Centamin plc
Annual report 2015
GROWTH THROUGH
CASH FLOW
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INVESTMENT SUMMARY
INSIDE THIS REPORT
Centamin plc (“Centamin” or
the “Company”) is a mineral
exploration, development and
mining company dual listed on
the London and Toronto Stock
Exchanges.
Centamin’s principal asset, the Sukari Gold Mine,
began production in 2009 and is the first
large‑scale modern gold mine in Egypt, with
an estimated 20 year mine life and production
which is rapidly increasing to an annualised
rate of 450,000‑500,000 ounces.
The major capital investment phase at Sukari is
now complete allowing the generation of free
cash flow and the opportunity for future growth
and shareholder returns.
PERFORMANCE
Centamin
FTSE Gold Mines Index
120
100
80
60
40
20
0
2011
2012
2013
2014
2015
This graph compares the Company’s cumulative total shareholder return on its ordinary shares with the
cumulative total return of the FTSE Gold Mines Index over the past five years assuming $100 was invested on
31 December 2010.
Visit us online
centamin.com
01
Centamin plc Annual report 2015
STRATEGIC REPORT
Strategic focus
1 Cash generation
2 Shareholder returns
3 Growth
4 Social responsibility
Risk management
24
26
28
30
32
Corporate social responsibility 38
Operational review
Financial review
48
56
02
03
04
10
14
18
64
70
72
74
76
80
98
NERATIO
E 24
G
PA
E
H G
S
A
C
1
R
e
s
p
o
n
s
i
b
l
e
o
p
e
r
a
t
i
o
n
s
S H A R E HOLDER RETURNS
PAGE 26
2
N
holders
re
a
h
S
R
e
f
i
n
e
r
s
E m ployees
GROWTH
POTENTIAL
WITH
LOW COSTS
G
o
v
e
r
n
m
e
n
t
s
s
e
niti
mu
C o m
Suppli e r s
4
SOCIAL RESPO N S I B I
Y
T
L I
PAGE 30
Environmental pro t e c t i o n
3
G
R
P
A
O
G
E
W
T
2
8
H
s
n
munity relatio
C o m
Financial highlights
Operational highlights
Centamin at a glance
Chairman’s statement
Chief executive
officer’s report
Business model
Introduction
Board of directors
Senior management
Corporate governance
Nomination report
Remuneration report
Audit and risk
committee report
Directors’ responsibilities
104
Independent
auditor’s report
105
Consolidated statement of
comprehensive income
110
Consolidated statement
of financial position
111
Consolidated statement
of changes in equity
Consolidated statement
of cash flows
Notes to the consolidated
financial statements
112
113
114
STRATEGIC REPORT
A detailed look at the
Company’s strategic
objectives for 2015,
its progress on strategy
and operational and
performance highlights
in 2015.
DIRECTORS’ REPORT
A detailed report
which provides
information on board
and management
composition,
governance and
remuneration structure
as well as the Company’s
control environment.
FINANCIAL STATEMENTS
The financial statements
and comprehensive
notes covering
the year ended
31 December 2015.
SHAREHOLDER INFORMATION
Summary information
for the shareholders
and stakeholders of
the Company.
Company legal form
and structure
Glossary
Advisers
147
149
152
02
Centamin plc Annual report 2015
STRATEGIC REPORT
FINANCIAL HIGHLIGHTS
Our financial highlights demonstrate how we have delivered on
our strategic priorities: to generate substantial free cash flow from
operations and to provide returns to shareholders which stand out
against our peer group.
03
Centamin plc Annual report 2015
STRATEGIC REPORT
OPERATIONAL HIGHLIGHTS
Our operational highlights illustrate how we have delivered on
our strategic priority to use cash reserves to fund our next stage
of growth.
REVENUE
(US$’000)
508,396
472,581
CASH OPERATING COST
(US$ per ounce)(1,2)
ALL-IN SUSTAINING COST
(US$ per ounce)(1,2)
729
713
906
885
2015 QUARTERLY PRODUCTION
(ounces)
2015 QUARTERLY ORE PROCESSED
(’000t)
2015 QUARTERLY ALL-IN SUSTAINING
COST AND QUARTERLY CASH
OPERATING COST
108,233
107,781
105,413
117,644
2,478
2,667
2,673
2,758
(US$ per ounce)(1,2)
879
871
943
842
717
706
767
667
2014
2015
2014
2015
2014
2015
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2015 TOTAL
508,396
2014: 472,581
2015 TOTAL
713
2014: 729
2015 TOTAL
885
2014: 906
2015 TOTAL
439,072
2014: 377,261
2015 TOTAL
10,576
2014: 8,428
2015 TOTAL
885
713
Quarterly all‑in
sustaining cost
Quarterly cash
operating cost
PROFIT BEFORE TAX
(US$’000)(1)
81,562
58,407
2014
2015
2015 TOTAL
58,407
2014: 81,562
EARNINGS PER SHARE
(pence)(1)
7.21
4.51
2014
2015
2015 TOTAL
4.51
2014: 7.21
CASH BALANCES
Cash and cash
equivalents at the
year end (US$’000)
Cash and liquid
assets at the
year end (US$’000)(3)
230,743
199,616
162,810
125,659
2014
2015
2014
2015
2015 TOTAL
199,616
2014: 125,659
(1) Excludes fuel subsidy (i.e. based on the full international fuel price), please refer to note 6 to the financial statements for further details.
(2) Cash operating costs and all‑in sustaining costs are non‑GAAP financial performance measures with no standard meaning under International Financial
Reporting Standards (“IFRS”) as adopted by the European Union and Article 4 of the IAS Regulation IFRS.
(3) Includes cash and cash equivalents, bullion on hand, gold sales receivables and available‑for‑sale financial assets.
SUKARI RESOURCES AND RESERVES(3)
(million ounces)
Proven and probable(4)
Measured and indicated(4,5)
8.8
2013: 8.2
12.9
2013: 13.4
Inferred
1.1
2013: 1.4
LOST TIME INJURY FREQUENCY RATE (“LTIFR”) 2015: 0.12 (2014: 0.39)
(per 200,000 working hours)
1.25
0.69
0.36
0.39
0.12
2011
2012
2013
2014
2015
(1) Excludes fuel subsidy (i.e. based on the full
international fuel price), please refer to note 6
of the financial statements for further details.
(2) Cash operating costs and all‑in sustaining
costs are non‑GAAP financial performance
measures with no standard meaning under
International Financial Reporting Standards
(“IFRS”) as adopted by the European Union
and Article 4 of the IAS Regulation IFRS.
(3) Resource and reserve statement announced
on 10 September 2015 and summarised on
pages 50 and 51 of the operational review.
(4) Includes production since 30 June 2015.
(5) Mineral resources are reported inclusive of
those resources converted to proven and
probable mineral reserves.
04
Centamin plc Annual report 2015
STRATEGIC REPORT
CENTAMIN AT A GLANCE
Production
05
Centamin plc Annual report 2015
STRATEGIC REPORT
Centamin’s principal asset, the Sukari Gold Mine, began production
in 2009 and is the first large scale modern gold mine in Egypt, with
production ramping up towards c.500,000 ounces per annum by 2017.
Production guidance for 2016 is 470,000 ounces of gold at a cash
operating cost of US$680 per ounce and an all‑in sustaining cost
of US$900 per ounce of gold.
SUKARI GOLD MINE
SUKARI PROCESS
OPEN PIT
ORE
UNDERGROUND
ORE
PRIMARY CRUSHING
MILL FEED
STOCKPILE 1
PLANT 1
BALL MILL 1
SAG MILL 1
BALL MILL 2
FLOTATION CIRCUIT 1
PLANT 2
Conc.
Tails
Conc.
Tails
MILL FEED
STOCKPILE 2
SAG MILL 2
FLOTATION CIRCUIT 2
BALL MILL 3
ROM
ROM
GYRATORY
CRUSHER
10M tpa
GYRATORY
CRUSHER
5M tpa
SECONDARY CONE
CRUSHERS
Process plant
The Sukari plant processed 10.6Mt of ore in 2015, a 26%
increase on 2014 (8.4Mt), reflecting the steady ramp up
in ore throughput following completion of the Stage 4
expansion during 2014. The total annual processed tonnes
were 6% above nameplate capacity of 10 million tonnes
per annum (Mtpa). Productivity continued to increase
throughout the year, with 2.76Mt processed during the
fourth quarter, achieving the plant’s minimum expected
long‑term rate of 11Mtpa.
THE LOCATION OF THE SUKARI GOLD MINE
ORE PROCESSED AND FEED GRADE
Million tonnes
Grade (g/t)
OPEN PIT MINING
Million tonnes (Mt)
Alexandria
Cairo
Egypt
Sukari
12
10
8
6
4
2
0
Ore
processed
Feed grade
2.5
2.0
1.5
1.0
0.5
0.0
2010
2011
2012
2013
2014
2015
70
60
50
40
30
20
10
0
Grade (g/t)
2.0
OP ore
mined
OP waste
mined
OP head
grade
OP reserve
grade
1.5
1.0
0.5
0.0
2010
2011
2012
2013
2014
2015
Carbon columns
DUMP LEACH
Solution
Solution
Tails
Solution
Tails
ELUTION & ELECTROWINNING
“OXIDE” CIL CIRCUIT
CONCENTRATE CIRCUIT
FINE-GRINDING
(VERTIMILL & SMDS)
TAILINGS STORAGE FACILITY
Open pit
Underground
The open pit delivered total material movement of
57,766kt for the year, an increase of 28% on the prior
year. This increase was related to improved fleet utilisation
and productivity, together with incremental blasting rates
following the increased daily usage of ammonium nitrate
(“AN”) from October 2014.
Ore production from the underground mine was a record
1,158kt, a 20% increase on 2014. The average head grade
was 6.5g/t.
A total of 8,501m of development was completed, of which
6,864m was mineralised (5,389m in Amun, and 1,466m in
Ptah) and associated with stoping blocks to be mined over
the coming years.
UNDERGROUND MINING
Thousand tonnes
Grade (g/t)
1,200
1,000
800
600
400
200
0
2010
2011
2012
2013
2014
2015
Development
ore
Stoping
ore
Mined
grade
12.0
10.0
8.0
6.0
4.0
2.0
0.0
06
Centamin plc Annual report 2015
STRATEGIC REPORT
CENTAMIN AT A GLANCE continued
07
Centamin plc Annual report 2015
STRATEGIC REPORT
Sukari – production upside potential
Sukari – continued reserve expansion
With continued optimisation of the following areas at Sukari
there is potential for further production growth beyond our base
case forecasts.
The underground operation is an important value driver for our
business and we expect further substantial growth of the reserve
over the coming years as development and exploration continues.
PRODUCTION UPSIDE THROUGH OPTIMISATION
DEVELOPMENT DRIVE IN THE UNDERGROUND MINE AT SUKARI
Processing
Plant throughput: base case throughput of 11Mtpa with
potential upside through ongoing process optimisation.
Plant recovery: base case of 88% metallurgical recovery
versus the potential to sustain 90%.
Open pit
Fleet capacity: base case of 66Mtpa is below mining fleet
capacity and therefore offers scope for improved scheduling
of open pit ore with higher mining rates.
Underground
Infrastructure capacity: base case of 1.0Mtpa ore with
potential to further increase mining rates to c.1.5Mtpa
of ore as underground mine development progresses.
PRODUCTION AND COSTS
Ounces produced
Cash cost of production
Forecast production
AISC
600
1,000
)
1
(
z
o
/
$
S
U
900
800
700
600
500
400
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
)
z
o
0
0
0
’
(
)
1
(
n
o
i
t
c
u
d
o
r
P
500
400
300
200
100
0
(1) The potential quantity and grade of the forecast underground production
is conceptual in nature. There has been insufficient exploration to fully
define a mineral resource and it is uncertain if further exploration will
result in the target being delineated as a mineral resource.
• Total reserve increased by 7% to 8.8Moz.
• Lower costs associated with reduced fuel prices.
• Underground component of reserve increased with
resource expansion from underground drilling.
Tonnes
(‘000t)
Grade
(g/t Au)
Gold
(Moz)
Sukari mineral reserve
Proven and probable
– open pit
– underground
250,000
2,720
Total mineral reserve
252,720
Previous reserve
230,000
Sukari total mineral resource
Measured and indicated
386,000
Inferred
33,000
1.03
6.00
1.09
1.11
1.03
1.00
8.3
0.5
8.8
8.2
12.9
1.1
1.
Reserves and resources calculated as at 30 June 2015 in accordance with
NI43‑101, using a gold price of US$1,300 per ounce. Previous reserves
were as announced in December 2013.
KEY FACTORS ON RESERVE ESTIMATE CHANGES
In situ gold (Moz)
10
9
8
7
6
5
0.5
0.2
7.5
0.1
1.0
0.9
0.5
0.5
0.3
8.0
Open pit
reserve
Stockpile
UG reserve
4
Resource additions
Diesel price reduction
Mining depletion
2013 reserve
and other(1)
($0.84 to $0.70/litre)
2015 reserve
Change in stockpile
(1) Includes resource growth, changes to reserve parameters (e.g. gold
price, cost inputs ex‑fuel, pit design) and adjustments for underground
mined stopes/development.
08
Centamin plc Annual report 2015
STRATEGIC REPORT
CENTAMIN AT A GLANCE continued
Exploration focused growth
There are a number of regional prospects within the Sukari
exploitation lease which offer potential for satellite deposits
to feed the existing processing plant.
09
Centamin plc Annual report 2015
STRATEGIC REPORT
Reconnaissance field work, including multiple geophysical and
geochemical surveys, was successful in identifying numerous
prospect areas.
SUKARI HILL
BURKINA FASO
CÔTE D’IVOIRE
LOCATION
Côte d’Ivoire
Burkina Faso
Ethiopia
Following a review of results received to date, the decision
was taken to cease exploration activities in Ethiopia.
Sukari Hill exploration
Burkina Faso
Drilling from underground remains a focus of the Sukari
exploration programme as ongoing development improves
access to test the potential high‑grade extensions of the
deposit. The Sukari Hill ore body has not yet been closed
off at depth and further underground drilling will take
place during 2016, predominantly from the Amun and
Ptah declines.
The strategy for 2015 was to continue to systematically
explore and drill‑test the numerous targets along the
160km strike length of greenstone belt contained within
our extensive 2,200km2 licence holding. This will lead to
further drilling and resource development during 2016. The
main focus of the exploration programme is to discover and
define areas of near‑surface and high‑grade mineralisation.
In addition, there are a number of regional prospects
within the Sukari exploitation lease which offer potential
for satellite deposits to feed the existing processing plant.
Exploration of these prospects continues.
A signed ministerial decree approving the Tiopolo mining
licence, which hosts the existing indicated resource of
1.92 million ounces and inferred resource of 1.33 million
ounces, was issued on 5 March 2015. A deferral was
granted by the Ministry of Mines and Energy in November
2015 in order to continue exploration, as provisioned in the
Burkina Faso Mining Code.
Circa 2,200km2 licence area in Burkina Faso
METRES DRILLED BY CENTAMIN
(POST-ACQUISITION) IN BURKINA FASO
Diamond
Reverse circulation
Air core
Auger
11,660
169,078
86,513
87,592
Côte d’Ivoire
Centamin has four permits covering 1,517km2, with a
further six permits under application and expected to
be granted during 2016. Reconnaissance field work,
including multiple geophysical and geochemical surveys,
was successful in identifying numerous prospect areas.
