(1,097)	(213,681)	(250,519)	(272,609)	-	(744,880)
Net book value
As at 31 December 2020	1,250	4,049	374,612	60,437	344,982	44,554	829,884
As at 31 December 2019	815	2,436	400,111	83,600	289,171	28,584	804,717

 

Included within the depreciation charge is US$0.5 million within the buildings asset class and US$0.1 million related to plant and equipment in relation to depreciation of ROU assets (2019: US$0.4 million buildings and plant and equipment).

An impairment trigger assessment was performed in 2020 on the Sukari Cash Generating Unit ("CGU"), refer to note 1.3.2 above, however no impairment triggers were identified in the assessment.

Assets that have been cost recovered under the terms of the Concession Agreement ("CA") 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 CA.

ACCOUNTING POLICY: PROPERTY, PLANT AND EQUIPMENT ("PPE")

PPE is stated at cost less accumulated depreciation and impairment. PPE will include capitalised development expenditure. Cost includes expenditure that is directly attributable to the acquisition of the item as well as the estimated cost of abandonment. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. The cost of PPE includes the estimated restoration costs associated with the asset.

Depreciation is provided on PPE, except for capital work in progress. Depreciation is calculated on a straight-line basis so as to write off the net cost or other revalued amount of each asset over its expected useful life to its estimated residual value. Depreciation on capital work in progress commences on commissioning of the asset and transfer to the relevant PPE category.

The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual financial period, with the effect of any changes recognised on a prospective basis.

Freehold land is not depreciated.

The following estimated useful lives are used in the calculation of depreciation:

Plant and equipment          2-20 years
Office equipment                3-7 years
Mining equipment               2-13 years
Buildings                             4-20 years

The gain or loss arising on the disposal or scrappage of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in other income or operating expenses.

Mine development properties

Where mining of a Mineral Resource has commenced, the accumulated costs are transferred from exploration and evaluation assets to mine development properties, net of any pre-production revenues.

Amortisation is first charged to new mine development ventures from the date of first commercial production. Amortisation of mine properties is on a unit of production basis resulting in an amortisation charge proportional to the depletion of the proved and probable ore reserves. The unit of production can be on a tonne or an ounce depleted basis.

Capitalised underground development costs incurred to enable access to specific ore blocks or areas of the underground mine, and which only provide an economic benefit over the period of mining that ore block or area, are depreciated on a unit of production basis, whereby the denominator is estimated ounces of gold in proven and probable reserves within that ore block or area where it is considered probable that those resources will be extracted economically.

Impairment of assets (other than exploration and evaluation and financial assets)

At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). For the purposes of assessing impairment, assets are grouped at the lowest levels for which they potentially generate largely independent cash inflows (cash generating units).

Recoverable amount is the higher of fair value loss costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset for which the estimates of future flows have not been adjusted.

If the recoverable amount of a cash generating unit is estimated to be less than its carrying amount, the carrying amount of the cash generating unit is reduced to its recoverable amount. Where an impairment loss subsequently reverses, the carrying amount of the cash generating unit is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the cash generating unit in prior years.

A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of an impairment loss is treated as a revaluation increase.

2.10 Exploration and evaluation asset

	31 December 2020 US$'000	31 December 2019 US$'000
Balance at the beginning of the year	68,138	59,154
Expenditure for the year	11,717	16,478
Pre-production gold sales net of costs related to Cleopatra	-	(4,280)
Transfer to property, plant and equipment	(16,154)	(3,214)
Balance at the end of the year	63,701	68,138

 

The exploration and evaluation asset relates to the drilling, geological exploration and sampling of potential ore reserves and can be attributed to Egypt (US$28.5 million) and Burkina Faso (US$35.2 million relating to the acquisition of Ampella Mining Limited).

In accordance with the requirements of IAS 36 'Impairment of assets' and IFRS 6 'Exploration for and evaluation of Mineral Resources' exploration and evaluation assets are assessed for impairment when facts and circumstances (as defined in IFRS 6 'Exploration for and evaluation of Mineral Resources') suggest that the carrying amount of exploration and evaluation assets may exceed its recoverable amount.

An impairment trigger assessment was performed in 2020 on the Exploration and Evaluation asset ("CGU"), refer to note 1.3.2 of above, however no impairment triggers were identified in the assessment.

ACCOUNTING POLICY: EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE

Exploration and evaluation expenditures in relation to each separate area of interest are differentiated between greenfield and brownfield exploration activities in the year in which they are incurred.

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; and

(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.

Greenfield exploration 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.

Brownfield exploration and evaluation expenditures in relation to each separate area of interest are recognised as an exploration and evaluation asset in the year in which they are incurred where the following conditions are satisfied:

·      the rights to tenure of the area of interest are current; and

·      at least one of the following conditions is also met:

o  the exploration and evaluation expenditures are expected to be recouped through successful development and exploration of the area of interest, or alternatively, by its sale; or

o  exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing.

Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies, exploration drilling, trenching and sampling and associated activities. General and administrative costs are only included in the measurement of exploration and evaluation costs where they are related directly to operational activities in a particular area of interest.

Exploration and evaluation assets are assessed for impairment when facts and circumstances (as defined in IFRS 6 'Exploration for and evaluation of Mineral Resources') suggest that the carrying amount of exploration and evaluation assets may exceed its recoverable amount. The recoverable amount of the exploration and evaluation assets (or the cash generating unit(s) to which it has been allocated, being no larger than the relevant area of interest) is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years.

Where a decision is made to proceed with development in respect of a particular area of interest based on the commercial and technical feasibility, the relevant exploration and evaluation asset is tested for impairment, reclassified to mine development properties, and then amortised over the life of the reserves associated with the area of interest once mining operations have commenced.

Mine development expenditure is recognised at cost less accumulated amortisation and any impairment losses. When commercial production in an area of interest has commenced, the associated costs are amortised over the estimated economic life of the mine on a units of production basis.

Changes in factors such as estimates of proved and probable reserves that affect unit of production calculations are dealt with on a prospective basis.

Income derived by the entity prior to the date of commercial production is offset against the expenditure capitalised and carried in the consolidated statement of financial position. All revenues recognised after commencement of commercial production are recognised in accordance with the Revenue Policy stated in note 2.2. The commencement date of commercial production is determined when stable and sustained production capacity has been achieved.

2.11 Inventories

The treatment and classification of mining stockpiles within inventory is split between current and non-current assets. Stockpiles which will not be consumed within the next twelve months based on mining and processing forecasts have been reclassified to non-current assets. The reason for the classification split is the manner in which the mining stockpiles will be utilised or drawn upon in the future within the life of mine, with priority being placed on the higher-grade ore. The volume of ore extracted from the open pit in the year far exceeded the volume that could be processed, which has caused a large increase in the volume and value of the mining stockpiles.