First pass drilling of priority targets commenced during the
fourth quarter. During 2016, the exploration programme
will aim to further develop these target areas and identify
additional prospects.
Circa 1,520km2 licence area in Côte d’Ivoire and
circa 1,800km2 under application
METRES DRILLED BY CENTAMIN
(POST-ACQUISITION) IN CÔTE D’IVOIRE
Reverse circulation
Air core
Auger
4,588
40,446
72,891
10
Centamin plc Annual report 2015
STRATEGIC REPORT
CHAIRMAN’S STATEMENT
Our growth strategy seeks to create
shareholder value by taking projects
through the mining value chain:
exploration, development and
operations.
Josef El-Raghy Chairman
During 2015 Centamin has maintained
its strategic focus on generating
shareholder returns and value‑accretive
growth, despite the continued gold
price weakness and widespread
challenges across the industry.
Our flagship Sukari Gold Mine has
continued to deliver substantial free
cash flows, driven by a sixth successive
year of production growth and industry
competitive costs.
The strong performance of our core
asset, together with the Company’s
robust financial position, allowed
the board of directors to approve an
interim 2015 payment of 0.97 US cents
per share (versus a 2014 interim
payment of 0.87 US cents per share).
I am now pleased to announce
the approval of a final dividend for
2015 of 1.97 US cents per share.
This represents a full year payout of
approximately US$33.7 million, which
sits at the top end of our dividend
policy to pay out 15‑30% of our net
free cash flow.
As noted at the beginning of the
year, the open pit operation at Sukari
progressed through the next stage
of pit development in line with the
long‑term mine plan, resulting in
below reserve‑average grades during
much of 2015. The underground
and processing operations offset
these lower grades from the open
pit in the first half of the year, with
above‑forecast levels of productivity
driving gold production in excess of
our initial guidance. Sukari continued
to perform well during the second
half, and full‑year production of
439,072 ounces was within the
revised guidance range of 430,000 to
440,000 ounces (originally 420,000
ounces). There was a strong end to
the year as the fourth quarter saw
plant throughput reach our minimum
expected long‑term rate of 11 million
tonnes per annum, being 10% above
nameplate capacity.
Full‑year cash operating costs
improved to US$713 per ounce from
US$729 per ounce in 2014, mainly
driven by the decrease in fuel price,
although marginally above guidance of
US$700 per ounce despite the higher
production than originally forecast.
It is pleasing to note the fourth quarter
cash operating cost of US$667 per
ounce, which points towards the
potential for Sukari to deliver
highly‑competitive cash margins,
as productivity and cost efficiencies
are the focus over the coming years.
All‑in sustaining costs (“AISC”) of
US$885 per ounce were below our
original forecast of US$950 per ounce,
mainly due to the rescheduling of
certain sustaining capital cost items,
as highlighted in the third quarter
results statement, as well as the
higher production.
11
Centamin plc Annual report 2015
STRATEGIC REPORT
Blast hole drill rigs in
place in the open pit
In May 2015, Centamin detailed
its five‑year production and cost
guidance following completion of
construction and commissioning of
the Stage 4 plant expansion in the
prior year. A seventh year of growth is
forecast for 2016, with production of
470,000 ounces at a cash operating
cost of US$680 per ounce and AISC
of US$900 per ounce. Further growth
is expected in 2017 with an annual
production rate of approximately
500,000 ounces per annum, with
AISC continuing to trend downwards
below US$900 per ounce. Continued
optimisation and increases in
productivity over the medium term,
in particular within the processing and
underground mining operations, offer
good potential for further production
growth and reductions in cash costs
and AISC.
2015 revenues of US$508 million were
up 8% year‑on‑year as an 8% fall in
realised gold prices were offset by a
17% increase in gold sales. EBITDA
decreased by 9% to US$152 million,
mainly due to a reduction of gross
operating margin as a result of
the drop in gold price, and also
an increased cost associated with
changes in production inventories.
Centamin made continued progress
during 2015 in developing its
longer‑term growth objectives.
At Sukari, the total combined
open pit and underground mineral
reserve estimate increased, net
of mining depletion, by 7% to
8.8Moz, continuing to support our
expectation for a mine life in excess
of 20 years. Whilst the increase was
partly due to lower operating costs
associated with reduced fuel prices,
it is pleasing to note that drilling from
underground continues to improve
the resource categories of our gold
asset base and thereby increases
the underground component of the
reserve. The underground operation
is an important value‑driver for our
business and we expect further
substantial growth of the reserve over
the coming years as development and
exploration continues.
Profit before tax of US$58.4 million
was down 28% on 2014 and earnings
per share for 2015 was 4.51 US cents,
compared with 7.21 US cents in 2014.
The reduction in profit was mainly due
to the decreased operating margin and
also a US$6.3 million write‑off following
our decision towards the end of the
year to cease exploration in Ethiopia.
During the year the Company incurred
an income tax charge of US$6.8 million
in relation to foreign exchange gains
on its cash holdings within Australia.
Centamin remains committed to its
policy of being 100% exposed to
the gold price through its unhedged
position, and its balance sheet remains
strong with zero debt. We ended the
year with US$230.7 million in cash,
bullion on hand, gold sales receivables
and available‑for‑sale financial assets.
This is a material increase over the
US$162.8 million at the end of 2014
and highlights the potential of the
business to continue self‑funding its
next stages of growth from cash flows
whilst maintaining a commitment to
dividend payments.
12
Centamin plc Annual report 2015
STRATEGIC REPORT
CHAIRMAN’S STATEMENT continued
Centamin is in a strong position to continue investing
in its long‑term growth throughout the cycle.
With the downturn in gold prices
having resulted in a significant
curtailment of industry spending on
exploration, Centamin is in a strong
position to continue investing in its
long‑term growth throughout the
cycle. Beyond Sukari we are focused
on our extensive licence holdings
within Burkina Faso and Côte d’Ivoire.
Whilst these districts hold potential for
several deposit types, our immediate
objective is to discover and define
areas of near‑surface and high‑grade
economic mineralisation. In this
respect, positive results during 2015
have seen a number of priority areas
emerge which will remain the focus for
resource growth during 2016. I look
forward to updating you further in due
course with our progress in unlocking
the Company’s next stage of growth
from these highly prospective regions.
Whilst disciplined and sustainable
growth on our existing projects remains
a key focus, we continue to evaluate
opportunities to grow through the
acquisition of projects which offer the
potential for the Company to deliver
on its strategic objectives.
Developments in the two litigation
actions, Diesel Fuel Oil and Concession
Agreement, are described in further
detail in note 20 to the financial
statements. In respect of the latter, the
Company continues to believe that
it has a strong legal position and, in
addition, that it will ultimately benefit
from Law no. 32 of 2014, which came
into force in April 2014 and which
restricts the capacity for third parties to
challenge any contractual agreement
between the Egyptian government
and an investor. This law, whilst in force
and ratified by the new parliament, is
currently under review by the Supreme
Constitutional Court of Egypt.
After a series of delays and
adjournments, the Concession
Agreement appeal has now been set
down for judgment on 24 May 2016.
If the judgment is a final judgment, the
Company expects it will be in its favour.
However, it has been advised that
the Egyptian legal system allows for
the possibility of an interim judgment
staying the appeal until the Supreme
Constitutional Court has ruled on the
validity of Law no. 32.
The group continues to benefit from
the full support of the Ministry of
Petroleum and the Egyptian Mineral
and Resources Authority (“EMRA”),
both in the Concession Agreement
appeal and at the operational level.
As part of our long‑term strategy, we
look forward to continuing to share the
benefits of the Company’s substantial
investment in Egypt as the Sukari
operation sets the stage for a new era
of gold mining in the country.
13
Centamin plc Annual report 2015
STRATEGIC REPORT
I would like to close by thanking all
those at Sukari, in Alexandria, Burkina
Faso, Côte d’Ivoire, Jersey and Perth
for their efforts in 2015 as Centamin
continued on its journey to becoming
an established, cash‑generative and
growing gold producer.
Your Company remains well positioned
to deliver outstanding shareholder
returns in the coming years. I look
forward to updating you further
over the course of 2016, and would
welcome you to join us at our AGM,
which this year will be held in Jersey
on 11 May 2016.
This strategic review, progress on
strategy, key performance indicators
and business model together form
the strategic report, which has been
approved by the board of directors.
By order of the board for and on behalf
of Centamin plc.
Josef El-Raghy
Chairman
21 March 2016
Open pit at Sukari
At the start of the year, Andrew Pardey
was appointed as chief executive
officer (“CEO”) and joined the
board as an executive director from
1 February 2015. Andrew has been a
driving force behind Sukari’s growth
into one of the world’s leading gold
mines and Centamin’s development
from a junior exploration company into
one of the largest gold producers in
North Africa. I am pleased to report
that during Andrew’s first year as
CEO, the Company has continued
to develop and has realised its next
stages of growth, whilst maintaining
its strategic focus on cash flows,
shareholder returns and social
responsibility.
I would also like to take this
opportunity to welcome Ross Jerrard
as our new chief financial officer
(“CFO”), effective 18 April 2016.
Ross joins Centamin from Deloitte
Australia, where he was a partner
with over twenty‑two years’ audit and
advisory experience, specialising in
the resources industry. He has worked
in southern Africa and the Middle
East, including a three‑and‑a‑half‑year
period based in Egypt, servicing
a range of multinational and
natural resources companies. This
appointment follows the resignation
of Pierre Louw, who will hand over
responsibilities in April 2016. We thank
Pierre for his service and wish him all
the best in his future endeavours.
14
Centamin plc Annual report 2015
STRATEGIC REPORT
CHIEF EXECUTIVE OFFICER’S REPORT
Centamin is entering a
sustainable period of cash
generation, which it will use to
reward shareholders through
dividends and ongoing growth.
Andrew Pardey Chief executive officer
I am pleased to report that, during
2015, Centamin has continued
to prosper under adverse market
conditions. The Company continues
to achieve positive results through
its core strategic focus on creating
value for all stakeholders. Value in the
mining industry is achieved through
a continual drive for productivity and
efficiency at operating mines, whilst
undertaking a growth strategy that is
focused on enhancing returns over the
long term.
In this context, Sukari delivered
production in line with guidance and
with AISC significantly below initial
forecasts. At the same time, Centamin
continues to invest in long‑term
growth, with continued resource and
reserve increases at Sukari and positive
indications of multiple high‑grade
prospects from within its West African
exploration projects. This stands
against an industry forced towards
short‑term initiatives to preserve
cash in response to the various
external challenges.
Centamin remains committed
to further improving health and
safety during 2016 towards our
zero‑harm target.
Sukari’s performance during 2015
continues to bode well for the
potential of the operation to generate
significant free cash flow over
the coming years. Fourth quarter
production of 117,644 ounces was
within the operation’s target annualised
rate of 450,000 to 500,000 ounces,
driven by the continued ramp‑up of
the expanded process plant to its
throughput rate of 11 million tonnes
per annum. The plant is now operating
at 10% above nameplate capacity,
which represents the achievement of
our base case forecast rate.
The average metallurgical recovery
was 88.8%, a 1.7% increase on 2014.
Work is continuing to optimise the
operational controls and improve
circuit stability to ensure recoveries
are maintained above 88% at the
increased rate of throughput.
Safety is a critical area of Centamin’s
performance and our aim is to ensure
that every person returns safe at
the end of each shift. Continued
development of the onsite health and
safety culture at Sukari has resulted in a
low LTIFR for 2015 of 0.12 per 200,000
man‑hours. Against this positive result,
however, a very unfortunate incident
occurred within the open pit operation
during the fourth quarter, when a
contractor’s employee was involved in
a rock collapse while relocating a grade
control drill rig. The operator, and sole
occupant of the drill rig, was fatally
injured in the incident. The loss was
deeply saddening and overshadowed
the strong operational performance
during the quarter.
Earlier in 2015, and as previously
reported, an unfortunate incident
occurred in Burkina Faso on a public
road near the Konkera village which
resulted in one of our local employees
being fatally wounded and another
sustaining injuries. A thorough
investigation into this bandit attack
on two of our vehicles has been
carried out. Further additional security
measures have been implemented
following the incident. There was no
impact on operational activity as a
result of the incident.
15
Centamin plc Annual report 2015
STRATEGIC REPORT
New processing
plant completed following
Stage 4 expansion
2015 was another successive record for
both open pit and underground mining
rates and productivity in both of these
areas remains strong. The open pit
delivered total material movement
of 57.8Mt, an increase of 28% on the
prior year. This was related to improved
fleet utilisation and productivity,
together with incremental blasting
rates following the increased daily
usage of ammonium nitrate (“AN”)
from October 2014. The open pit
remains on a secure footing to deliver
the scheduled material movements as
required for the expanded operation.
Open pit mined grades are expected
to increase towards the reserve
average from 2016, in line with the
mine plan and our production forecasts
as detailed in May 2015.
The underground mine produced a
record 1.16Mt of ore, a 20% increase
on 2014. The average mined head
grade was 6.5g/t, in line with our
forecast, and represents a successful
reduction in grade volatility when
compared with 2014, a period when
the operation underwent a significant
ramp‑up in productivity. The focus for
the operation remains to consistently
deliver ore at an average grade of at
least 6g/t.
There was a material year‑on‑year
decrease in operating costs per tonne
in both the mining and processing
areas, principally driven by the
decrease in the international fuel price.
The trend towards lower unit costs is
expected to continue in the coming
quarters, as the expanded operation
continues to be optimised and further
efficiency gains are realised.
In September 2015, an updated
resource and reserve estimate for
Sukari provided further support for
our production forecasts and our
expectation of a long life and low
cost operation that will continue to
generate significant cash flow even
under the current weak gold price
environment. Open pit reserves of
8.3 million ounces increased from the
previous estimate by approximately
0.5 million ounces, net of mining
depletion. This increase was due to
lower mining and processing costs
associated with the recent reduction in
international fuel prices and continued
underground resource expansion from
drilling. The estimate was based on
assumptions conservatively above
current operating costs.
Reserves were based on a
US$1,300 per ounce gold price,
consistent with previous estimates and
allowing for comparisons exclusive of
short‑term volatility in the gold market
over the expected 19‑year‑plus life of
the operation.
Continued growth of the underground
resource and reserve demonstrates the
potential for further material increases
over the coming years. The ongoing
drilling programme continues to return
high grade assay results and we expect
this to continue as the development
and drilling extends along the strike
and at depth.
Our exploration programmes in West
Africa continue to build momentum.
In Burkina Faso, at the Wadaradoo,
Napelapera and Torkera prospects,
drilling has indicated the presence
of structurally controlled high‑grade
mineralised zones in addition to
extensive lower‑grade mineralisation.
In Côte d’Ivoire, first‑pass drilling
over targets defined by geochemical
and geophysical surveys has outlined
mineralised zones over a number
of prospects. We continue to test
the potential for lateral and depth
extensions at these more advanced
prospects, whilst also progressing the
numerous other prospects within our
significant land packages.
17
Centamin plc Annual report 2015
STRATEGIC REPORT
16
Centamin plc Annual report 2015
STRATEGIC REPORT
CHIEF EXECUTIVE OFFICER’S REPORT continued
We take every action to ensure Sukari has the minimum
impact on the social environment, as well as to deliver
positive benefits to Egypt and the community as a result
of our investment.
The greenhouse gas emissions
reporting required by Schedule 7
of the Large and Medium‑Sized
Companies and Groups (Accounts
and Reports) Regulations 2008 as
amended by the Companies Act 2006
(Strategic Report and Directors’ Report)
Regulations 2013 only applies to UK
incorporated quoted companies.
Centamin has, however, provided
information relating to this legislation
in the CSR report as part of its
commitment to environmental issues.
Maintaining good community relations
is a core part of our operational
strategy and corporate governance
standards. As the first mining company
in Egypt in modern times, we strive to
set an example of a socially responsible
industry through adopting a good
neighbour policy. We take every action
to ensure Sukari has the minimum
impact on the social environment, as
well as to deliver positive benefits to
Egypt and the community as a result of
our investment, and further details of
our various initiatives can be found in
the CSR report.
Our work force is remunerated well
above the average for Egypt and our
career development programmes
are highly valued. In general we
enjoy a very positive and constructive
relationship with our employees.
Outlook
Our longer‑term production and cost
forecasts remain unchanged and there
remains scope for significant additional
production increases as productivity
in the various areas of the expanded
Sukari operation is further optimised.
Safety remains a priority and our
target is a lost time injury rate of zero
during 2016.
Guidance for 2016 is for 470,000
ounces at US$680/ounce cash
operating cost and US$900/ounce
all‑in sustaining cost. Whilst this
guidance implies further material
production growth at Sukari, the
key focus for the operation during
the year is on realising the potential
for additional productivity and cost
efficiencies.
The productivity levels achieved during
2013 in the pre‑expansion process
plant, together with the various design
improvements implemented during
the Stage 4 project, provide us with
confidence that the expanded plant
will achieve, in time, production levels
materially above current levels. At the
underground mine, we see potential
for further incremental productivity
increases whilst the priority remains
stable grade delivery. The additional
shareholder value that can be gained
from this continued drive for efficiency
has the potential to be significant
and requires no material capital
expenditure.
The objective, as always, is to generate
substantial free cash flow even under
challenging gold price assumptions.
We intend to return 15‑30% of this
cash flow to our shareholders, in
line with our dividend policy, and to
allocate the remainder towards our
medium‑ and long‑term objective
of organic growth aimed at realising
incremental shareholder value
and returns.
Exploration drill rig
in Côte d’Ivoire
No capital expenditure for expansion
or project development is planned
for 2016.
Exploration at Sukari continues to
prioritise extensions of the high‑grade
underground resource and reserve
and we expect to continue to deliver
positive news in line with our strong
results to date. A resource and reserve
update is planned during 2016.
In West Africa, we expect a total
exploration expenditure of circa
US$25 million in 2016, with the
largest proportion on the advanced
exploration programme in Burkina
Faso. In line with our overall
exploration strategy, the actual
expenditure on these projects is results
driven and the current estimated
expenditures are therefore subject
to ongoing revisions.
We will continue to evaluate potential
opportunities to grow the business
through the acquisition of projects
offering the potential for the Company
to deliver on its strategic objectives.
Finally, I would like to thank all my
colleagues for their hard work over
the years including the employees
onsite at Sukari, those on the
exploration sites in Burkina Faso,
Côte d’Ivoire and Ethiopia as well
as those in the corporate and
administration offices in Jersey and
Australia. I would also like to thank
your board of directors for their
continued support and I am very much
looking forward to another prosperous
year for Centamin and its stakeholders
in 2016.
Andrew Pardey
Chief executive officer
21 March 2016
18
Centamin plc Annual report 2015
STRATEGIC REPORT
BUSINESS MODEL
19
Centamin plc Annual report 2015
STRATEGIC REPORT
Our vision is to expand on our position as Egypt’s first large scale
gold producer to deliver increased shareholder returns.
Our value chain continues from early stage explorer through to
gold production and is driven by our investments, employees
and business culture.
OUR BUSINESS MODEL
Strategic focus areas
We have established four areas
of strategic focus, as follows:
1. Cash generation
A rising production profile and
focus on reducing costs.
2. Shareholder returns
Dividend returns and a strong
balance sheet.
3. Growth
Developing a well‑balanced
project pipeline with potential to
add increasing production and
incremental shareholder value.
4. Social responsibility
Ensuring the safety of our workforce
and developing skills; conducting
our business in a responsible
manner and contributing positively
to the local economy and
environment.
S H A R E HOLDER RETURNS
PAGE 26
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Environmental pro t e c t i o n
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OUR VALUE CHAIN
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Strategic enablers – key relationships
Along this journey, relationships with employees, governments, suppliers, local
communities and other stakeholders are key to the success of the Company.
EMPLOYEES
Safety, welfare, training,
professional development, wages,
benefits, sustainable operations.
GREENFIELDS EXPLORATION
ADVANCED EXPLORATION
Early stage of exploration involving regional surveys
leading to prospect generation and first‑pass drilling
programmes.
Targeted drilling programmes leading to resource and
reserve estimates and feasibility studies.
CONTRACTORS
GOVERNMENTS
COMMUNITIES
HSE policies, induction
training, monitoring.
Profit sharing, GDP, new industries,
job creation, engagement, profit
sharing & royalty, resource allocation.
Infrastructure, conservation,
healthcare, engagement,
concessions.
SUPPLIERS
REFINERS
Local economy, local suppliers,
government suppliers,
contracts, imports.
Exports, commodities.
SHAREHOLDERS
Governance, strategy,
engagement, dividend.
GOLD PRODUCTION
Development of economically
viable projects leading to
profitable production of gold.
2015 PRODUCTION
(ounces)
2015 ORE PROCESSED
(’000 tonnes)
2015 TOTAL
439,072
2014: 377,261
2015 TOTAL
10,576
2014: 8,482
20
Centamin plc Annual report 2015
STRATEGIC REPORT
BUSINESS MODEL continued
Our KPIs and targets for 2016 are set out below:
21
Centamin plc Annual report 2015
STRATEGIC REPORT
In 2015, Centamin’s strategy was to maximise free cash flow,
through the value of our current assets and to increase our reserve
and resource base.
Cash
generation
1
Shareholder
returns
2
Growth
3
Social
responsibility
4
• Competitive costs.
• Rising production.
• Cash operating cost of
US$713 per ounce (a reduction
on US$729 in 2014 and
marginally above guidance
of US$700 per ounce).
• All‑in sustaining cost of
US$885 per ounce (below
guidance of US$950 per ounce).
• 439,072 ounces produced
(re‑guided upwards during the
year), a 16% increase on 2014.
• Targeted US$680 cash operating
cost per ounce.
• Targeted US$900 per ounce
all‑in sustaining cost.
• Targeted production of 470,000
ounces of gold.
• Share price performance relative
to peers.
• Dividend returns, with free cash
flow to fund the next stage
of growth.
• Total dividend in 2015 of
2.94 US cents per share.
• Annual dividend of between
15‑30% net cash flow after
sustaining capital and profit
share and before exploration
expenditure outside of Sukari.
• Maintaining a safe environment
to work, with opportunities for
our employees to train and
develop skills.
• A reduction of our yearly LTIFR
(0.12 per 200,000 man‑hours)
against our zero‑harm target.
However, two fatalities were
reported during the year (details
in the CSR report).
• Zero‑harm safety record
throughout the group’s
operations.
• Developing a well‑balanced
project pipeline, with potential
to add incremental shareholder
value by increasing production
across the group.
• M&A activity for greenfield or
early exploration.
• Nameplate capacity of 11Mtpa
achieved in Q4 2015.
• Replacement and expansion of
the Sukari underground reserve.
• Exploration programme over
licence areas in Burkina Faso.
• Exploration programme over
licence areas in Côte d’Ivoire.
• Resource/reserve replacement
and expansion at Sukari, with
a focus on the high‑grade
underground.
• Drilling on priority targets in
Burkina Faso and Côte d’Ivoire,
providing the foundation for
further resource development.
Strategic
focus areas
Objectives
KPIs reported in 2015
KPIs set for 2016
Key risks
Single project dependency
Joint venture
Gold price and currency exposure
Jurisdictional tax exposure
Political risk – Egypt
Political risk – West Africa
Reserve and resource estimates
Production estimates
Litigation
22
Centamin plc Annual report 2015
STRATEGIC REPORT
BUSINESS MODEL continued
EXPLORER,
DEVELOPER
AND OPERATOR
“ Our growth strategy seeks to create
shareholder value by taking projects
through the mining value chain:
exploration, development and operations.”
Josef El-Raghy, Chairman
Having successfully built a substantial gold mining operation through a staged
expansion programme and with a total of circa US$1.1 billion capital investment
in Egypt, the Company is placed in a strong competitive position, with low cost
production, solid growth potential and a stable balance sheet. The business is
well placed to continue self funding its next stages of growth from cash flows
whilst maintaining a commitment to dividend payments.
PRODUCTION HISTORY
(ounces of gold)
262,828
202,699
150,289
439,072
377,261
356,943
2010
2011
2012
2013
2014
2015
23
Centamin plc Annual report 2015
STRATEGIC REPORT
Greenfields exploration
in Côte d’Ivoire
Advanced exploration
in Burkina Faso
Crushed ore stock pile at Sukari
Burkina FasoEgyptCôte d’IvoireSukari 24
24
Centamin plc Annual report 2015
Centamin plc Annual report 2015
STRATEGIC REPORT
STRATEGIC REPORT
1
STRATEGIC FOCUS
Cash
generation
A rising production profile with
competitive costs
Highlights
•
Investment phase complete at Sukari
• Continued production growth and cost
reduction with optimisation of expanded
operations at Sukari
• No debt payments or
hedging obligations
Underground at Sukari
Stage 4 processing plant
25
Centamin plc Annual report 2015
STRATEGIC REPORT
HOW WE GENERATE FREE
CASH FLOW AND DELIVER
SHAREHOLDER RETURNS
• Track record of project delivery:
investment and construction
phase at Sukari complete.
• Production: 2016 guidance of
470,000oz, rising to
circa 500,000oz in 2017.
FOCUS ON COST CONTROL
• Capex: Sukari staged
construction delivered
on budget.
• Low cash operating cost of
production: target of US$680/oz
in 2016.
• Low all-in sustaining cost:
target of US$900/oz in 2016.
OPTIMISING PRODUCTION
• Upside: further potential for
production growth and cost
reduction compared with our
base‑case forecasts.
• Long life: Sukari has an
estimated 20 year mine life.
• Reserve growth: further
exploration potential to extend
the mine life and/or increase
production.
STABLE FINANCES AND
SHAREHOLDER RETURNS
• Capex: no further significant
capital expansion at Sukari.
• Cash: in excess of US$200 million
cash and cash equivalents.
• Dividend: competitive
dividend policy.
• Debt free: no interest payments
or hedging obligations.
NEXT STAGE OF GROWTH
• Cash flow: post‑dividend cash
flows are used to fund growth.
Our flagship Sukari Gold Mine has
continued to deliver substantial free
cash flows.
With the completion of the Stage 4 expansion project in 2014, the Sukari
operation has transitioned out of its investment phase, where cash flows were
used to fund the staged construction, and into a sustainable period of free cash
flow generation over the remaining life of mine. As production continues to rise
towards our base‑case target of 450,000 to 500,000 ounces per annum, cash
operating costs are expected to be US$680 per ounce and all‑in sustaining costs
are expected to be US$900 per ounce in 2016, with potential to reduce further in
the coming years. Centamin has no debt or hedging and is therefore financially
robust, is well positioned to benefit from a recovery in the gold price, and has the
financial flexibility to grow both organically and through strategic acquisitions.
KPIs reported during the year:
• cash operating cost of US$713 per ounce;
• all‑in sustaining cost of US$885 per ounce; and
• revenue was driven by increased production offset by the lower average gold
price of US$1,159 per ounce.
KPIs set for 2016:
• targeted US$680 cash operating cost per ounce;
• targeted US$900 all‑in sustaining cost per ounce; and
• revenue increase proportional to production growth.
Our KPIs reported for 2015 are set out below:
Q4 2015 Q4 2014
2015
2014
• Advanced exploration projects:
Cash
Cash operating cost
of production
All‑in sustaining
cost of sales
US$ per ounce
667
655
713
729
US$ per ounce
842
815
885
906
Revenue
US$’000
130,196 151,117 508,396 472,581
Burkina Faso.
• Early-stage exploration
projects: Côte d’Ivoire.
• Acquisitions: financial
flexibility to acquire
value‑accretive projects.
26
26
Centamin plc Annual report 2015
Centamin plc Annual report 2015
STRATEGIC REPORT
STRATEGIC REPORT
2
STRATEGIC FOCUS
Shareholder
returns
Balance sheet strength:
dividend returns a priority
Highlights
• Annual dividend between 15‑30%
of free cash flow(1)
• 2015 interim dividend 0.97 US cents
per share (0.87 US cents for 2014)
• 2015 final dividend declared
of 1.97 US cents per share
(1.99 US cents for 2014)
View of the process plant
Face shovel in open pit
(1) Foreign direct investment data from the Central Bank of Egypt.
27
Centamin plc Annual report 2015
STRATEGIC REPORT
Interim dividend of
0.97 US cents
per share
Final dividend of
1.97 US cents
per share
CENTAMIN CONTINUED TO
INVEST IN EXPANSION DURING A
PERIOD WHEN EGYPTIAN FOREIGN
DIRECT INVESTMENT (“FDI”)
FELL SIGNIFICANTLY:
)
n
o
i
l
l
i
m
$
S
U
(
I
D
F
t
p
y
g
E
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
300
250
200
150
100
50
0
)
n
o
i
l
l
i
m
$
S
U
(
t
n
e
m
t
s
e
v
n
i
i
n
m
a
t
n
e
C
2009 2010 2011 2012 2013 2014
Centamin investment in Egypt
Net FDI in Egypt(2)
(2) Source: Central Bank of Egypt.
The 2015 dividend of approximately
US$33.7m sits at the top end of our
policy to pay out 15‑30% of our net
free cashflow.
Having successfully built a substantial gold mining operation through a staged
expansion programme and with a total of circa US$1.1 billion capital investment
in Egypt, the Company is placed in a strong competitive position, with low cost
production, solid growth potential and a stable balance sheet. In recognition
of this, the board of directors declared a maiden dividend in August 2014 and
a final dividend for the year, which totalled 2.86 US cents per share for 2014
(totalling approximately US$33 million). In 2015, an interim dividend of 0.97 US
cents per share was paid and a final dividend of 1.97 US cents per share will
be paid to shareholders following the AGM on 11 May 2016. The ex‑dividend
date is 21 April 2016 for LSE listed shareholders and 20 April 2016 for TSX listed
shareholders. The record date for both exchanges is 22 April 2016.
What we do for Egypt – stakeholder returns:
• direct payments to the government of US$84 million to date
(royalty + advance payments against future profit share);
• approximately US$1.1 billion of total expenditure to date with
Egyptian suppliers; and
• over 1,100 Egyptian companies have supplied Sukari to date
(270 regular suppliers).
KPIs reported during the year:
• annual dividend within the range of 15‑30% of the Company’s free cash flow(1);
and
• total dividend 2.94 US cents per share for 2015 (totalling approximately
US$33.7 million).
Dividend policy and KPIs set for 2016:
• annual dividend within the range of 15‑30% of the Company’s free cash flow(1).