The carrying value of the non-current asset portion is assessed at the lower of cost or net realisable value. The cost of the mining stockpiles was assessed through comparing the current costs and discounting the future processing costs at a US$ applicable rate of 1.35% over the expected life of the asset to an future expected selling price, this was assessed using two different future expected selling prices:

·      US$1,891 per ounce which was the year end spot price. This resulted in headroom of US$78 million above the cost; and

·      US$1,450 per ounce which was the three-year internal budgeted gold price used in the going concern and viability assessments. This resulted in headroom of US$10 million above the cost.

 

US$1,386 per ounce which was calculated as the breakeven selling price. The net realisable value was the higher than the cost in of all of the above scenarios and as such it is valued at cost.

	31 December 2020 US$'000	31 December 2019 US$'000
Non-current
Mining stockpiles	64,870	52,658
	64,870	52,658

 

	31 December 2020 US$'000	31 December 2019 US$'000
Current
Mining stockpiles, ore in circuit, doré supplies	40,112	38,620
Stores inventory	81,383	72,169
Provision for obsolete stores inventory	(2,790)	(1,832)
	118,705	108,957

 

Stores inventories written off in the year total US$0.03 million as per note 2.3 (2019: US$0.6 million).

ACCOUNTING POLICY: INVENTORIES

Inventories include mining stockpiles, gold in circuit, doré supplies and stores and materials. All inventories are stated at the lower of cost and 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 LOM processing plan and is currently being optimised based on the known Mineral Reserves, current plant capacity and mine design. Ore tonnes contained in the stockpiles 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 (0.4 to 0.5g/t) open pit stockpile material above the cut-off grade of 0.4g/t has been reclassified to non-current assets as these ore tonnes are not planned to be processed within the next twelve 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 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.

2.12 Trade and other payables

	31 December 2020 US$'000	31 December 2019 US$'000
Non-current
Other creditors	1,437	-
	31 December 2020 US$'000	31 December 2019 US$'000
Current
Trade payables	31,483	27,249
Other creditors and accruals	33,005	30,162
	64,488	57,411

 

Trade payables principally comprise the amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 26 days (2019: 23 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.

Other creditors and accruals relate to various accruals that have been recognised due to amounts known to be outstanding for which invoices have not yet been received.

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

Accounting policy: Trade and other payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within twelve months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

Employee benefits

A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave and sick leave when it is probable that settlement will be required, and they are capable of being measured reliably.

Liabilities recognised in respect of employee benefits expected to be settled within twelve months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of employee benefits which are not expected to be settled within twelve months are measured at the present value of the estimated future cash flows to be made by the consolidated entity in respect of services provided by employees up to reporting date.

Superannuation

The Company contributes to, but does not participate in, compulsory superannuation funds (defined contribution schemes) on behalf of the employees and directors in respect of salaries and directors' fees paid. Contributions are charged against income as they are made.

2.13 Provisions

	31 December 2020 US$'000	31 December 2019 US$'000
Current
Employee benefits(1)	1,440	701
Provision for cost recovery items(2)	5,089	7,060
Other current provisions(3)	951	828
	7,480	8,589
Non-current
Restoration and rehabilitation(4)	20,496	14,572
Provision for cost recovery items(2)	12,229	-
Other non-current provisions	27	3
	32,752	14,575
Movement in restoration and rehabilitation provision
Balance at beginning of the year	14,572	13,591
Additional provision recognised	5,574	570
Interest expense - unwinding of discount	350	411
Balance at end of the year	20,496	14,572

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

(2) Provision held for in-country settlement of cost recovery items relating to EMRA. The amount is based on the written offer proposed to EMRA in March 2021 to settle all outstanding matters which includes payment of US$17.6 million spread over a 5.5 years period. This has been discounted to present value. The prior year provision was based on a probability weighted outcome of the matters under discussion which are being finalised as part of the proposed settlement.

(3) Provision for customs, rebates and withholding taxes.

(4) The provision for restoration and rehabilitation has all been discounted by 1.35% (2019: 2.40%) using a US$ applicable rate and inflation applied at 1.23% (2019: 1.77%). The annual review undertaken as at 31 December 2020 has resulted in a US$5.6 million increase in the provision (2019: US$0.57 million).

Key management estimates are the unit costs used in calculating the nominal provision amount, for various activities, namely ripping and grading, hauling and application, regrading slopes, construction of bunds and demolition of buildings, as well as certain fixed costs, including labour and dismantling of equipment. Unit costs are considered to be the key assumption within the estimate which range between $0.33/m² to $6.62/m². A 10% change in these unit and fixed costs would have a US$1.8 million impact on the provision and corresponding asset amounts, with a minimal effect on the consolidated statement of comprehensive income. 10% is chosen as an appropriate sensitivity as this is in line with the year on year increase in nominal cost base, when excluding one-off changes in relation to increases in rehabilitation site areas.

In 2021, in line with the life of asset review, Centamin will commence a full review of the restoration and rehabilitation plan for Sukari which could result in a change in the provision recognised to date.

ACCOUNTING POLICY: RESTORATION AND REHABILITATION

A provision for restoration and rehabilitation is recognised when there is a present legal or constructive obligation as a result of exploration, development and production activities undertaken, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the provision can be measured reliably. The estimated future obligations include the costs of dismantling and removal of facilities, restoration and monitoring of the affected areas. The provision for future restoration costs is the best estimate of the present value of the expenditure required to settle the restoration obligation at the reporting date in accordance with the requirements of the Concession Agreement. Future restoration costs are reviewed annually and any changes in the estimate are reflected in the present value of the restoration provision at each reporting date.

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 decommission infrastructure, restore affected areas by ripping and grading of compacted surfaces to blend with the surroundings, closure of project components to ensure stability and safety at the Group's sites at the end of the life of mine. This restoration and rehabilitation estimate 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 to date.

Discount rates to present value the future obligations are determined by reference to market risk free rates for periods which approximate the period of the associated obligation.

The initial estimate of the restoration and rehabilitation provision relating to exploration, development and mining production activities is capitalised into the cost of the related asset and amortised on the same basis as the related asset, unless the present obligation arises from the production of the inventory in the period, in which case the amount is included in the cost of production for the period. Changes in the estimate of the provision of restoration and rehabilitation are treated in the same manner, except that the unwinding of the effect of discounting on the provision is recognised as a finance cost within other operating costs rather than being capitalised into the cost of the related asset.

2.14 Issued capital

	31 December 2020		31 December 2019
	Number	US$'000	Number	US$'000
Fully paid ordinary shares
Balance at beginning of the year	1,155,955,384	672,105	1,154,722,984	670,589
Own shares acquired during the year	-	(3,298)	-	-
Employee share option scheme - proceeds from shares issued	-	-	1,232,400	1,312
Transfer from share option reserve	-	-	-	204
Balance at end of the year	1,155,955,384	668,807	1,155,955,384	672,105

 

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

At 31 December 2020, the trustee of the deferred bonus share plan held 2,373,049 ordinary shares (2019: 473,049 ordinary shares) pursuant to the plan rules.

Fully paid ordinary shares carry one vote per share and carry the right to dividends. See note 6.3 for more details of the share options.

ACCOUNTING POLICY: ISSUED CAPITAL

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Where the Company or other members of the consolidated Group purchase the Company's equity share capital, the consideration paid is deducted from the total shareholders' equity of the Group and/or of the Company as treasury shares until they are cancelled. Where such shares are subsequently sold or reissued, any consideration received is included in shareholders' equity of the Group and/or the Company.

2.15 Share option reserve

	31 December 2020 US$'000	31 December 2019 US$'000
Share option reserve
Balance at beginning of the year	4,179	5,688
Share-based payments expense	3,190	2,646
Transfer to accumulated profits	(4,026)	(2,639)
Transfer to issued capital	-	(1,516)
Balance at the end of the year	3,343	4,179

 

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.

2.16 Cash flow information

(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.

	31 December 2020 US$'000	31 December 2019 US$'000
Cash and cash equivalents	291,281	278,229

 

ACCOUNTING POLICY: CASH AND CASH EQUIVALENTS

Cash comprises cash on hand and demand deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

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

	For the year ended 31 December 2020 US$'000	For the year ended 31 December 2019 US$'000
Profit for the year before tax	314,999	173,029
Adjusted for:
Profit on financial assets at fair value through profit or loss	(960)	(3,889)
Depreciation/amortisation of property, plant and equipment	124,512	116,187
Inventory written off	29	594
Prepayments written off	986	-
Inventory obsolescence provision	958	(1,500)
Foreign exchange gains, net	(6,921)	(5,806)
Share-based payments (credit)/expense	(836)	7
Finance income	(1,554)	(5,817)
Loss/(gain) on disposal of property, plant and equipment	623	(137)
Changes in working capital during the year:
Decrease/(increase) in trade and other receivables	28,637	(13,619)
(Increase) in inventories	(22,919)	(30,141)
(Increase)/decrease in prepayments	(2,785)	559
Increase in trade and other payables	7,076	18,167
Increase in provisions	11,470	1,414
Cash flows generated from operating activities	453,315	249,048

 

(c) Non-cash financing and investing activities

During the year there have been no non-cash financing and investing activities.

3. Group financial risk and capital management

3.1 Group financial risk management

3.1.1 Financial instruments

(a) Group risk management

The Group manages its capital to ensure that entities within the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the cash and equity balance. The Group's overall strategy remains unchanged from the previous financial period.

The Group has no debt and thus not geared at the year end or in the prior year. The capital structure consists of cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital and reserves as disclosed in notes 2.14 and 2.15. The Group operates in Australia, Jersey, Egypt, Burkina Faso and Côte d'Ivoire. None of the Group's entities are subject to externally imposed capital requirements.

The Group utilises inflows of funds toward the ongoing exploration and development of SGM in Egypt, and the exploration projects in Burkina Faso and Côte d'Ivoire.

Categories of financial assets and liabilities

	31 December 2020 US$'000	31 December 2019 US$'000
Financial assets
Cash and cash equivalents	291,281	278,229
Trade and other receivables (excluding VAT receivables)	17,593	46,320
Financial assets at fair value through profit or loss	-	6,454
	308,874	331,003
Financial liabilities
Trade and other payables	64,488	57,411

 

(b) Financial risk management and objectives

The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential risk adverse effects and ensure that net cash flows are sufficient to support the delivery of the Group's financial targets whilst protecting future financial security. The Group continually monitors and tests its forecast financial position against these objectives.

The Group's activities expose it to a variety of financial risks: market, commodity, credit, liquidity, foreign exchange, and interest rate. These risks are managed under Board approved directives through the Audit and Risk Committee. The Group's principal financial instruments comprise interest bearing cash and cash equivalents. Other financial instruments include trade receivables and trade payables, which arise directly from operations.

It is, and has been throughout the period under review, Group policy that no speculative trading in financial instruments be undertaken.

(c) Market risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Australian dollar, Great British pound and Egyptian pound. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities that are denominated in a currency that is not the entity's functional currency. The risk is measured by regularly monitoring, forecasting and performing sensitivity analyses on the Group's financial position.

Financial instruments denominated in Great British pounds, Australian dollars and Egyptian pounds are as follows:

	Great British pound		Australian dollar		Egyptian pound
	31 December 2020 US$'000	31 December 2019 US$'000	31 December 2020 US$'000	31 December 2019 US$'000	31 December 2020 US$'000	31 December 2019 US$'000
Financial assets
Cash and cash equivalents	4,997	1,999	17,566	1,339	2,057	2,141
Financial assets at fair value through profit or loss	-	-	-	6,454	-	-
	4,997	1,999	17,566	7,793	2,057	2,141
Financial liabilities
Trade and other payables	2,682	224	19,883	10,192	13,829	(858)
	2,682	224	19,883	10,192	13,829	(858)
Net exposure	2,315	1,775	(2,317)	(2,399)	(11,772)	2,999

 

The following table summarises the sensitivity of financial instruments held at the reporting date to movements in the exchange rate of the Great British pound, Egyptian pound and Australian dollar to the US dollar, with all other variables held constant. The sensitivities are based on reasonably possible changes over a financial period, using the observed range of actual historical rates.

	Impact on profit		Impact on equity
	31 December 2020 US$'000	31 December 2019 US$'000	31 December 2020 US$'000	31 December 2019 US$'000
US$/GBP increase by 10%	555	161	-	-
US$/GBP decrease by 10%	(680)	(197)	-	-
US$/AUD increase by 10%	588	(805)	-	(587)
US$/AUD decrease by 10%	(718)	984	-	717
US$/EGP increase by 10%	(655)	273	-	-
US$/EGP decrease by 10%	799	(333)	-	-

 

The Group's sensitivity to foreign currency has increased at the end of the current period mainly due to an increase in GBP and EGP foreign currency cash holdings offset by a decrease in AUD foreign currency cash holdings as well as an increase in AUD financial assets at fair value through profit or loss holdings an increase in AUD and GBP trade payables offset by a decrease in EGP trade payables. There is also a decrease in US dollar cash holdings and offset by an increase in US dollar trade payables.

The amounts shown above are the main currencies which the Group is exposed to. Centamin also has small deposits in euro (US$211,212) and West African franc (US$460,730), and net payables of US$4,110,508 in euro and US$951,748 in West African franc. A movement of 10% up or down in these currencies would have a negligible effect on the assets/liabilities.

The Group has not entered into forward foreign exchange contracts. Natural hedges are utilised wherever possible to offset foreign currency liabilities. The Company maintains a policy of not hedging its currency positions and maintains currency holdings in line with underlying requirements and commitments.

(d) Commodity price risk

The Group's future revenue forecasts are exposed to commodity price fluctuations, in particular gold and fuel prices. The Group has not entered into forward gold hedging contracts.

Gold price

The table below summarises the impact of increases/decreases of the average realised gold price on the Group's profit after tax for the year. The analysis assumes that the average realised gold price per ounce had increased/decreased by 10% with all other variables held constant.