(1) After sustaining capital and profit share to EMRA and before exploration expenditure outside
of Sukari.
28
28
Centamin plc Annual report 2015
Centamin plc Annual report 2015
STRATEGIC REPORT
STRATEGIC REPORT
3
STRATEGIC FOCUS
Growth
Developing a well‑balanced
project pipeline with potential to
add increasing production and
incremental shareholder value
Highlights
• Base case production growth to circa 500,000
ounces per annum from 2017
• Advanced exploration in Burkina Faso
• Early‑stage exploration in Côte d’Ivoire
• Ongoing evaluation of
M&A opportunities
Underground at Sukari
24 hour operation
in the open pit
29
Centamin plc Annual report 2015
STRATEGIC REPORT
2016 guidance of
470,000 ounces
at cash cost of US$680 per ounce
and all‑in sustaining cost of
US$900 per ounce.
We expect to continue self‑funding our
next stages of growth from cash flows.
Our strategy with regard to growth is summarised in the table below.
NEAR TERM (1-2 YEARS)
MEDIUM TERM (3-5 YEARS)
LONG TERM (5+ YEARS)
• Continuing the production
ramp up at Sukari towards circa
500,000 ounces per annum
in 2017.
• Resource/reserve replacement
and expansion at Sukari,
with a focus on underground
high grade.
• Exceed 500,000 ounces per
annum at Sukari through
optimising productivity and
continued expansion of the
underground operation.
• Resource/reserve expansion
at Sukari, with a focus on
underground high grade.
• Resource expansion and project
• Development and first
evaluation in Burkina Faso.
production in Burkina Faso.
• Target generation and maiden
• Results driven progression of
resource in Côte d’Ivoire.
Côte d’Ivoire.
• Continue to evaluate selective
M&A opportunities with the
potential to develop low
cost projects.
• Continue to evaluate selective
M&A opportunities with
the potential to develop
low‑cost projects.
KPIs set for 2016:
Our KPIs for 2015 are set out below:
• Continue to expand group
reserves and production through
exploration.
• Become a multi‑asset gold
producer maintaining lowest
quartile cost profile.
• Continue to evaluate selective
M&A opportunities with
the potential to develop
low‑cost projects.
• annualised production rate of
450,000 to 500,000 ounces;
• resource/reserve replacement and
expansion at Sukari, with a focus on
underground high grade;
• resource expansion through
systematic drilling programmes;
• first pass drilling on priority targets,
providing the foundation for
resource development in 2016; and
• reduction in LTIFRs.
Productivity
Q4 2015 Q4 2014
2015
2014
Open pit ore mined
‘000t
2,229
4,123
8,746 10,936
Underground ore mined
‘000t
300
284 1,158
968
Ore processed
Gold recovery
Gold produced
Revenue
‘000t
2,785
2,597 10,576
8,428
%
88.6
87.0
88.7
87.8
Ounces 117,645 128,115 439,072 377,261
US$’000 130,196 151,117 508,396 472,581
No changes have been made to the source of data or calculation methods used in the year.
1.
Results reflect an exceptional provision against prepayments to reflect the removal of fuel subsidies.
Subsidies were removed in January 2012 (refer to note 6 to the financial statements for further details).
Excluding fuel subsidy (refer to note 6 to the financial statements for further details).
Including fuel subsidy (refer to note 6 to the financial statements for further details).
2.
3.
30
30
Centamin plc Annual report 2015
Centamin plc Annual report 2015
STRATEGIC REPORT
STRATEGIC REPORT
4
STRATEGIC FOCUS
Social
responsibility
The environment, workplace health
and focus on employee safety
Highlights
•
Improvements in LTIFR
• Striving for a
zero‑harm workplace
• Progressive training
for employees
Exploration in Côte d’Ivoire
Exploration in Burkina Faso
31
Centamin plc Annual report 2015
STRATEGIC REPORT
Key themes in the CSR
report are as follows:
• integration of
Company policies;
• health services;
• environment;
• community and society;
and
• community development
initiatives.
Centamin is committed to working with the highest level
of respect for our employees and the communities and
environments in which we operate.
Our employees
Our people are our most valuable
resource. We are committed to
attracting, energising, developing
and retaining a highly skilled and
experienced workforce. We value
individuals with outstanding technical,
professional and managerial skills
who can contribute to a positive
working environment and demonstrate
willingness to lead, take responsibility
and display initiative. We aim to foster
a relation of trust and open dialogue
between employees and management.
Health and safety
Centamin is committed to minimising
health and safety risks to a reasonably
practical level, while striving for a
zero‑harm, healthy and productive
work place.
Sukari
• Improvements in LTIFR during 2015 which remained at low levels over the
course of the year.
• Hygiene standards improved progressively during the year.
• Regular and progressive training programmes at Sukari.
• Management of the scrap area at Sukari.
Safety performance
Fatality injury (“FIFR”)
Lost time injury (“LTIFR”)
Medical treatment injury (“MTIFR”)
(1) Based on 200,000 working hours.
2015
frequency
2014
frequency
2013
frequency
rate(1)
rate(1)
rate(1)
2012
frequency
rate(1)
0.04
0.12
0.6
—
0.39
0.39
—
0.36
1.28
—
0.69
1.37
One fatality occurred in November 2015, when a contractor’s employee was
involved in a rock collapse whilst relocating a grade control drill rig. The incident
resulted in the death of the contractor’s employee. The incident was investigated
and duly reported to the authorities at the time of its occurrence.
Burkina Faso
The project lies in Batie, Noymbeil,
in the south‑west region of
Burkina Faso. Batie is a city with a
population of about 30,000 and has
several cities and villages affiliated
to it. The city is considered the least
developed in Burkina Faso.
Safety performance
2015 frequency rate(1)
FIFR
LTIFR
MTIFR
0.2
0.62
0.21
(1) Based on 200,000 working hours.
In February 2015, an incident
occurred on a public road near the
Konkera village which resulted in
one of our local employees being
fatally wounded and another
sustaining injuries.
32
Centamin plc Annual report 2015
STRATEGIC REPORT
RISK MANAGEMENT
The process for identifying and assessing risk is an integral and
inseparable part of the group’s performance culture and processes
and is therefore at the core of our business.
Understanding the risks the group faces and managing
them appropriately allows the group to improve its decision
making process, deliver on its objectives and therefore
improve its performance as a mining company.
The exploration for and development of metals and mineral
resources, together with the construction and development
of mining operations is an activity that involves a high
degree of risk.
This group can only manage, rather than eliminate risk and
the following summarises how the group identifies, assesses
and manages risks.
The board retains overall responsibility for assessing the
effectiveness of the Company’s systems for management
of material business risks. The board discharges the
responsibility of implementing risk management systems
to the executive management and the monitoring of risk
and internal controls is delegated to the audit and risk
committee.
The teams in Egypt, Burkina Faso and Côte d’Ivoire are
responsible for managing the operational risks in their
respective areas and report on these to management.
Centamin conducts a variety of risk assessments throughout
the year, including assessing risks daily at an operational
level, risk assessment as part of the monthly reporting
process, annual business continuity planning, preparations
for five year forecasts, as well as planning over the longer
term, such as the preparation of impairment and life of
mine models.
The audit and risk committee and the board are pleased to
confirm that the Company remains in compliance with best
practice guidelines and with the UK Corporate Governance
Code and relevant Canadian requirements. The latest
edition of the Code (September 2014) contained a number
of changes including an increased focus on how risk is
governed and managed, with new provisions on the robust
assessment of solvency and liquidity, continuous monitoring
of systems of internal control and a statement on business
viability. Details of our viability statement can be found on
page 37 and our going concern statement can be found on
page 103.
This risk assessment carried out by the group covers the
following key areas:
• operational risks within the business;
• corporate risks (identified as either strategic or
operational in nature); and
• principal risks based on the corporate risk register.
The assessment identifies the risks facing the business and
we consider the annual assessment to be suitably robust,
covering strategic and operational risks at a corporate level
and risks identified at our operations in Egypt, Burkina Faso
and Côte d’Ivoire.
The assessment carried out during the year, which also
took note of the work carried out by the internal auditor,
concluded that there were adequate procedures, polices
and controls in place at an operational level and that the
risks at a corporate level, taking into account the Company’s
strategic objectives, had been adequately identified. The
areas for improvement following the review were as follows:
• improvements in documenting the process for identifying
risks at a corporate level and linking the risks to the
organisation’s objectives;
• at present, risks do not have assigned owners, making
it difficult to hold management to account for the
mitigation of these risks;
• risk management procedures are needed to more clearly
define the risks and the responsible persons to help
define the roles and responsibilities; and
• more training needed in identifying and responding
to risk.
As part of the review process, it was decided to update
the existing corporate policy on risk and the board adopted
a revised and updated risk management framework
agreement. The risk management framework includes
additional detail about the scope and structure of an
executive risk management working group.
It was noted that the areas of improvement identified
following the review were not seen as significant failings
or weaknesses, but reflect the breadth and scope of
the review.
Having considered the risks in detail, the key principal risks
have been identified and are set out on page 34. The risks
reflected in the matrix and the mitigating actions reflect the
key principal risks to the Company and its stakeholders.
The board has overall responsibility for establishing risk
across Centamin through a robust risk management system
that allows for the assessment and management of material
strategic and operational risks. In addition, the board is
responsible for articulating the group’s risk appetite against
the principal risks.
33
Centamin plc Annual report 2015
STRATEGIC REPORT
The audit and risk committee monitors the risk management
and internal control structure implemented by management.
It advises on significant changes to that structure so as to
obtain reasonable assurance that the Company’s assets
are safeguarded and that reliable financial records are
maintained. The committee assists in developing the risk
environment, making suggestions on ways in which the
business can improve its internal reporting. The committee
receives comprehensive monthly reporting information from
the group’s operations and enhanced reporting in the event
of an incident.
The other committees of the board ensure that their areas
of responsibility take account of the group’s risk strategy and
any matters relating to risk identification are raised directly
to the board on a quarterly basis.
The CEO, aided by the senior management team, is
responsible for developing short‑, medium‑ and long‑term
corporate strategies for the group, preparing business plans
and reports with senior management and reporting to the
board on current and future initiatives. In developing the
corporate strategy, the CEO ensures that the group has the
appropriate risk management practices and policies in place
and assesses business opportunities which are of potential
benefit to the group taking into account its strategic
objectives and risk appetite.
The executive management team is responsible for
defining, debating and challenging the nature of the
principal and corporate risks, and for ensuring that risk
management is consistently applied within the group. The
executive and key personnel within management meet
regularly to discuss new and emerging risks for the group.
At an operational level, the heads of department are
responsible for implementing the requirements of the risk
management framework and providing assurance to the
executive management that the work has been carried out.
The internal auditor reports primarily to the audit and risk
committee and provides an independent viewpoint and
assurance over certain strategic risks and the controls that
are in place to mitigate the risks. The internal auditor also
assists the business in monitoring the effectiveness of the
risk management and internal control environment. See
page 100 for further details on the role and scope of the
internal auditor.
The external auditor designs procedures to assess the
risks of material misstatement in the financial statements,
looking particularly at subjective judgments that involved
making assumptions and considering future events that are
inherently uncertain. The responsibilities of the group and
those of the external auditor in forming their opinion are set
out in the independent auditor’s report on page 105.
Activity during 2015 relating to risk management
During the year, the audit and risk committee and the board
evaluated their risk management processes and reporting.
In evaluating the current processes and taking advice and
guidance from both the external and internal auditors, they
have prepared a revised and updated risk management
framework. During 2016, the updated framework will
assist the Company to enhance reporting and information
flows to the board and assist the board, aided by the audit
and risk committee, in assessing the effectiveness of the
Company’s systems for management of material strategic
and operational risks. In addition, the following reports were
prepared for the audit and risk committee’s review:
• comprehensive control environment memorandum and
recommendations for further improvement prepared by
the management team;
• monthly and quarterly reporting on the operational
activity, including enhanced reporting on any significant
operational and corporate issues;
• internal audit work on the risk management structure
and recommendations on developing the reporting and
information flows between the operational areas and
the board;
• external audit work culminating in the annual and
half‑yearly audit report; and
• significant incident reports.
Targets in 2016
The board and the audit and risk committee will use the
risk framework agreement to influence the type and form
of risk information that is currently reported to management
and the board. The board will also consider the approach
taken to, and effectiveness in, influencing the Company’s
risk appetite and risk culture throughout the organisation.
Activities that will be taking place during 2016 include:
• embedding the risk management framework within the
organisation;
• enhancing the reporting to the board at a strategic and
operational level;
• considering further our risk appetite towards strategic
risks and strategic objectives; and
• continuing with its work to improve the control
environment and updating the control environment
memorandum.
The results of these initiatives will be published in the
2016 annual report and accounts.
34
Centamin plc Annual report 2015
STRATEGIC REPORT
RISK MANAGEMENT continued
35
Centamin plc Annual report 2015
STRATEGIC REPORT
Principal risks
Centamin takes a number of measures to mitigate risks associated with its underlying operational
and exploration activity which are monitored and evaluated regularly. Due to the nature of
these inherent risks, it is not possible to give absolute assurance that mitigating actions will be
wholly effective.
The descriptions below describe the current status of the principal risks affecting Centamin and
its operational and exploration activities together with the measures to mitigate risk.
RISK CATEGORY
STRATEGIC RISK
Single project dependency
TREND
NATURE OF RISK
MITIGATION
Neutral
The Sukari Project currently constitutes Centamin’s main mineral resource and sole mineral reserve
and near‑term production and revenue. The resource at the advanced stage of exploration in
Burkina Faso is not currently of a sufficient size to convert into a reserve. The regional exploration
of the licence portfolio in Burkina Faso and Côte d’Ivoire continues on the existing 1.92Moz
indicated and 1.33Moz inferred resource.
The project at Sukari has two distinct ore sources (open pit and underground) and the processing
plant has two separate flotation circuits and two separate power stations. Whilst one project, the
nature of the design of the plant provides adequate mitigation and reduces the relative likelihood of
dependence compared to a single layer plant design. The second circuit of the processing plant has
been fully operational for over twelve months which shows the resilience of the project. In addition,
the plant is fed by both the open pit and underground operation, providing high and lower‑grade
ore to the processing plant. Operational activity and production is expected to continue at above
nameplate capacity. Other mitigating factors include the continued focus on longer term growth and
expansion through exploration and acquisition targets both inside and outside of Egypt.
COMMENTARY
Until further production growth beyond Sukari
is identified, the potential impact remains high
and safeguarding the project is paramount to
the Company.
INTERNAL STRATEGIC RISK
Neutral
Sukari project joint venture risk
and relationship with EMRA
Whilst Centamin retains control over the project, the joint venture holding company, Sukari
Gold Mines (“SGM”), is jointly owned with EMRA with equal board representation from both
parties. The board of SGM operates by way of simple majority. As such, should the board of
SGM be unable to reach consensus on a matter requiring board level approval or in the event
of any dispute that may arise which can’t otherwise be amicably resolved, arbitration or other
proceedings may need to be employed to resolve any disputes.
EXTERNAL STRATEGIC RISK
Neutral
The Company does not currently hedge against the price of gold or exposure to currencies.
Gold price and currency exposure
INTERNAL STRATEGIC RISK
Neutral
Jurisdictional taxation exposure
The group’s corporate structure includes operational activity in Egypt and West Africa held
through holding companies in Australia and the United Kingdom.