	Decrease by 10% US$/oz	31 December 2020 US$/oz	Increase by 10% US$/oz
Average realised gold price	1,589	1,766	1,942
	Decrease by 10% US$'000	31 December 2020 US$'000	Increase by 10% US$'000
Profit after tax	233,588	314,949	394,147

 

Fuel price

Any variation in the fuel price has an impact on the mine production costs. The analysis assumes that the average fuel price had increased/decreased by a few US cents per litre with all other variables held constant.

	Decrease by 10% US$/litre	31 December 2020 US$/litre	Increase by 10% US$/litre
Fuel price	0.41	0.45	0.50
	Decrease by 10% US$'000	31 December 2020 US$'000	Increase by 10% US$'000
Mine production costs	(7,416)	(339,012)	7,416

 

(e) Interest rate risk and liquidity risk

The Group's main interest rate risk arises from cash and short-term deposits and is not considered to be a material risk due to the short-term nature of these financial instruments. Cash deposits are placed on term period of no more than 30 days at a time.

The financial instruments exposed to interest rate risk and the Group's exposure to interest rate risk as at the balance sheet date were as per the table below.

The Group's liquidity position is managed to ensure that sufficient funds are available to meet its financial commitments in a timely and cost-effective manner.

Ultimate responsibility for liquidity risk management rests with the Board, which has established an appropriate management framework for the management of the Group's funding requirements. The Group manages liquidity risk by maintaining adequate cash reserves and management monitors rolling forecasts of the Group's liquidity on the basis of expected cash flow. The tables in section (a) to (c) of this note above reflect a balanced view of cash inflows and outflows and show the implied risk based on those values. Trade payables and other financial liabilities originate from the financing of assets used in the Group's ongoing operations. These assets are considered in the Group's overall liquidity risk. Management continually reviews the Group's liquidity position including cash flow forecasts to determine the forecast liquidity position and maintain appropriate liquidity levels.

	Weighted average effective interest rate %	Less than one month US$'000	One to twelve months US$'000	Total US$'000
31 December 2020
Financial assets
Variable interest rate instruments	0.42%	111,147	150,009	261,156
Non-interest bearing	-	47,717	-	47,717
		158,864	150,009	308,873
Financial liabilities
Non-interest bearing	-	66,694	-	66,694
		66,694	-	66,694
31 December 2019
Financial assets
Variable interest rate instruments	1.32	162,360	110,790	273,149
Non-interest bearing	-	57,853	-	57,853
		220,213	110,790	331,003
Financial liabilities
Non-interest bearing	-	57,567	-	57,567
		57,567	-	57,567

 

(f) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group measures credit risk on a fair value basis. The Group's credit risk is concentrated on one entity, the refiner Asahi Refining Canada Ltd, but the Group has a good credit check on its customer and none of the trade receivables from the customer has been past due. Also, the cash balances held in all currencies are held with financial institutions with a high credit rating.

The gross carrying amount of financial assets recorded in the financial statements represents the Group's maximum exposure to credit risk without taking account of the value of collateral or other security obtained.

(g) Fair value

The carrying amount of financial assets and financial liabilities recorded in the financial statements represents their respective fair values, principally as a consequence of the short-term maturity thereof.

(h) Fair value measurements recognised in the statement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, Grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

·      Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

·      Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

·      Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

	2020
	Level 1 US$'000	Level 2 US$'000	Level 3 US$'000	Total US$'000
Financial assets at fair value through profit or loss	-	-	-	-

 

	2019
	Level 1 US$'000	Level 2 US$'000	Level 3 US$'000	Total US$'000
Financial assets at fair value through profit or loss	6,454	-	-	6,454

There were no financial assets or liabilities subsequently measured at fair value on Level 3 fair value measurement bases.

(i) Mineral reserve and resource statement impact on ore reserves

The following disclosure provides information to help users of the financial statements understand the judgments made about the future and other sources of estimation uncertainty. The key sources of estimation uncertainty described in note 1.3.4 above and the range of possible outcomes are described more fully below.

Depreciation of capitalised underground mine development costs

Depreciation of capitalised underground mine development costs at SGM is based on reserve estimates. Management and Directors believe that these estimates are both realistic and conservative, based on current information. The analysis is based on the assumption that the reserve estimate has increased/decreased by 25% with all other variables held constant.

	Decrease by 25% US$'000	31 December 2020 US$'000	Increase by 25% US$'000
Amortisation of rehabilitation asset (within mine development properties)	(1,161)	(871)	(653)
Amortisation of mine development properties (remainder)	(58,711)	(44,033)	(33,025)
Mine development properties - net book value	330,014	344,982	356,208
Property, plant and equipment - net book value	814,916	829,884	841,110

 

 

3.2 Capital management

3.2.1 Risk management

The Group's objectives when managing capital are to:

·      safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders; and

·      maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to owners of the parent, return capital to owners of the parent or issue new shares.

3.2.2 Dividends to owners of the parent

	31 December 2020 US$'000	31 December 2019 US$'000
Ordinary shares
Q1 interim dividend for the year ended 31 December 2020 of 3.0 US cents per share (2019: Final dividend for the year ended 31 December 2018 of 3.0 US cents per share)	69,240	34,672
Q2 Interim dividend for the year ended 31 December 2020 of 6.0 US cents per share (2019: Interim dividend for the year ended 31 December 2019 of 4.0 US cents per share)	69,485	46,357
Total dividends provided for or paid	138,725	81,029
Dividends to owners of the parent:
Paid in cash	138,725	81,029

 

 

 

4. Group structure

4.1 Subsidiaries and controlled entities

The parent entity of the Group is Centamin plc, incorporated in Jersey, and the details of its subsidiaries and controlled entities are as follows:

		Country of incorporation	Ownership interest
	Nature of activity		31 December 2020 %	31 December 2019 %
Centamin Egypt Limited	Holding company	Australia(2)	100	100
Pharaoh Gold Mines NL (holder of an Egyptian branch)	Holding company	Australia(2)	100	100
Sukari Gold Mining Company(10)	Mining Company	Egypt(5)	50	50
Centamin Group Services UK Limited	Services Company	UK(3)	100	-
Centamin West Africa Holdings Limited	Holding company	UK(4)	100	100
Sheba Exploration Limited (holder of an Ethiopia branch)	Holding company	UK(4)	100	100
Sheba Exploration Holdings Limited(1)	Exploration Company	UK(4)	100	100
Centamin Group Services Limited	Services Company	Jersey(9)	100	100
Centamin Holdings Limited	Holding company	Jersey(9)	100	100
MHA Limited	Holding company	Jersey(9)	100	100
Centamin Limited	Holding company	Bermuda(8)	100	100
Ampella Mining Limited	Holding company	Australia(2)	100	100
Ampella Mining Gold SARL	Exploration Company	Burkina Faso(6)	100	100
Ampella Mining SARL	Exploration Company	Burkina Faso(6)	100	100
Ampella Resources Burkina Faso	Exploration Company	Burkina Faso(6)	100	100
Konkera SA	Mining Company	Burkina Faso(6)	90	90
Ampella Mining Côte d'Ivoire	Exploration Company	Côte d'Ivoire(7)	100	100
Centamin Côte d'Ivoire	Exploration Company	Côte d'Ivoire(7)	100	100
Ampella Mining Exploration CDI	Exploration Company	Côte d'Ivoire(7)	100	100
Centamin Exploration CI	Exploration Company	Côte d'Ivoire(7)	100	100

(1) Previously Sheba Exploration (UK) plc.

(2) Address of all Australian entities: Suite 8, 7 The Esplanade, Mount Pleasant, WA 6153.

(3) Address of Centamin Group Services UK Limited, Second Floor, 9-10 Savile Row, London, W1S 3PF

(4) Address of all other UK entities: Hill House, 1 Little New Street, London, EC4A 3TR.

(5) Address of all Egypt entities: 361 El-Horreya Road, Sedi Gaber, Alexandria, Egypt.

(6) Address of all Burkina Faso entities: Ampella Resources Burkina Faso: 11 BP 1974 Ouaga 11. Ampella Mining SARL: 01 BP 1621 Ouaga 01. Ampella Mining Gold SARL: 11 BP 1974 CMS 11 Ouaga 11. Konkera SA: 11 BP 1974 Ouaga CM11.

(7) Address of all Côte d'Ivoire entities: 20 BP 945 Abidjan 20.

(8) Address of Bermuda entity: Appleby Corporate Services (Bermuda) Ltd, Canon's Court, 22 Victoria Street, Hamilton HM EX, Bermuda.

(9) Address of all Jersey entities: 2 Mulcaster Street, St Helier, Jersey JE2 3NJ.

(10) Sukari Gold Mining Company is fully consolidated within the Group under IFRS 10 'Consolidated financial statements' as if it were a subsidiary due to it being a controlled entity, reflecting the substance and economic reality of the Concession Agreement ("CA") (see note 1.3.1, note 4.1 and note 4.2).

Through its wholly owned subsidiary, PGM, the Company entered into the Concession Agreement ("CA") with EMRA and the ARE granting PGM and EMRA the right to explore, develop, mine and sell gold and associated minerals in specific concession areas located in the Eastern Desert of Egypt. The CA came into effect under Egyptian law on 13 June 1995.

In 2005 PGM, together with EMRA, were granted an exploitation lease over 160km² surrounding the Sukari Gold Mine site. The exploitation lease was signed by PGM, EMRA and the Egyptian Minister of Petroleum and gives tenure for a period of 30 years, commencing 24 May 2005 and extendable by PGM for an additional 30 years upon PGM providing reasonable commercial justification.

In 2006 SGM was incorporated under the laws of Egypt. SGM was formed to conduct exploration, development, exploitation and marketing operations in accordance with the CA. Responsibility for the day-to-day management of the project rests with the general manager, who is appointed by PGM.

The fiscal terms of the CA require that PGM solely funds SGM. PGM is however entitled to recover from sales revenue recoverable costs, as defined in the CA. EMRA is entitled to a share of SGM's net production surplus or profit share (defined as revenue less payment of the fixed royalty to ARE and recoverable costs). As at 31 December 2015, PGM had not recovered its cost and, accordingly, no EMRA entitlement had been recognised at that date. During 2016, payments to EMRA commenced as advance profit share distributions. Any payment made to EMRA pursuant to these provisions of the CA are recognised as dividend paid to the non-controlling interest in SGM.

4.2 Joint arrangements

The consolidated entity has interests in the following joint arrangements:

Name of joint operation	Percentage interest
	31 December 2020 %	31 December 2019 %
Sukari Gold Mining Company(1)	50	50
Egyptian Pharaoh Investments(2)	50	50

(1) Sukari Gold Mining Company is fully consolidated within the Group under IFRS 10 'Consolidated financial statements' as if it were a subsidiary due to it being a controlled entity, reflecting the substance and economic reality of the Concession Agreement ("CA") (see note 1.3.1, note 4.1 and note 4.2).

(2) Dormant company.

The Group has a US$1 (cash) interest in the Egyptian Pharaoh Investments joint operation. The amount is included in the consolidated financial statements of the Group. There are no capital commitments arising from the Group's interests in this joint operation.

Accounting policy: Interests in joint arrangements

The Group applies IFRS 11 'Joint arrangements'. Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor. Joint ventures are accounted for using the equity method. In relation to its interests in joint operations, the Group recognises its share of assets and liabilities; revenue from the sale of its share of the output; and its share of expenses.

SGM is wholly consolidated within the Centamin Group of companies, reflecting the substance and economic reality of the CA (see note 1.3.1, note 4.1 and note 4.2).

5. Unrecognised items

5.1 Contingent liabilities and contingent assets

Contingent liabilities

Fuel supply

As set out in note 2.8, in January 2012 the Group was notified by Chevron, its supplier of Diesel Fuel Oil, that, on the instructions of the Egyptian General Petroleum Corporation ("EGPC"), Chevron would only be able to supply Diesel Fuel Oil to the mine at Sukari at international prices rather than at local subsidised prices which had been charged prior to that date. It is understood that EGPC had been advised by 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. On 19 June 2012, legal proceedings were issued by PGM in the Administrative Court against EGPC and the Minister of Petroleum, alleging that the withdrawal of the subsidy was unlawful. 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, amounting to EGP403 million (approximately US$25.9 million at current exchange rates). EGPC filed a counterclaim against PGM for this amount.

In September 2016, the State Commissioner issued a report on the case, which was unfavourable to PGM, although this report is not binding on the court. In June 2020 the Administrative Court issued a judgment rejecting PGM's claim on procedural grounds, and at the same time it also rejected EGPC's counterclaim. The Court did not consider the merits of either PGM's case or the counterclaim. The Group's legal advisers remain of the view that the Group has a strong case and have advised that the judgment against PGM is based on an error of law. The Group has therefore submitted an appeal, as has EGPC. In September 2020 both appeals were referred to the State Commissioner for preparation of a legal report, which is expected later this year. If either appeal is successful, the case will be returned to the Administrative Court for consideration of the relevant claim or claim on its merits.

The Group believes that its grounds for challenging EGPC's decision 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 continued to advance funds to its fuel supplier based on the international price for fuel from 2012 until the withdrawal of the domestic subsidy for Diesel Fuel Oil in 2020. Should this court action be successfully concluded the Group will look to recover the excess funds advanced. However, management recognises the practical difficulties associated with reclaiming funds from the government and for this reason has fully provided against the prepayment of US$367 million. Refer to note 2.8 of these financial statements for further details on the impact of this provision on the Group's results for 31 December 2020.

No provision has been made in respect of the historical 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 NL, 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 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 immediate 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 underway.

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 Group believes this demonstrates the government's commitment to their investment at Sukari and the government's desire to stimulate further investment in the Egyptian mining industry.