These include ensuring co‑operative and timely correspondence, maintaining good relations with
EMRA and making sure that the terms and conditions of the Concession Agreement governing the
mine are fully complied with.
Current discussions with EMRA are focused on the cost recovery process and determining the exact
timing and quantum of the first payment of profit share for Sukari, as well as the interpretation of
certain provisions of the Concession Agreement. Centamin has shown its willingness to assist EMRA
through prepayments in relation to future profit share.
The successful management of the Sukari Gold
Mine is in part dependent on maintaining a good
working relationship with EMRA. The group has
regular meetings with officials from EMRA and invests
time in liaising with relevant ministry and other
governmental representatives.
Centamin manages its exposure to gold price by keeping operating costs as low as possible.
Revenues from gold sales are in US dollars and Centamin has exposure to costs in other currencies
including Egyptian pounds, Australian dollars and sterling. Natural hedges against currency
fluctuations are utilised wherever possible to offset foreign currency liabilities.
The group is 100% exposed to the gold price,
however, the cash costs of the Sukari Gold Mine
remain low compared with the industry norm.
Exposure to changing cross jurisdictional tax legislation could have an adverse effect of the
Company’s ability to repatriate revenues. The group engages tax advisers to provide local advice at
an operational level as well as corporate and structuring advice at a corporate level.
See note 7 in the financial statements for details of
the tax liability through the Australian holding group
of companies.
EXTERNAL STRATEGIC RISK
Improved
Political risk – Sukari
The Company’s operational activities are primarily in Egypt, a country which has been subject to
civil and military disturbance. Future political and economic conditions in Egypt could change with
future governments adopting different policies that may impact the development and ownership
of mineral resources. Policy changes and licensing may also impact the use of explosives, tenure of
mineral concessions, taxation, royalties, exchange rates, environmental protection, labour relations
and repatriation of income and capital. Changes may also impact the ability to import key supplies
and export gold.
The Concession Agreement with EMRA and the Egyptian government, was declared into Egyptian
Law no. 222 of 1994 which further protects the Company’s licence rights and sets the applicable
tax regime for a number of years. The law received full parliamentary approval as required by
Egyptian law.
EXTERNAL STRATEGIC RISK
Neutral
Political risk – West Africa
The Company operates in Burkina Faso and Côte d’Ivoire. There are no assurances that future
political and economic conditions in these countries will not result in the governments adopting
different policies in respect to foreign development and ownership of exploration and
exploitation licences.
INTERNAL OPERATIONAL RISK
Neutral
Reserve and resource estimate
INTERNAL OPERATIONAL RISK
Improved
Failure to achieve production estimates
EXTERNAL OPERATIONAL RISK
Improved
Litigation
Mineral resource and reserve figures are prepared by Centamin personnel and reviewed by
externally appointed independent geologists. By their nature, mineral resources and reserves
are estimates based on a range of assumptions, including geological, metallurgical, technical
and economic factors. Other variables include expected costs, inflation rates, gold price and
production outputs. There can be no guarantee that the anticipated tonnages or grades expected
by Centamin will be achieved both from the underground operation or open pit.
Centamin prepares annual estimates for future gold production from the Sukari Gold Mine.
There can be no assurance that Centamin will achieve its production estimates and such failure
could have a material and adverse effect on Centamin’s future cash flows, profitability, results of
operations and financial condition. It should be specifically noted that the potential quantity and
grade from the Sukari underground mine is conceptual in nature, that there has been insufficient
exploration to define a mineral resource and that it is uncertain if further exploration will result in
the target being delineated as a mineral resource.
Centamin’s finances, and its ability to operate in Egypt, may be severely adversely affected by
current and any future litigation proceedings and it is possible that further litigation could be
initiated against Centamin at any time. Centamin is currently involved in litigation that relates both
to (a) the validity of its exploitation lease at Sukari and (b) the price at which it can purchase Diesel
Fuel Oil. Full details of the current litigation can be found on page 133.
In respect to the Company’s operations in Egypt,
the potential for serious impact should be balanced
against the Egyptian government’s support of
Centamin’s investment and contribution to both
revenue and development of the mining industry.
New laws have been introduced to protect and
therefore encourage foreign investment which is
a positive step for the country. This new law was
recently confirmed by the newly installed Parliament,
although Law no. 32 remains subject to a challenge in
the Supreme Court.
Policies have developed over many years to
encourage foreign investment and the development
of mining operations, which continues to be the focus
of governments in these regions.
The most recent technical update was completed in
Form 43‑101 dated 23 October 2015 and is available
at www.sedar.com. Details of the reserve and resource
can be found on pages 50 and 51.
Centamin actively monitors legal and political developments, engaging in dialogue with relevant
government and legal policy makers to discuss all key legal and regulatory developments.
Management has implemented processes to continuously monitor and evaluate the current life of
the Sukari Gold Mine, mine plans and production targets.
The realisation of production estimates are dependent on, amongst other things: the accuracy of
mineral reserve and resource estimates; the accuracy of assumptions regarding ore grades and
recovery rates; the ore tonnes and grade mined from the underground operation which are outside
the current reserve base; ground conditions, a skilled and motivated labour force: processing
capacity and maintenance policies and logistics for consumables and parts.
Whilst there can be no certainties, production to date
has provided confidence in management’s estimation
and mine planning methods and with the fully
operational expanded processing plant, the prospect
of improvements in reliable forecasting is increased.
In order to mitigate this risk Centamin has (a) engaged appropriate legal advice and continues to
actively pursue its legal rights with respect to the existing litigation and its legal advisers believe that
Centamin will ultimately be successful in both of these cases; and (b) actively monitors both activity
in court and local media for signs of any legislative developments that may threaten its operations,
finances or prospects.
The potential for serious impact should be balanced
against Centamin’s adherence to local laws and
agreements, as well as the Egyptian government’s
support of Centamin’s investment and Law no. 32 of
2014 that should protect Centamin against litigation
of this nature as well the fact that Egypt and Australia
have in place a bilateral investment treaty.
36
Centamin plc Annual report 2015
STRATEGIC REPORT
RISK MANAGEMENT continued
One of our main objectives is to achieve a target of zero
injuries and for every employee to be safe every day.
The control environment and operating practices in place
at our mining and exploration operations help reduce
the likelihood of harm to our employees. We are also
committed to attracting, energising, developing and
training our workforce to ensure they are highly skilled
and motivated. In the fourth quarter, the Sukari Gold Mine
operation encountered its first fatality, when a contractor’s
employee was involved in a rock collapse whilst relocating
a grade control drill rig. The incident was thoroughly
investigated and more details on the incident can be found
in the CSR report on page 38 and operational report on
page 48. Earlier in 2015, an incident occurred in Burkina
Faso on a public road near the Konkera village which
resulted in a local employee being fatally wounded and
another sustaining injuries. A thorough investigation into
this bandit attack on two of our vehicles has been carried
out. Further additional security measures were implemented
following the incident.
We recognise the value of being a socially responsible
employer and the importance of engaging with the wider
community in the areas in which we operate. By investing in
the community and engaging in projects that directly and
positively impact local people, we can foster a co‑operative
working environment. Full details of our community
projects and local initiatives are set out in our CSR report on
page 46.
The trend column on page 34 indicates the relative
movement (either adverse, neutral or improving) for
each principal risk, over the last twelve months. This
trend represents the views of the Company based on
their experience operating and working in the relevant
jurisdictions.
Risk appetite
Risk appetite forms an integral part of corporate
governance and in defining risk appetite the board has
given consideration to the following:
a) the Company’s strategy, objectives and specific goals;
b) acceptable risk tolerances, the parameters for acceptable
risk and attitudes towards risk;
c) existing policies, processes and practices within the
group to ensure risks are managed within the acceptable
and agreed limits;
d) the competitive environment with consideration of
shareholders’ views and the need to reassess or more
fully communicate risk appetite; and
e) short‑term risk which needs to be specifically managed.
The group’s employees are paramount to the success of
the organisation and therefore the group’s policies and
procedures demand the lowest levels of risk appetite
and risk tolerance for employee and contractor health,
safety and wellbeing. The group has a higher risk appetite
towards its strategic objectives, such that risks are reduced
to reasonably practicable levels, in the pursuit of mineral
exploration, development and gold production. Meeting
environmental, regulatory and legal obligations takes
priority over other business objectives.
CENTAMIN PLC RISK MANAGEMENT PROCESS – INITIAL RISK IDENTIFICATION, DOCUMENTATION AND ASSESSMENT
d
r
a
o
B
Set corporate
objectives
Approve risk
policy and
strategy, and set
risk appetite
k
s
i
r
d
n
a
t
i
d
u
A
e
e
t
t
i
m
m
o
c
i
r
o
n
e
S
t
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e
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e
g
a
n
a
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l
a
n
o
i
t
a
r
e
p
O
t
n
e
m
e
g
a
n
a
m
If unsatisfied with
management’s view of risks
Review,
challenge and
approve risk
register
Identify key risks
to objectives
Assess and
analyse key risks
Consider risks in
relation to risk
appetite
Document
mitigating
actions and
sources of
assurance
Report to the
audit and risk
committee on
risks
Implement risk
management at
an operational
level
Risk
monitoring
Develop
operational level
risk registers
37
Centamin plc Annual report 2015
STRATEGIC REPORT
Fire safety
The May 2015 investor presentation, together with the
latest presentations can be viewed on the Company’s
website which contain the latest up‑to‑date operational
and financial forecasts.
As well as the May 2015 review, the directors’ overall
assessment took into account the Company’s resource and
reserve statement, which was completed in September
2015 and underpins longer‑term strategic and operational
projections. The relevant 43‑101 Technical Report can be
viewed at www.sedar.com and on the Company’s website.
The management team also considers strategic, operational
and compliance risks throughout the year and produces the
following reports and documents for board and audit and
risk committee review to support it in making the formal
viability statement:
• operational risk assessment register and corporate
risk matrix;
• annual impairment review;
• going concern review;
• life of mine model;
• business continuity planning; and
• monthly and annual budgets.
On the basis of all the procedures outlined above, the
directors confirmed on the date of this report that they have
a reasonable expectation that the Company will be able to
continue in operation and meet its liabilities as they fall due
over the five‑year period of their assessment.
The group’s risks may change over time, as will the group’s
risk appetite statement, as the external environment
changes and as operations are expanded into new
geographical areas. The risk management and review
process requires regular monitoring of the Company’s
existing risks and the identification of any new and
emerging risks facing the Company, including financial
and non‑financial matters. It also requires the ongoing
management of the appropriateness of the risk mitigation
in place.
Viability statement
In accordance with provision C.2.2 of the Code, the
directors have assessed the Company’s prospects over
the longer term, addressing a period of five years. A key
part of the directors’ assessment was a review carried out
in May 2015 for business reasons which also assisted the
process of formalising a review of the longer term viability
of the Company. The assessment took into account the
Company’s position and progress against its four strategic
focus areas including generating free cash flow, shareholder
return, growth and social responsibility. The strategic focus
areas are set out on page 18. In addition, the Company
considered the potential impact on its principal risks, and
also considered how its appetite for risk might affect the
assessment. The May 2015 review allowed management
to share the Company’s strategic objectives with key
stakeholders and to explain the Company’s business model
and its prospects over the coming five years.
The review received board approval and formed the basis of
an investor presentation. The financial forecasts used in the
review included key assumptions about gold price, future
production levels, operating and capital costs, cash flows
and the group’s balance sheet and shareholder returns.
The operational forecasts included mining and process
plant throughput levels, grades and metallurgical recovery
rates. The operation at Sukari has a low cost‑per‑ounce of
production compared with other operating mines, which
contributes to the Company’s longer term viability.
Although the business does prepare plans over a longer
time horizon, notably in the Sukari life of mine models, the
Company chose five years for its viability statement due
to the level of rigour and detail involved in the May 2015
review process.
As part of the May 2015 review process the potential
impact on the group’s principal risks was considered, at
both a strategic and operational level. Of the principal risks
identified on pages 34 and 35 those with the most potential
to impact negatively upon the Company’s ongoing viability,
include the gold price, the relationship with its joint venture
partner, political risk and the ongoing litigation in Egypt.
A sensitivity analysis was carried out on the key inputs to
the financial and operational forecasts, including sensitivity
analysis on the average gold price.
38
Centamin plc Annual report 2015
STRATEGIC REPORT
CORPORATE SOCIAL RESPONSIBILITY
The HSES committee is
focused on maintaining a safe
environment to work, with
opportunities for our employees
to train and develop their skills.
Trevor Schultz
Chairman of the HSES committee
Dear shareholders
I am presenting this report in my capacity as chairman of the
health, safety, environmental and sustainability committee
(“HSES”), a committee of the board of Centamin plc.
The committee is responsible for making recommendations
to the board on all matters in connection with issues of
the environment, workplace health and safety, and the
development of sustainable engagement with communities
and stakeholders.
During the year the HSES committee worked closely with
management on the following matters:
• review monthly and quarterly reporting on corporate
sustainable development issues and initiatives;
• develop and implement HSES policies in Burkina Faso
and Côte d’Ivoire;
• complete existing community initiatives at Sukari and the
neighbouring town, Marsa Alam;
• steer community initiatives in Burkina Faso and
Côte d’Ivoire;
• review of environmental, health, safety and contingency
planning issues; and
• review of incident reports relating to the two fatalities
occurring in 2015 (one incident in Burkina Faso and one
incident occurring at Sukari).
Key issues were raised by the committee during the year
and in particular the committee assisted in progressing the
segregation of material in the scrap yard at Sukari.
The committee was also encouraged by the level of training
undertaken at Sukari, with many employees achieving
certification following tailored training programmes in the
following areas:
• fire safety training;
• emergency response training; and
• hygiene standards.
One of our main priorities is for each employee to return
home safely at the end of each day having worked in a
zero‑harm environment. Our safety and LTIFR has improved
further this year; however, it is regrettable that Sukari
experienced its first fatality during 2015. An unfortunate
incident occurred within the open pit operation, when a
contractor’s employee was involved in a rock collapse whilst
relocating a grade control drill rig. The operator, and sole
occupant of the drill rig, was fatally injured in the incident.
The committee was consulted and informed by
management as the incident, the response and the
follow‑up investigation unfolded. The committee praised
the work of the response team and also the leadership
onsite in the aftermath of the incident, ensuring personnel
received regular and reliable information. The committee
is working with management regarding implementation of
additional safety measures for any area of the operation
where there is scope for improvement.
The committee has also been involved in the security
assessment and follow up community work following the
unfortunate incident in early 2015 in Burkina Faso. The
incident, which occurred on a public road near the Konkera
village, resulted in one of our local employees being fatally
wounded and another sustaining injuries.
The wellbeing of our employees is a priority for Centamin
and the committee will continue to ensure that health and
workplace safety remain at the top of the agenda.
The report below covers the key HSES issues for Sukari
and concludes with information relating to the exploration
activity in Burkina Faso.
Trevor Schultz
Chairman of HSES committee
21 March 2016
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Centamin plc Annual report 2015
STRATEGIC REPORT
HSES
CASE STUDY – TOOL BOX TALK
The HSES committee members at the date of this report
are Trevor Schultz (chairman), Mark Bankes and Kevin
Tomlinson, all of whom are independent directors of the
Company. The previous chairman of the committee, Bob
Bowker, retired in January 2015.