In 2016 the Supreme Administrative Court stayed the Concession Agreement appeal until the Supreme Constitutional Court has ruled on the validity of Law no. 32 of 2014. Law no. 32 of 2014 restricts the right of third parties to challenge contractual agreements between the Egyptian government and an investor and has partial retrospective effect, applying to any cases then before the courts but in which no final judgment had been given. The validity of this law, which was ratified by the Egyptian parliament in 2016, is currently under review by the Supreme Constitutional Court ("SCC"). In 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 took the view that Law no. 32 was unconstitutional. The State Commissioner's report and complementary report are advisory and non-binding on the SCC. If Law 32 is upheld, it is expected that a decision to uphold the Company's appeal would be taken in a relatively short time frame. If Law 32 is held to be invalid, it is possible that the Egyptian Government could introduce further legislative changes either to amend or replace Law 32, in which case the stay on proceedings would remain in place until the position is clear. If the Government decides against legislative action, then the stay on proceedings would be lifted and PGM's appeal would proceed to be considered on its merits.

The Group continues to believe that it has a strong legal position and that in the event that the SCC rules that Law no. 32 is invalid, it remains confident that its appeal would be successful.

Consequently, at this stage, it is not possible to say when the appeal will conclude, although there is the potential for court 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.

Other contingent assets

There were no other contingent assets at year-end (31 December 2019: nil).

5.2 Dividends per share

The dividends paid in 2020 were US$138,724,519 and are reflected in the consolidated statement of changes in equity for the year (2019: US$81,029,238).

A final dividend in respect of the year ended 31 December 2020 of 3 US cents per share, totalling approximately US$34.7 million has been proposed by the Board of Directors and is subject to shareholder approval at the annual general meeting on 11 May 2021. These financial statements do not reflect the dividend payable.

As announced on 9 January 2017, the update to the Company's dividend policy sets a minimum payout level relative to cash flow while considering the financial condition of, and outlook for, the Company. When determining the amount to be paid, the Board will take into consideration the underlying profitability of the Company and significant known or expected funding commitments. Specifically, the Board will aim to approve an annual dividend of at least 30% of the Company's net cash flow after sustaining capital costs and following the payment of profit share due to the government of Egypt.

5.3 Subsequent events

As referred to in note 5.2, subsequent to the year end, the Board proposed a final dividend for 2020 of 3 US cents per share. Subject to shareholder approval at the annual general meeting on 11 May 2021, the final dividend will be paid on 15 June 2021 to shareholders on record date of 21 May 2021.

As referred to in note 1.3.4, the Group mineral reserve and resource statement for SGM has been published with an effective date of 31 December 2020. The changes from the previous statement published with an effective date of 30 June 2019 will have a prospective effect on the amortisation of the rehabilitation asset and mine development properties. Please refer to the mineral reserve and resource statement impact on ore reserves note 3.1.1(i) where these sensitivities to the change has been disclosed.

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

 

 

6. Other information

6.1 Related party transactions

(a) Equity interests in related parties

Equity interests in subsidiaries

Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 4.1.

Equity interest in associates and jointly controlled arrangements

Details of interests in joint ventures are disclosed in note 4.2.

(b) Key management personnel compensation

Key management personnel are persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including any director (executive or otherwise) of the Group.

The aggregate compensation made to key management personnel of the consolidated entity is set out below:

	For the year ended 31 December 2020 US$	For the year ended 31 December 2019 US$
Short-term employee benefits	7,627,053	5,906,929
Post-employment benefits	7,292	7,311
Share-based payments	1,564,277	1,919,602
	9,198,622	7,833,841

 

(c) Key management personnel equity holdings

The details of the movement in key management personnel equity holdings of fully paid ordinary shares in Centamin plc during the financial year ended 31 December 2020 are as follows:

31 December 2020	Balance at 1 January 2020	Granted as remuneration ("DBSP")	Granted as remuneration ("PSP")	Net other change - share plan lapse(1)	Net other change(2)	Balance at 31 December 2020
M Horgan	-	-	590,000	-	16,405	606,405(3)
R Jerrard	1,897,000	-	390,000	(420,000)	15,000	1,882,000(3)
J Rutherford	-	-	-	-	200,000	200,000
S Eyre	-	-	-	-	-	-
M Bankes	190,000	-	-	-	-	190,000
M Cloete	15,000	-	-	-	-	15,000
C Farrow	-	-	-	-	-	-
I Fawzy	-	-	-	-	-	-
H Faul	-	-	-	-	-	-
Y El-Raghy	793,662	60,000	110,000	(72,000)	(200,000)	691,662(3)
H Bills	-	-	200,000	-	-	200,000(3)
P Cannon	-	-	-	-	-	-
J Singleton	546,000	-	200,000	-	-	746,000(3)
C Murray	-	-	200,000	-	-	200,000(3)
A Carse	385,336	80,000	80,000	-	-	545,336(3)
D Le Masurier	527,000	67,500	67,500	(107,000)	(117,700)	437,300(3)
R Nel	230,000	50,000	50,000	-	-	330,000(3)

(1) "Net other change - share plan lapse" relates to awards that have lapsed due to the full performance conditions not being met on the 2017 grant.

(2) "Net other change" relates to the on-market acquisition or disposal of fully paid ordinary shares.

(3) Balance includes unvested grants under the Company's performance share plan.

Since 31 December 2020 to the date of this report there have been no transactions notified to the Company under DTR 3.1.2.R.

The details of the movement in key management personnel equity holdings of fully paid ordinary shares in Centamin plc during the financial year ended 31 December 2019 are as follows:

31 December 2019	Balance at 1 January 2019	Granted as remuneration ("DBSP")	Granted as remuneration ("PSP")	Net other change - share plan lapse(1)	Net other change(2)	Balance at 31 December 2019
R Jerrard	1,805,000	-	617,000	(525,000)	-	1,897,000(3)
S Eyre	-	-	-	-	-	-
M Bankes	190,000	-	-	-	-	190,000
M Cloete	-	-	-	-	15,000	15,000
C Farrow	-	-	-	-	-	-
I Fawzy	-	-	-	-	-	-
Y El-Raghy	763,662	-	114,000	(84,000)	-	793,662(3)
J Singleton	-	-	546,000	-	-	546,000(3)
A Carse	216,336	-	169,000	-	-	385,336(3)
D Le Masurier	576,000	-	127,000	(96,000)	(80,000)	527,000(3)
R Nel	120,000	-	110,000	-	-	230,000(3)

(1) "Net other change" relates to the on-market acquisition or disposal of fully paid ordinary shares.

(2) Includes shareholdings attributable to the El-Raghy family.

(3) Balance includes unvested grants under the Company's performance share plan.

(d) Key management personnel share option holdings

There were no options held, granted or exercised during the year by Directors or senior management in respect of ordinary shares in Centamin plc.

(e) Other transactions with key management personnel

The related party transactions for the year ended 31 December 2020 are summarised below:

·      salaries, superannuation contributions, bonuses, LTIs, consulting and directors' fees paid to Directors during the year ended 31 December 2020 amounted to US$3,915,877 (31 December 2019: US$3,507,050); and

(f) Transactions with the government of Egypt

Royalty costs attributable to the government of Egypt of US$24,792,435 (2019: US$19,700,850) were incurred in 2020. Profit share to EMRA of US$174,275,000 (2019: US$87,075,000) was incurred in 2020.

(g) Transactions with other related parties

Other related parties include the parent entity, subsidiaries, and other related parties.

During the financial year, the Company recognised tax payable in respect of the tax liabilities of its wholly owned subsidiaries.

Payments to/from the Company are made in accordance with terms of the tax funding arrangement.

During the financial year the Company provided funds to and received funding from subsidiaries.

All amounts advanced to related parties are unsecured. No expense has been recognised in the year for bad or doubtful debts in respect of amounts owed by related parties.

Transactions and balances between the Company and its subsidiaries were eliminated in the preparation of the consolidated financial statements of the Group.

 

 

6.2 Contributions to Egypt

(a) 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 EGP80 million (2019: EGP50 million). In return, SGM facilitates the purchase of refined gold bullion for the CBE from SGM's refiner, Asahi Refining Canada Ltd. 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). Thirty-four transactions have been entered into at the date of this report, twelve of which in the current year, pursuant to this agreement, and the values related thereto are as follows:

	For the year ended 31 December 2020 US$'000	For the year ended 31 December 2019 US$'000
Gold purchased	29,319	35,641
Refining costs	15	19
Freight costs	30	53
	29,364	35,713

 

	For the year ended 31 December 2020 Oz	For the year ended 31 December 2019 Oz
Gold purchased	16,262	25,721

 

At 31 December 2020 the net receivable in EGP owing from the Central Bank of Egypt is approximately the equivalent of US$42,987 (2019: US$30,893 net payable owing to CBE).

(b) University grant

During 2018, the Group together with Sami El-Raghy and the University of Alexandria Faculty of Science initiated a sponsored scholarship agreement, the Michael Kriewaldt Scholarships, to outstanding geology major students to enrol at the postgraduate research programme of the geology department of the University for their MSc and/or PhD in mining and mineral resources. EGP10,000,000, EGP7,330,000 by PGM and EGP2,670,000 by Sami El-Raghy, was deposited in a fixed deposit account of which the interest earned will be put towards the cost of the scholarships and will be administered by the University on the conditions set out in the agreement. This amount has been accounted for under donations expense in profit and loss in 2019 and in 2020 the interest earned has also been accounted for under donations expense.

6.3 Share-based payments

Performance share plan

The Company's shareholder approved Performance Share Plan ("PSP") allows the Company the right to grant awards (as defined below) to employees of the Group. Awards may take the form of either conditional share awards, where shares are transferred conditionally upon the satisfaction of performance conditions; or share options, which may take the form of nil cost options or have a nominal exercise price, the exercise of which is again subject to satisfaction of applicable performance conditions.

The awards due to be granted in June 2021 will vest following the passing of three years. Vesting will be subject to the satisfaction of the performance conditions (and for Executive Directors a full two-year post-vesting holding period). Awards will vest based upon a blend of three-year relative TSR, cash flow and production targets, full details of which are set out in the Directors' Remuneration Report. These measures are assessed by reference to current market practice and the Remuneration Committee will have regard to current market practice when establishing the precise performance conditions for awards.

To date, the Company has granted the following conditional awards to employees of the Group:

June 2018 awards

Of the 4,908,000 awards granted on 27 June 2018 under the PSP, 585,400 awards remain granted to eligible participants (31 in total) applying the following performance criteria:

·      40% of the award shall be assessed by reference to a target total shareholder return;

·      20% of the award shall be assessed by reference to compound growth in Adjusted EBITDA; and

·      40% of the award shall be assessed by reference to compound growth in gold production.

June 2019 awards

Of the 4,845,000 awards granted on 14 June 2019 under the PSP, 2,711,000 awards remain granted to eligible participants (14 in total) applying the following performance criteria:

·      50% of the award shall be assessed by reference to a target total shareholder return;

·      25% of the award shall be assessed by reference to compound growth in adjusted free cash flow; and

·      25% of the award shall be assessed by reference to compound growth in gold production.

Conditional share awards and options together constitute "awards" under the plan and those in receipt of awards are "award holders".

June 2020 awards

Of the 2,582,500 awards granted on 5 June 2020 under the PSP, 2,382,500 awards remain granted to eligible participants (13 in total) applying the following performance criteria:

·      50% of the award shall be assessed by reference to a target total shareholder return;

·      25% of the award shall be assessed by reference to compound growth in adjusted free cash flow; and

·      25% of the award shall be assessed by reference to compound growth in gold production.

Conditional share awards and options together constitute "awards" under the plan and those in receipt of awards are "award holders".

A detailed summary of the scheme rules is set out in the 2020 AGM proxy materials which are available at www.centamin.com. In brief, awards will vest following the passing of three years from the date of the award and vesting will be subject to satisfaction of performance conditions. The above measures are assessed by reference to current market practice and the Remuneration Committee will have regard to market practice when establishing the precise performance conditions for future awards.

Where the performance conditions have been met, in the case of conditional awards awarded to certain participants, 50% of the total shares under the award will be issued or transferred to the award holders on or as soon as possible following the specified vesting date, with the remaining 50% being issued or transferred on the second anniversary of the vesting date.

Performance share plan awards granted during the year:

Grant date	PSP 2020 5 June 2020
Number of instruments	1,090,000
TSR: fair value at grant date GBP(1)(2)	0.87
TSR: fair value at grant date US$(1)(2)	1.07
Adjusted free cash flow and gold production: fair value at grant date GBP(1)(2)	1.28
Adjusted free cash flow and gold production: fair value at grant date US$(1)(2)	1.58
Vesting period (years)	3
Holding period applicable to 50% of the award (years)(2)	2
Expected volatility (%)	49%
Expected dividend yield (%)	0%
Number of instruments	1,492,500
TSR: fair value at grant date GBP(1)	0.99
TSR: fair value at grant date US$(1)	1.22
Adjusted free cash flow and gold production: fair value at grant date GBP(1)	1.47
Adjusted free cash flow and gold production: fair value at grant date US$(1)	1.81
Vesting period (years)	3
Holding period applicable to 50% of the award (years)	0
Expected volatility (%)	49%
Expected dividend yield (%)	0%

(1) The vesting of 50% of the awards granted under this plan are dependent on a TSR performance condition. As relative TSR is defined as a market condition under IFRS 2 'Share-based payments', this requires that the valuation model used takes into account the anticipated performance outcome. We have therefore applied a Monte-Carlo simulation model. The simulation model takes into account the probability of performance based on the expected volatility of Centamin and the peer group companies and the expected correlation of returns between the companies in the comparator group. The remaining 50% of the awards are subject to adjusted free cash flow and gold production performance conditions. As these are classified as non-market conditions under IFRS 2 they do not need to be taken into account when determining the fair value. These grants have been valued using a Black‑Scholes model. The fair value calculated was then converted at the closing GBP:US$ foreign exchange rate on that day.

(2) A discount for lack of marketability has been applied to account for the decrease in value of the award by reason of the two-year holding period restriction.

Deferred bonus share plan ("DBSP")

In 2012, the Company implemented the DBSP, which is a long-term share incentive arrangement for senior management (but not Executive Directors) and other employees (participants).