Health and safety
Centamin is committed to minimising health and safety
risks to a reasonably practical level, while striving for a
zero‑harm and productive work place. We have designed
and implemented systems, procedures and measures to
manage occupational health and safety risks. Such systems
are implemented in full conformity with local legislation,
licence and permit conditions, as well as international best
practice standards.
In 2015, we were able to reduce the LTIFR further and we
continue to strive for an injury‑free environment.
Safety-conscious culture
We realise that safety is the responsibility of all employees
and pursue the development of a safety culture at our
sites. We do this by empowering employees, giving them
responsibility for their wellbeing as well as the safety of the
colleagues they work alongside. Through training, coaching
and leading by example, our employees are fully aware of
the safety requirements and standards expected.
Safety is a main element of discussion in pre‑shift, daily
planning and weekly safety meetings. Safety alerts are also
periodically issued and sent to all employees.
Proactive approach and emergency response planning
The HSES team onsite prepare and train to respond quickly
to emergencies. We have developed a detailed emergency
plan with full response and rescue procedures for different
potential risk scenarios. The plan is coupled with emergency
arrangements for different areas of the operation.
Risk assessment is integral to all operational activities onsite
and we continuously evaluate potential and actual hazards,
their probability and likely outcomes, to determine the
level of risk and appropriate risk mitigation and safeguards.
A variety of different procedures and systems have been
developed and implemented including job hazard analysis
for new and non‑recurrent activities.
We undertake emergency drills to test our performance
and our equipment. In 2015, we undertook 53 emergency
drills covering different risk scenarios to test our emergency
response, rescue and evacuation capabilities.
An inspection and maintenance programme is implemented
to ensure all emergency response equipment is fit for use at
all times.
The tool box talks are an effective and easy method of
safety communication. Full‑time trainers are available in
almost all operational departments to provide in‑field
training and coaching for the work force. Tool box talks
before shifts are used to address safety issues, to share
tips and lessons learnt.
The talk provides an environment for interactive
discussion and promotes a safety‑conscious culture.
This timely safety communication addresses numerous
safety aspects and supplements formal training. Our
safety professionals are continuously developing
material for the talks in a simple form using brief text,
photos and drawings. The tool has proved to be a very
successful method of continuous safety learning.
The Company is committed to continuously training
the employees through a comprehensive safety training
and coaching programme:
• a tailored safety induction for new employees,
contractors and visitors;
• incident investigation;
• training modules addressing job hazard analysis,
risk assessments, incident investigations, work
permits, first aid, fire extinguishing, and hazard
identification; and
• technical competence tuition, such as isolation
training, lifting procedures, confined space entry,
hot work and working at height.
Training is repeated regularly through refresher courses
and employees are all tested to ensure a high level
of understanding and application. The training is
undertaken by the onsite HSE department. Mandatory
training is rolled out for all departments, encompassing
area‑specific training, field training and coaching.
LOST TIME INJURY FREQUENCY RATE
(per 200,000 working hours)
1.25
0.69
0.36
0.39
0.12
2011
2012
2013
2014
2015
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STRATEGIC REPORT
CORPORATE SOCIAL RESPONSIBILITY continued
Monitoring methodology includes measurements, medical
surveillance, auditing and visual inspection, as well as
systematic observation of the work and behaviour of staff.
Measurements are performed through in‑house capabilities
as well as third‑party entities. Reactive or responsive
evaluation is also undertaken to investigate and analyse
incidents and to identify root causes to help implement
corrective measures. The information collated from these
processes is reported to the committee on a monthly and
quarterly basis.
All employees and contractors are required to report all
hazards, near‑misses and incidents for investigation and
analysis. This embodies the principles adopted by the
HSES policies and procedures that everyone shares and
contributes in a responsible manner to creating a safe
working environment.
Our safety performance in 2015 saw a considerable
improvement in our lost time injury (“LTI”) frequency rate
and a slight increase in our medical treated injury (“MTI”)
frequency rate. We have had one fatal incident at Sukari
which occurred in 2015.
This incident was investigated and duly reported to
authorities and occurred within the open pit operation,
when a contractor’s employee was involved in a rock
collapse whilst relocating a grade control drill rig. The
operator, and sole occupant of the drill rig, was fatally
injured in the incident.
2015
frequency
2014
frequency
2013
frequency
rate(1)
rate(1)
rate(1)
2012
frequency
rate(1)
Fatality injury
(“FIFR”)
Lost time
injury (“LTIFR”)
Medical
treatment injury
(“MTIFR”)
0.04
—
—
—
0.12
0.39
0.36
0.69
0.6
0.39
1.28
1.37
(1) Per 200,000 working hours.
CASE STUDY – ESTABLISHING A CAPABLE
EMERGENCY TEAM
Creating and maintaining a qualified emergency team
is an essential element of emergency preparedness.
At Sukari, we have structured a very competent
response and rescue team to be immediately
mobilised in case of emergency situations. The team
has received ample training and was coached for a
year by a resident emergency response expert. The
capacity building programme includes theoretical and
practical training as well as drills to simulate different
emergency situations. The team is equipped with the
required response equipment, supplies and rescue
facilities. A training plan is implemented to ensure full
competence of the team. As noted earlier, in the HSE
chairman’s summary, the committee praised the work
of the response team at Sukari in the aftermath of the
unfortunate incident that occurred within the open pit
operation in the fourth quarter.
Contractor management
All contractors operating onsite are required to adhere to
the implemented safety management system, whether
they work for long periods of time or for short assignments.
Currently there are around 485 permanent contractors
at Sukari.
We provide and share information with our contracting
teams, in support of our compliance and safety procedures.
Contractors are provided with a standard health and safety
induction upon their arrival at site and given full access to
health services available onsite.
Tracking safety performance and safety
performance indicators
A core element of our management system is to assess our
safety performance and identify areas for improvement. The
evaluation of our safety performance is essential to indicate
the effectiveness of our systems and controls and to identify
opportunities for continuous improvement. In that regard,
we have monitoring systems in place for:
• workplace and occupational health parameters;
• occupational health parameters to detect health impacts
due to work‑related matters;
• fitness to work to detect personnel under the influence
of alcohol or illegal drugs;
• implementation of safety procedures and standards to
ensure they are assimilated and adhered to; and
• stability of structures to detect any potential movement,
cracks or other instabilities.
Fire drill training at Sukari
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STRATEGIC REPORT
We provide quality health service for our employees
onsite and offsite through a comprehensive health
insurance system.
Our employees and contractors
Our people are core to the success of our business.
We are committed to attracting, energising, developing
and retaining a highly skilled and experienced workforce.
The Company’s activities provide direct and indirect
employment, training and work experience for many
Egyptian employees. Our workforce has witnessed
considerable growth since we started production in 2010,
both in terms of the number of employees and the range
of skills and expertise of our workforce.
In Egypt, we employ 1,316 people of whom 95% are
Egyptian. The remaining 5% are experienced expatriate
mining professionals, which is well below the 10% maximum
expatriate limit mandated by Egyptian law. Approximately
50% of our Egyptian nationals are from Upper Egypt,
the area where Sukari is situated, which typically has less
economic activity than the more prosperous areas around
the Nile Delta.
Only 1% of our Egyptian workforce are women and they
work in the group’s office in Alexandria – this is mainly
because social conditions in Egypt and in the Middle East
in general do not encourage the work of female employees
in remote sites away from their families.
The table below sets out the number of people employed
by the group (excluding contractors) by country, during the
years stated.
Health and wellbeing
We pay the utmost attention to the wellbeing of our
employees and their protection from exposure to
occupational health risks. We provide protective measures
and equipment for different operations ensuring the
equipment is appropriate for the working conditions.
Medical tests, including blood analysis, are conducted
regularly, particularly for laboratory personnel and those
working with chemicals and metals. In 2015, the following
tests and measurements were also carried out and the
outcomes were as follows:
• internal health and hygiene audits confirmed the results
were within acceptable limits;
• water quality sampling and analyses carried out by an
external laboratory confirmed no major anomalies; and
• work environment monitoring and personal exposure
levels recorded no anomalies and confirmed that Sukari
was compliant with required standards.
CASE STUDY – HEALTH SERVICES AT SUKARI
Sukari has a well‑equipped clinic providing health
and emergency related services on a 24 hours a day,
seven days a week basis. A doctor and qualified nurse
manage the clinic and provide professional services in
normal conditions. It is also equipped to respond to
emergency situations. A medical evacuation scheme
(“MEDIVAC”) is in place supported by first aid facilities,
as well as an ambulance for transportation to the
nearest hospital.
Our health programme has a special focus on food safety
and hygiene, given we have a large mess that provides
meals to about 1,500 employees and contractors per
day. We employ in‑house health and hygiene officers
who supervise food safety and undertake inspection and
auditing on all components of the system. Periodic external
audits are also undertaken for verification. In 2015, the
programme yielded very satisfactory results and a higher
level of hygiene was achieved and maintained.
Year ended
Year ended
31 December 31 December 31 December 31 December 31 December 31 December
2010
Year ended
Year ended
Year ended
Year ended
2015
2012
2011
2014
2013
Year ended
30 June
2010
Egypt
Australia
Jersey
Ethiopia
Burkina Faso
Côte d’Ivoire
Total
1,316
1,296
1,340
1,120
1,106
985
816
1
10
3
102
30
1
10
31
64
11
1
9
37
—
—
1
7
45
—
—
2
2
47
—
—
2
—
—
—
—
3
—
—
—
—
1,462
1,413
1,387
1,174
1,157
988
819
The table above excludes contractors onsite. The number of contractors onsite at Sukari, Egypt during the year averaged
485 individuals.
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CORPORATE SOCIAL RESPONSIBILITY continued
Human resources principles
Our recruitment procedures and standards are innovative
and target those who will have not only the relevant
competence, skills and qualifications, but who have
potential for growth and development and could integrate
within a large work team working in a remote area.
Our human resources policy provides the framework within
which we operate. It delineates the rights, obligations and
benefits for employees. Our policies ensure:
• all employees have the same rights and obligations and
there is no discrimination based on religious grounds,
nationality or political views;
• employment decisions, such as hiring and promotion are
based on the ability of a person to perform the job in
question, without regard to personal characteristics that
are unrelated to the inherent job requirements;
• harassment of employees by anyone and in any way is
not tolerated;
• any practices of forced and compulsory labour are not
allowed in any work related to our activities;
• all employees are entitled to a safe healthy work
environment, and each employee is accountable
for HSE performance in the Company;
• child or forced labour is prohibited, whether in our
permanent employment or in contractors’ workforces;
and
• we are committed to the highest ethical standards and
behaviours as firmly rooted in our Code of Conduct.
The code secures the adherence to set principles and
promotes confidence in the integrity of the Company.
Contractors are required by their agreements to abide by
these requirements, and follow‑up checks are carried out to
establish that our conditions are met.
We expect all employees to uphold our core values of
honesty and integrity. All employees are encouraged
to treat their fellow colleagues with respect, dignity
and common courtesy. All employees are required to
understand and act in accordance with the Company’s
requirements and to fully integrate within the work team.
Annual performance appraisals are undertaken for all
employees. The appraisal covers several areas including
the employee’s job knowledge, skills attained during
the year, quality of work, initiative and innovation. The
appraisal is undertaken by the immediate supervisor and
the performance is agreed with the section head. The
process also identifies the need for training or coaching,
modification of responsibilities or opportunities to
undertake more challenging roles and responsibilities.
Capacity building and development
We actively invest in securing the full spectrum of skills and
competencies needed for effective operations. We adopt
a comprehensive development plan for each position
to enhance skills and qualifications for the Egyptian staff
to become a workforce of international repute in the
mining industry.
We work with all our employees closely and encourage
those who show keenness and desire to develop new
personal skills and experience. External training is arranged
either onsite or abroad. Special training programmes for
databases, software and surveys are designed to include
distant follow‑up and support.
We value regular communication and feedback with
employees which helps enhance the efficiency, effectiveness
and safety of everyday activities and overall operational
performance.
Recreational facilities onsite
In addition to creating a positive work environment, the
Company believes it is important that employees enjoy their
time before and after work. The majority of our staff live
in the Sukari camp, and thus we have invested in a variety
of leisure facilities such as playing fields, a gymnasium,
a library, internet access and satellite television. Special
barbecue dinners are also held at the beach or around
Sukari and sports tournaments are regularly organised.
Sukari has also arranged accommodation complexes
outside the site in Marsa Alam city centre.
Underground core samples
assessed by operator
The environment
Our HSE policy outlines our commitment to environmental
responsibility. One of Centamin’s core values is to minimise
the environmental impact and risk of an environment
incident from its operations, to a reasonably practical
level. We remain committed to maintaining, and whenever
possible exceeding, the high level of environmental
performance that we have achieved in 2015.
An environmental and social impact assessment
(“ESIA”) was prepared as part of the project feasibility
study at Sukari. We strive to maintain high standards
of environmental performance. We meet, and where
possible, exceed relevant legal requirements. The system
is supported by a robust documentation system that ensures
the maintenance of required registers, documents and
renewal of required permits.
The environmental management scheme for the Sukari
project includes a monitoring programme designed to
evaluate compliance with environmental laws, regulations,
Company policies and international best practice. The
system covers waste management; material, water and
energy management; management of hazardous substances
and chemicals and biodiversity management.
Maintaining an environmentally responsible culture
Employees are made aware of their environmental
responsibilities and relevant procedures through a number
of means. We maintain an established programme of
environmental training and awareness. The programme
addresses different environmental fields including chemical
management; waste management; emissions and water
conservation, as well as general environmental management
practices. Other forms of awareness are undertaken through
meetings and tool box talks.
Resource management
Systems and procedures are in place to ensure efficient
and safe handling of material used at the mine including
chemicals and hazardous materials.
Risk assessments are carried out for handling and usage
of all chemicals and hazardous materials. Controls include
containment, automatic alarms and shut‑off systems.
Preventative maintenance programmes for tanks and
equipment are also in place. Our emergency response
system include spill prevention and response measures.
We fully acknowledge the importance of managing
chemicals in a sound manner so as to minimise harm to
the environment and the health of employees. Hazard
communication and chemical management handling
is a core component of our training programme and
our continuous education system. The systems in place
ensure safe transportation, storage, labelling and handling
of chemicals.
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Recreational area and
facilities at Sukari
Water management and groundwater protection
Water is a crucial input for our processes, thus it is essential
to secure and maintain a sustainable source of water for our
operations. In an area with limited fresh water resources,
we rely on a sea water intake and pipeline from the Red
Sea to provide a sustainable water supply to the mine.
As a secondary source of water, we have beach wells where
sea water infiltrates through the soil. We have desalination
plants for generating fresh water for the process plant and
for domestic use.
The sea water pumped to site is used, and then recycled
throughout the process plant ensuring optimum usage
of this resource. This is undertaken through an internal
recycling system where different water streams are deployed
in closed‑loop systems to reduce consumption as much as
possible. We strictly monitor our water use and strive to
adopt measures for efficient use of water.
In 2015, we used a total of 9,743,584m3 per year with an
increase of 18% on 2014 (8,298,474m3). About 99% of the
water consumed at Sukari is sea water, which has no impact
on fresh water resources.
Desalinated water used in camps and offices is tested to
ensure its quality in terms of chemical and bacteriologic
parameters. Bottled water (used for drinking) is also
periodically tested to ensure supplier standards and storage
procedures are maintained. All samples are compliant with
Egyptian legal requirements.
Groundwater protection measures have been incorporated
in the design of the tailing storage facility and other
components where a layer of gypsum and a HPDE
liner are used to prevent seepage. Workshops have
concrete working areas to prevent seepage. We monitor
groundwater quality through monitoring bores downstream
from the tailing storage facility to detect any potential
contamination. In 2015, the monitoring of these bores
showed no contamination.
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CORPORATE SOCIAL RESPONSIBILITY continued
Energy
Marsa Alam, the region in which the Sukari mine is located,
is a remote area with no direct connection to any power
grid. The city has its own power plant whose capacity is
only sufficient for residential use not industrial needs.
Our monitoring activities in 2015 confirmed that we
remained within legal requirements and international best
practice standards in respect of the following areas:
• ambient air quality in the camp area (in terms of dust
and emissions);
Consequently, the project at Sukari powers the
entire processing plant through its own onsite diesel
power station.
In 2015, Sukari consumed a total of 130,687,478 litres of
diesel, an increase of 20% from 109,422,636 litres in 2014.
About 68% of this quantity is used in power generation
and the rest is used in operating mobile equipment and
vehicles, and in operation.
Calculation of the direct greenhouse gases (“GHG”)
emissions is based on the Intergovernmental Panel on
Climate Change Guidelines for National Greenhouse Gas
Inventories. In 2015, the Sukari mine generated 367,588(1)
tonnes of CO2 equivalent against production of 439,072
ounces per annum. The emissions intensity for 2015 was
0.84 tonnes of CO2 equivalent per ounce of gold produced.
(1) Scope 1 emissions are direct emissions occurring from sources that are
controlled directly through the operating company, Sukari Gold Mines.
There are no material external purchases of power. Exploration beyond
Sukari and overheads occurring at the corporate offices in other locations
are not considered material for the purposes of these calculations.
Fuel
consumption
(litres)
CO2
CO2
equivalent
equivalent per ounce
of gold
(tonnes)
2014
2015
109,422,636 308,146
130,687,478 367,588
0.82
0.84
A review of alternative fuel sources to supply the
processing plant is ongoing, but to date there have
been no viable alternatives.
Emissions, effluents and wastes
Systems and procedures are in place for sound
management of different environmental aspects including
emissions, effluents, non‑process waste, waste rock and
tailings. The system is based on setting annual plans;
development of documented procedures and standards;
awareness and training of employees and monitoring of
performance to achieve further improvement.
All our industrial wastewater streams are recycled within
the process. Sewage is treated in a tertiary wastewater
treatment plant and the treated water is used in
landscaping. Periodic inspections are conducted on the
treated wastewater and monitoring is undertaken for
its effluent.
• dust concentration in different work areas;
• noise and illumination;
• work environment emissions, including carbon
monoxide, sulphur dioxide and ammonia;
• stack emissions due to fuel combustion;
• quality of treated wastewater; and
• quality of groundwater.
The waste management system in place at Sukari, Egypt
includes procedures for the handling, storage and disposal
of waste. The system is focused on:
• waste minimisation through different measures to reduce
generation of waste;
• maximising onsite recycling and reuse of different types
of wastes;
• recovery of valuable material from the waste;
• reuse of treated wastewater streams; and
• disposal of discarded material in an environmentally
acceptable manner.
We maintain a salvage area where valuable wastes are
temporarily stored until transferred offsite or recycled
in different areas onsite. A key focus for the committee
has been improving the rate at which waste material is
transferred offsite or recycled and this is an ongoing task.
CASE STUDY – CREATING VALUE FROM WASTE
At Sukari, we believe that waste has a value that must
be recovered to the most practically feasible extent.
In that respect:
• waste oil is recovered from oily filters before
disposal, waste oil is recycled offsite within a
national system;
• food waste is transported off site to our
neighbouring Bedouins to use as animal fodder;
• spent chemical solutions are recycled in the process
plant after appropriate treatment;
• empty plastic containers are cleaned and used as
waste baskets all over the site; and
• discarded timber is used to make benches at the site
and in Marsa Alam streets.
45
Centamin plc Annual report 2015
STRATEGIC REPORT
Biodiversity
Centamin is committed to protecting the wildlife unique
to the eastern desert by minimising the impact of our
operations on the environment. We are conscious that the
sea near Sukari is renowned for its crystal clear water, and
includes a variety of coral reefs and marine biota. The desert
environment is characterised by its scarce terrestrial
biodiversity resources, and the area of Marsa Alam also
includes the Wadi El‑Gemal protectorate, one of Egypt’s
largest environmental protectorates, with about 100km of
pure beach and desert landscapes.
Biodiversity conservation principles were integrated into the
project design for Sukari from the outset and are applied to
all of our activities.
There were no incidents reported of negative impact on
wildlife as a result of operations at Sukari during 2015.
Land management and rehabilitation
We are committed to transferring Sukari to a stable and
self‑sustaining condition after closure. Due consideration
will be given to environmental and social impacts to avoid
long‑term challenges for neighbouring parties.
The planning for the closure of the mine aims to ensure
that a physically and chemically stable landform is
maintained, with minimal erosion and minimal potential
for dust generation and that the hazards are reduced to
levels equal to or below those naturally existing within the
surrounding environment.
Forest and farmland
in Burkina Faso
Our restoration and rehabilitation plan is updated each year
to account for all components and activities within the mine.
A provision for restoration and rehabilitation is included in
the annual budget. The provision for future restoration costs
is the best estimate of the present value of the expenditure
required to settle the restoration obligations at the
reporting date.
In addition to the long‑term rehabilitation plan, we
undertake short‑term rehabilitation activities especially
for construction sites and for clean‑up of spills.
Community and society
Centamin recognises that it has a responsibility to support
and enhance the community in which it operates, and
to minimise its impact on the environment and local
people at every stage of its activities. We consider good
community relations as a key component of continued
operational success as well as a corporate requirement.
We are committed to acting in a socially responsible manner
at all times.
Stakeholder engagement
We nurture dialogue and build relations with the local
community in areas in which we operate. We maintain
open channels of communication with all our stakeholders.
A public consultation system has been in place at
Sukari since the project design phase, and during the
construction phase. With mining in operation we have
maintained open channels of communication with all our
stakeholders for the purpose of information disclosure
and for them to raise grievances or concerns. In providing
these opportunities we have been pleased to find that,
throughout 2015, as in previous years, the Sukari mine
continues to enjoy full support from the local community
and government authorities.
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Centamin plc Annual report 2015
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CORPORATE SOCIAL RESPONSIBILITY continued
Community development initiatives
In 2015, we have continued our support and contribution
to community development in Marsa Alam and Red Sea
area at large. Initiatives were designed and implemented
to address community needs and were implemented where
possible through full collaboration and coordination with
local authorities, community groups and associations. Our
interventions addressed projects with a variety of focuses:
• infrastructure needs;
• income generative initiatives;
• social activities;
• enhancing education;
• social welfare.
Infrastructure initiatives:
• provision of additional generators and related
transformers to add 3.2MW to Marsa Alam
power station;
• continuing to supply electricity to a neighbouring
Bedouin settlement of 200 people;
• supporting the youth centre at Marsa Alam;
• financing the maintenance activities undertaken in
Marsa Alam institutes and schools;
• maintenance and changing tiles for one of the
Marsa Alam squares; and
• installing tiles in a Marsa Alam mosque.
Income generation activities:
• provision of food waste to neighbouring Bedouins for
grazing purposes.
Social involvement activities:
• organising a marathon along Marsa Alam and
Edfu roads;
• sponsoring local events and celebrations including the
orphans’ day, police day and the environment day;
• donation of equipment and furniture to local authorities
in Marsa Alam;
• maintenance activities for the civil defence centre in
Marsa Alam; and
• providing furniture for an infants’ nursery in Marsa Alam.
Enhancing education:
• training of 66 geology and engineering students at
Sukari in the summer vacation;
• organising field visits to Sukari for 660 students
and officials; and
• provision of furniture to Marsa Alam nursing school.
Social welfare contributions:
• financing surgery for Bedouins in the Marsa Alam
hospital;
• financing daily iftars during Ramadan for unprivileged
individuals in Marsa Alam; and
• distributing food at feasts.
Advanced exploration
Burkina Faso
Integration of Company policies
The Company’s health, safety and environmental policies
and standards are being integrated into the Batie
operations where relevant. These include:
• provision of health services at camp;
• training and induction requirements;
• incident investigation and reporting requirements;
• internal communication mechanisms;
• vehicle safety requirements; and
• contractor management.
Safety performance
The safety performance of Batie project is monitored and
evaluated and is, in general, satisfactory.
Fatality injury (“FIFR”)
Lost time injury (“LTIFR”)
Medical treatment injury (“MTIFR”)
(1) Based on 200,000 working hours.
2015
frequency
rate(1)
0.2
0.62
0.21
In February 2015, an incident occurred on a public road
near the Konkera village which resulted in one of our local
employees being fatally wounded and another sustaining
injuries. Further additional security measures have been
implemented following the incident.
Health services
The Batie camp site has a well‑equipped clinic operated by
ISOS and the clinic has a full‑time paramedic. The camp is
also equipped with an ambulance to transfer cases to the
nearest medical centre in Batie or to hospital in Gauoa.
The clinic is accessible to employees at all times and
provides quality health services with a particular focus
on malaria. Through applying protective measures and
through employee awareness programmes, the malaria
frequency rate was maintained at 43 per 1,000 people
in 2015 compared to the 225 country frequency rate in
Burkina Faso as a whole.
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Environment
An environmental impact assessment study (“EIA”) has been
carried out in accordance with Burkina Faso legislation.
Of particular note in connection with the EIA were the
specific issues relating to the social environment and these
were identified, as follows:
• relocation of communities directly impacted;
• relocation of cashew tree plantations;
• identification of sacred and religious sites;
• social acceptability and job creation;
• economic impact assessment; and
• community projects.
The process of developing the EIA included a stakeholder
consultation for the project and the associated relocation
requirements. The proposed Batie project extends to
villages and occupied areas and thus some farms, houses
and public areas will need to be relocated. A relocation plan
has been prepared taking account of the views expressed
in the consultation including those of farmers, land owners,
local chiefs. Local committees have been formed to follow
up the process. With the further optimisation and design of
the project, the relocation plan will be refined accordingly.
An important component of exploration activities is the
rehabilitation of sites. There are procedures to ensure the
safe, stable and environmentally sound closure of pits
and wells immediately after completion of works. Drilling
contractors are required to implement such procedures at
all their drilling sites.
Community and society
Stakeholder engagement remains a key element throughout
the exploration and advanced exploration phase. This will
become increasingly important as the Company proves
the resource and is able to develop an operating mine in
the region. Centamin, through its local subsidiaries, will
continue to engage with the local community in relation to
its projects in Batie.
Stakeholder engagement is undertaken through individual
and group meetings to discuss concerns. These include:
• access to exploration lands
• identification of sacred sites that must not be disturbed
• compensation for removing trees or disturbing land
• conflict management
Community development initiatives
Community development in 2015 had tackled several
objectives including enhancing:
• education;
• health services;
• social involvement; and
• livelihood.
Enhancing education
• internship for two technical students at the mechanical
department at Batie camp; and
• internship for two geology students in the
exploration department.
Enhancing health services
• supporting Batie medical centre through providing
antivenins, running water, power access, analysis
equipment, and financing hygiene services; and
• repair of water bore for the Wadaradoo maternity clinic.
CASE STUDY: SUPPORTING BATIE MEDICAL CENTER
Our community development team has undertaken
visits and discussions with the Batie medical centre
to identify needs for enhancement of health services
and responding to emerging needs. As a result the
following have been carried out:
• provision of antivenins for snake attacks;
• construction of a water tank and related connections
to provide running water in the centre;
• implementing solar energy installations to provide
lighting to critical areas in the centre;
• provision of advanced haematology equipment
and kits; and
• provision of cleaning kits and contracting
professional cleaning services to ensure high levels
of hygiene.
Social involvement:
• sponsorship of, and participation in, community
events and celebrations; and
• support for vulnerable students in education.
Enhancing livelihood:
• establishing two water bores in Danhal
tenement; and
• supplying 50 bicycles for students with excellence
achievements.
48
Centamin plc Annual report 2015
STRATEGIC REPORT
OPERATIONAL REVIEW
49
Centamin plc Annual report 2015
STRATEGIC REPORT
In this section we feature our operational performance and
exploration review for 2015.
The open pit delivered total material movement of 57.8Mt,
an increase of 28% on the prior year.
Health and safety – Sukari
The LTIFR for 2015 was 0.12 per 200,000 man‑hours
(2014: 0.39 per 200,000 man‑hours), with a total
of 5,032,828 man‑hours worked during 2015
(2014: 5,620,444). Continued development of the onsite
health and safety culture has resulted in improved reporting
of incidents.
Against this positive result, an incident occurred within
the open pit operation during the fourth quarter, when a
contractor’s employee was involved in a rock collapse whilst
relocating a grade control drill rig. The operator, and sole
occupant of the drill rig, was fatally injured in the incident.
Centamin remains committed to further improving health
and safety during 2016 towards our zero‑harm target.
Open pit
The open pit delivered total material movement of 57.8Mt,
an increase of 28% on the prior year. This increase was
related to improved fleet utilisation and productivity,
together with incremental blasting rates following the
increased daily usage of ammonium nitrate (“AN”) from
October 2014. Mining continued to focus on the Stage 3A
and 3B areas and the northern and eastern walls of the
open pit, in line with the mine plan.
Ore production from the open pit was 8.75Mt at 0.75g/t,
with an average head grade to the plant of 0.78g/t. The
ROM ore stockpile balance decreased by 1.5Mt to 0.7Mt
by the end of the year. Ore mining was primarily from the
Stage 3A area, which provided access to higher‑grade
sulphide portions of the ore body during the second half
of the year.
Underground mine
The underground mine produced a record 1.16Mt of ore,
a 20% increase on 2014. Ore from stoping accounted for
52% (0.60Mt) of the total and 48% (0.56Mt) was ore from
development. Ore tonnages from stopes increased by
18% on the previous year.
The average mined head grade was 6.5g/t, in line with
our forecast. The average grade from stoping was 6.9g/t
(an increase of 5% on 2014) and the average grade from
development was 6.0g/t (an increase of 9% on 2014).
Underground development took place over 8,501 metres,
including progression of the Amun and Ptah declines.
Of this total, there was 6,864 metres of development
in mineralised areas between the 845 and 680 levels (5,389
metres in Amun, and 1,466 metres in Ptah) associated with
stoping blocks planned for mining over the coming years.
The exhaust ventilation circuit for the Ptah decline was
progressed, ensuring sufficient ventilation as the decline
extends deeper into the orebody. Ore drive development
continued on the Ptah P810, P790, P775, P745 and
P735 levels.
A total of 12,277 metres of grade control diamond drilling
were completed, aimed at short‑term stope definition,
drive direction optimisation and underground resource
development. A further 26,835 metres of HQ and NQ
drilling continued to test the depth extensions below the
current Amun and Ptah zones.