On 4 June 2013, the Group offered to both the beneficiaries of the shares awarded under the Employee Loan Funded Share Plan ("ELFSP") and to the majority of the beneficiaries of the options granted under the Employee Option Scheme ("EOS") the choice to replace their awards and options with awards under the DBSP. The Group has accounted for this change as modifications to the share-based payment plans and will be recognising the incremental fair value granted, measured in accordance with IFRS 2, by this replacement over the vesting period of the new DBSP awards.

Under this offer, each participant has been granted a number of awards under the DBSP equivalent to the number of shares or options held under the ELFSP and EOS respectively. Such DBSP awards shall be subject to the terms and conditions of the DBSP and shall ordinarily vest in three equal tranches on the anniversary of the grant date, conditional upon the continued employment with the Group. All offers made to participants were accepted. The award of the deferred shares will not have any performance criteria attached. They will, however, be subject to a service period.

DBSP awards granted during the year:

Grant date	DBSP 2020 5 June 2020
Number of instruments	3,679,500
Share price/fair value at grant date Tranche 1 £(1)	1.39
Share price/fair value at grant date Tranche 1 US$(1)	1.72
Share price/fair value at grant date Tranche 2 £(1)	1.27
Share price/fair value at grant date Tranche 2 US$(1)	1.57
Share price/fair value at grant date Tranche 3 £(1)	1.17
Share price/fair value at grant date Tranche 3 US$(1)	1.44
Vesting period Tranche 1 (years) (2)	1
Vesting period Tranche 2 (years) (2)	2
Vesting period Tranche 3 (years) (2)	3
Expected dividend yield Tranche 1 (%)	5.90%
Expected dividend yield Tranche 2 (%)	4.88%
Expected dividend yield Tranche 3 (%)	7.60%

 (1) The fair value of the shares awarded under the DBSP were calculated by using the closing share price on grant date, converted at the closing GBP:US$ foreign exchange rate on that day. No other factors were taken into account in determining the fair value of the shares awarded under the DBSP.

(2) Variable vesting dependent on one to three years of continuous employment.

ACCOUNTING POLICY: SHARE-BASED PAYMENTS

Equity settled share-based payments with employees and others providing similar services are measured at the fair value of the equity instrument at grant date. Fair value is measured by the use of the Black-Scholes model. Where share-based payments are subject to market conditions, fair value was measured by the use of a Monte-Carlo simulation. A discount for lack of marketability has been applied to account for the decrease in value of the award by reason of the two-year holding period restriction. The fair value determined at the grant date of the equity settled share-based payments is expensed over the vesting period, based on the consolidated entity's estimate of shares that will eventually vest.

Share-based payments

Equity settled share-based transactions with other parties are measured at the fair value of the goods or services received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted:

·      including any market performance conditions (for example, an entity's share price);

·      excluding the impact of any service and non-market performance vesting conditions (for example, profitability and remaining an employee of the entity over a specified time period); and

·      including the impact of any non-vesting conditions (for example, the requirement for employees to save or holding shares for a specific period of time).

When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. Further details on how the fair value of equity settled share-based transactions has been determined can be found above. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss over the remaining vesting period, with corresponding adjustment to the equity settled employee benefits reserve.

6.4 Earnings per share ("EPS") attributable to owners of the parent

	For the year ended 31 December 2020 US cents per share	For the year ended 31 December 2019 US cents per share
Basic earnings per share	13.531	7.588
Diluted earnings per share	13.453	7.535

 

Basic earnings per share attributable to owners of the parent

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

	For the year ended 31 December 2020 US$'000	For the year ended 31 December 20189 US$'000
Earnings used in the calculation of basic EPS	155,979	87,463

 

	For the year ended 31 December 2020 Number	For the year ended 31 December 2019 Number
Weighted average number of ordinary shares for the purpose of basic EPS	1,152,715,180	1,152,715,180

 

Diluted earnings per share attributed to owners of the parent

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

	For the year ended 31 December 2020 US$'000	For the year ended 31 December 2019 US$'000
Earnings used in the calculation of diluted EPS	155,979	87,463

 

	For the year ended 31 December 2020 Number	For the year ended 31 December 2019 Number
Weighted average number of ordinary shares for the purpose of basic EPS	1,152,715,180	1,152,715,180
Shares deemed to be issued for no consideration in respect of employee options	6,703,214	8,011,425
Weighted average number of ordinary shares used in the calculation of diluted EPS	1,159,418,394	1,160,726,605

 

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

 

 

6.5 Auditors' remuneration

The analysis of the auditors' remuneration is as follows:

	For the year ended 31 December 2020 US$'000	For the year ended 31 December 2019 US$'000
Fees payable to the Company's auditors and their associates for the audit of the Company's annual financial statements
- Audit fee for the current year audit(1)	564	436
- Non-recurring audit fee in relation to scope changes(2)	151	86
Fees payable to the Company's auditors and their associates for other services to the Group
- Audit fee of the Company's subsidiaries	65	58
Total audit fees	789	604
Non-audit fees:
- Audit related assurance services - interim review	134	112
- Risk management and advisory services	-	154
Total non-audit fees	134	266

^{(1)        2020 fee includes amounts in relation to the base audit fee US$437k (2019: US$420k), new applicable regulatory and auditing standards US$40k , changes in scope and timetable of the audit US$48k, corporate reporting review US$18k (2019: US$16k) and going concern assessments US$21k (2019: US$27k).}

^{(2)        Non-recurring audit fees relate to the prior year audit addressing going concern assessments US$27k, impairment assessments US$51k and changes in scope and timetable of the audit as a result of Covid-19 US$73k.}

All audit fees are billed in GBP and were translated at a foreign exchange rate of US$1.37:GB£1 (2019: US$1.32:GB£1). Not included within the above amounts are auditors' expenses (recharged to the company) of US$9k (2019: US$24k).

The Audit and Risk Committee and the external auditors have safeguards in place to avoid the possibility that the auditors' objectivity and independence could be compromised. These safeguards include the implementation of a policy on the use of the external auditors for non-audit related services.

Where it is deemed that the work to be undertaken is of a nature that is generally considered reasonable to be completed by the auditors of the Company for sound commercial and practical reasons, the conduct of such work will be permissible provided that it has been pre-approved. All these services are also subject to a predefined fee limit. Any work performed in excess of this limit must be approved by the Audit and Risk Committee.

6.6 General information

Centamin plc (the "Company") is a listed public company, incorporated and domiciled in Jersey and operating through subsidiaries and jointly controlled entities operating in Egypt, Burkina Faso, Côte d'Ivoire, United Kingdom and Australia. It is the Parent Company of the Group, comprising the Company and its subsidiaries and joint arrangements.

Registered office and principal place of business:

Centamin plc
2 Mulcaster Street
St Helier, Jersey JE2 3NJ

The nature of the Group's operations and its principal activities are set out in the Governance Report and the Strategic Report of the Annual Report.

 

 

 

 

 

 

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