Processing
The Sukari plant processed 10.6Mt of ore in 2015, a
26% increase on 2014 and reflecting the ramp‑up of the
expanded plant circuit. The annual tonnes processed were
6% above the nameplate capacity of 10Mtpa. Productivity
continued to increase throughout the year, with 2.76Mt
processed during the fourth quarter, representing a 13%
increase on 2014 annual productivity rates and achieving
the plant’s minimum expected long‑term rate of 11Mtpa.
The average metallurgical recovery was 88.8%, a 1.1%
increase on 2014. Work is continuing to optimise the
operational controls and improve circuit stability to ensure
recoveries are maintained above 88% at the increased rate
of throughput.
The dump leach operation produced 15,642oz in 2015.
Sukari Gold Mine production summary
Open pit mining
Ore mined(1) (‘000t)
Ore grade mined (g/t Au)
Ore grade milled (g/t Au)
Total material mined (‘000t)
Strip ratio (waste/ore)
Underground mining
Ore mined from development (‘000t)
Ore mined from stoping (‘000t)
Ore grade mined (g/t Au)
Ore processed (‘000t)
Head grade (g/t)
Gold recovery (%)
Gold produced – dump leach (oz)
Gold produced – total(2) (oz)
Cash cost of production(3)(4) (US$/oz)
Open pit mining
Underground mining
Processing
General and administrative
Gold sold (oz)
Average realised sales price (US$/oz)
Year ended
31 December
2015
Year ended
31 December
2014
Q4 2015
8,746
2,229
10,936
0.75
0.78
0.77
0.75
0.80
0.97
Q4 2014
4,123
1.00
1.31
57,766
13,754
44,820
13,804
5.6
5.17
3.1
2.4
560
598
6.47
151
149
7.05
10,575
2,758
1.40
88.8
1.47
88.5
464
504
6.10
8,428
1.56
87.8
15,642
3,417
15,564
115
169
5.43
2,597
1.71
87.0
2,564
439,072
117,644
377,261
128,115
713
243
46
367
56
667
232
42
338
54
729
241
59
375
54
565
228
48
334
45
437,571
117,351
375,300
125,416
1,159
1,103
1,257
1,203
(1) Ore mined includes 54kt @ 0.54g/t delivered to the dump leach in Q4 2015 (221kt @ 0.46g/t in Q4 2014). Gold produced is gold poured and does not
include gold‑in‑circuit at period end. Cash operating costs exclude royalties, exploration and corporate administration expenditure.
(2) Gold produced is gold poured and does not include gold‑in‑circuit at period end.
(3) Cash costs exclude royalties, exploration and corporate administration expenditure. Cash cost is a non‑GAAP financial performance measure with no
standard meaning under GAAP. For further information and a detailed reconciliation, please see glossary for definition.
(4) Cash costs of production reflect an exceptional provision against prepayments to reflect the removal of fuel subsidies which occurred in January 2012
(refer to notes 3 and 6 respectively to the financial statements for further details).
50
Centamin plc Annual report 2015
STRATEGIC REPORT
OPERATIONAL REVIEW continued
51
Centamin plc Annual report 2015
STRATEGIC REPORT
Resources and reserves – Sukari
Underground mineral resource for the Sukari Gold Mine (included within the total resource above)
During the year, Centamin updated its mineral resource and mineral reserve estimates for the Sukari Gold Mine
as at 30 June 2015. An updated NI 43‑101 resource and reserve report was completed and filed on SEDAR at
www.sedar.com.
The total measured and indicated mineral resource estimate of 13 million ounces (“Moz”) gold is reported as an open pit
resource at a 0.3g/t cut‑off grade. This total is inclusive of the 1.0Moz underground mineral resource. The open pit and
surface stockpile mineral reserve estimate is 8.3Moz and the underground mineral reserve estimate is 2.7 million tonnes
(“Mt”) containing 0.5Moz gold.
The total combined open pit and underground mineral reserve estimate of 8.8Moz represented an increase of 7% over the
previous 8.2Moz as at 30 September 2013. The increase is due to lower operating mining and processing costs associated
with lower international fuel prices, and continued drilling from underground to move ounces up through the resource
categories and increase the underground reserve.
Resource and reserve definition drilling continues to target higher grade areas of the Sukari Hill deposit, in parallel with
expanding underground infrastructure. Positive results from the ongoing programme are discussed in the following section.
Total mineral resource for the Sukari Gold Mine
Measured
Indicated
Total measured and indicated
Inferred
Tonnes
(‘000t)
1,850
2,820
4,670
6,970
Grade
(g/t)
6.5
7.0
6.8
5.6
Gold
(‘000oz)
390
630
1,020
1,240
• Totals may not equal the sum of the components due to rounding adjustments.
• The mineral resource is reported above 2g/t within interpreted mineralised domains.
• The mineral resource estimate is depleted by underground mine workings as at 30 June 2015.
• All available information has been used including mapping from underground mining and assays as at June 2015.
• Available resource data resulted in 21,369 one metre down hole composites used for grade estimation.
• The mineral resources were estimated utilising a single indicator weighted kriging method (“IK”) to estimate gold for each of the mineralisation domains.
•
Measured mineral resources are defined by a drill spacing of at least 20m x 20m and confined to the interpreted mineralisation defined by underground
mine development. Indicated mineral resources are defined as areas outside the measured mineral resource and defined by approximately 20m x 20m drill
spacing. Inferred mineral resources include all remaining estimated mineralisation defined by a drill spacing of approximately 50m x 50m.
• Mineral resources are reported inclusive of those resources converted to proven and probable mineral reserves.
• The underground resource is located within the boundaries of the open pit resource, and is included within that total.
Measured
Indicated
Total measured and indicated
Inferred
Total combined (open pit and underground) mineral reserve for the Sukari Gold Mine
Cut‑off (g/t) Tonnes (Mt) Grade (g/t) Tonnes (Mt) Grade (g/t) Tonnes (Mt) Grade (g/t) Gold (Moz) Tonnes (Mt) Grade (g/t) Gold (Moz)
Proven
Probable
Mineral reserve
0.3
0.4
0.5
0.7
1.0
198
160
133
95
62
1.05
1.22
1.38
1.69
2.14
188
152
124
87
56
1.02
1.18
1.34
1.66
2.12
386
312
257
182
118
1.03
1.20
1.36
1.68
2.13
12.9
12.0
11.2
9.8
8.1
33
26
21
15
9
1.0
1.2
1.3
1.7
2.1
1.1
1.0
0.9
0.8
0.6
• Totals may not equal the sum of the components due to rounding adjustments.
•
The mineral resource estimate is based on the open pit mined surface as at 30 June 2015 and adjusted for underground mine workings as at
30 June 2015.
• All available assays as at February 2015.
• Resource data set comprises 252,449 two metre down hole composites and surface rock chip samples.
• Mineral resources are reported inclusive of those resources converted to proven and probable mineral reserves.
• The resources are estimates of recoverable tonnes and grades using multiple indicator kriging with block support correction.
•
Measured resources lie in areas where drilling is available at a nominal 25m x 25m spacing, indicated resources occur in areas drilled at approximately
25m x 50m spacing and inferred resources exist in areas of broader spaced drilling.
The resource model extends from 9700mN to 12200mN and to a maximum depth of 0mRL (a maximum depth of approximately 1,000m below wadi level).
•
Ore stock pile at Sukari
Underground at Sukari
Tonnes (Mt)
Grade (g/t)
Tonnes (Mt)
Grade (g/t)
Tonnes (Mt)
Grade (g/t)
Gold (Moz)
New reserve(1-4)
Previous reserve(5)
152
119
1.05
1.06
101
111
1.15
1.17
253
230
1.09
1.11
8.8
8.2
Totals may not equal the sum of the components due to rounding adjustments.
(1) Total includes:
Open pit mineral reserve = 229Mt @ 1.09g/t for 8.0Moz
Underground mineral reserve = 2.7Mt @ 6.0g/t for 0.5Moz
Stockpiles = 21Mt @ 0.42g/t for 0.3Moz
(2) Based on open pit mined surface as at 30 June 2015, underground mine workings as at 30 June 2015, and a gold price of US$1,300 per ounce.
(3) Ultimate open pit design has a waste to ore ratio of 5.9:1.
(4) See additional notes in tables below for the underground and open pit mineral reserves.
(5) As at 30 September 2013 at US$1,300 per ounce.
Open pit mineral reserve by classification
The component of the combined reserve, as outlined above, that relates to the open pit operation is summarised below:
Reserve classification
Tonnes (Mt) Grade (g/t Au)
Gold (Moz)
Proven
Probable
Stockpile
Total
130
99
21
250
1.11
1.07
0.42
1.03
4.6
3.4
0.3
8.3
International diesel price reductions allowed a lower diesel price assumption, resulting in a lowering of the mining cost and the CIL processing costs.
• Totals may not equal the sum of the components due to rounding adjustments.
• Based on mined surface as at 30 June 2015 and a gold price of US$1,300 per ounce.
•
• Diesel price used was US$0.70/litre and the previous diesel price was US$0.84/litre, current fuel price for Sukari is US$0.52/litre
• Cut‑off grades (gold): CIL oxide 0.40g/t, CIL transitional 0.42g/t, CIL sulphide 0.42g/t, dump leach oxide 0.08g/t.
• Designed underground reserves detailed below do not form part of the open pit reserve.
52
Centamin plc Annual report 2015
STRATEGIC REPORT
OPERATIONAL REVIEW continued
Underground mineral reserve by classification
Ptah
The component of the combined reserve, as outlined
above, that relates to the underground operation is
summarised below.
Reserve
Proven
Probable
Total
Tonnes
(‘000t)
1,020
1,700
2,720
Grade
(g/t Au)
Gold
(‘000oz)
6.1
5.9
6.0
200
320
520
•
Totals may not equal the sum of the components due to
rounding adjustments.
• Based on underground mine workings as at 30 June 2015.
•
Stopes for reserves estimation are designed using a 3g/t cut‑off and
mining dilution applied at 15% @ 0.8g/t as all stopes are located in
mineralised porphyry and 10% mining loss is then assumed to allow for
stope bridges and material left in stopes after mining.
Mineral resources are reported inclusive of those resources converted to
Proven and probable mineral reserves.
•
Exploration
Sukari
During 2015, drilling from underground remained the
focus of the Sukari exploration programme as expanded
development continued to improve access to test the
potential high‑grade extensions of the deposit. The ore
body remains open to the north, south and at depth and
further underground drilling of the Sukari deposit will take
place during 2016, predominantly from both the Amun and
Ptah declines.
Selected underground drilling results received during
the year (including from the fourth quarter), include
the following:
Amun
Hole number
UGRSD0098
UGRSD0225
UGRSD0411
UGRSD0412B
UGRSD0416
UGRSD0417
UGRSD0418
UGRSD0418
UGRSD0426
UGRSD0439
Interval
(m)
5.2
12.0
13.2
10.6
1.5
21.1
1.7
1.5
1.8
1.6
Au
(g/t)
39.8
14.6
48.2
16.4
207.3
46.1
258.0
85.5
289.0
149.8
Hole number
UGRSD0140
UGRSD0164
UGRSD0545
UGRSD0551
UGRSD0561
UGRSD0566_W2
UGRSD0569_W1
UGRSD0572_W1
UGRSD0573
UGRSD0574_W1
Burkina Faso
Interval
(m)
1.9
5.3
5.0
2.7
5.9
18.4
21.9
38.0
29.6
31.2
Au
(g/t)
304.7
147.2
50.8
807.0
33.4
17.9
12.5
9.0
6.3
6.8
The strategy for 2015 was to continue to systematically
explore and drill‑test the numerous targets along the
160km length of greenstone belt contained within our
extensive 2,200km2 licence holding. Results from this
programme will lead to further drilling and resource
development during 2016. The main focus of the
exploration is to discover and develop new zones of
near surface high grade mineralisation.
Earlier in 2015, and as previously reported, an incident
occurred in Burkina Faso on a public road near the Konkera
village which resulted in one of our local employees being
fatally wounded and another sustaining injuries. A thorough
investigation into this bandit attack on two of our vehicles
has been carried out. Further additional security measures
have been implemented following the incident. There was
no impact on operational activity as a result of the incident.
A signed ministerial decree approving the Tiopolo mining
licence, which hosts the existing indicated resource of
1.92 million ounces and inferred resource of 1.33 million
ounces, was issued on 5 March 2015. A deferral was granted
by the Ministry of Mines and Energy in November 2015 in
order to continue exploration, as provided for in the Burkina
Faso Mining Code.
53
Centamin plc Annual report 2015
STRATEGIC REPORT
At Wadaradoo East, higher‑grade lenses are observed
within a broad halo of low‑grade mineralisation. Increasing
data has helped to improve our understanding of the
geological controls and higher‑grade mineralisation can
now be traced for 400m along strike, remaining open in all
directions. One of the high‑grade zones was intersected on
two adjacent 50m‑spaced sections, returning 25m @ 3.5g/t
(hole WDRC586) and 7m @ 6.4g/t (WDRC589).
Several good targets with favourable structural and
lithological settings have been identified at Wadaradoo,
particularly in the north and south of the prospect area.
Targets continue to be identified through combining the
structural model with alteration patterns, geochemical
results and interpretation of the IP and magnetic surveys.
Exploration is continuing at a number of other target
areas, where major cross cutting structures coincide
with demagnetised and altered zones. This includes
the Gongombili anticline (the southern continuity of
the Wadaradoo Main structure in an area with a broad
paragonite anomaly), Wadaradoo Far East (large auger
anomalies where an intrusive is interpreted at depth),
and Doukou (around a major NE striking mafic dyke).
Burkina Faso and Côte d’Ivoire prospects
The exploration programme in Burkina Faso includes
geological mapping and geochemical surveys in order
to outline prospects for further work. During the year a
regional geophysical interpretation was completed, with
follow‑up Induced Polarisation (“IP”) ground surveys
defining numerous anomalies for follow‑up drill testing.
The drilling fleet comprises five multipurpose reverse
circulation/diamond (“RC/DD”) rigs, 2 aircore (“AC”) rigs
and three auger rigs. During 2015 there were 118,758m of
RC, 8,510m of diamond, 86,514m of aircore and 52,380m
of auger drilled.
A number of regional exploration targets with potential
have been identified utilising the developed structural
model for high‑grade mineralisation in the region. Based
on positive results received during 2015, two prospect areas
– Wadaradoo and Napelapera – were prioritised for further
work. At present, three RC/DD multipurpose rigs are drilling
at Wadaradoo, with two further RC/DD rigs conducting
regional reconnaissance working in conjunction with the
AC rigs in both the north and south of the licence region.
Exploration at Wadaradoo has to date focused on several
zones, including Wadaradoo Main and Wadaradoo East.
At Wadaradoo Main high‑grade south‑plunging shoots have
been identified on both the main 020° trending structure
and 320o trending splay structures. Results have confirmed
at least three shoots that are open at depth. One shoot
returned intersections of 5m @ 15.7g/t (hole WDRD524),
4m @ 2.9g/t (WDRD525), 8m @ 8.0g/t and 14m @ 4.4g/t
(WDRD334W2).
Geologists in Côte d’Ivoire
Exploration in Burkina Faso
55
Centamin plc Annual report 2015
STRATEGIC REPORT
Ground IP surveys were undertaken over identified
prospects. To date, drill results have correlated well with
anomalies and further IP surveys are under preparation.
AC drilling was completed at multiple prospects, with
some significant intercepts being currently followed up with
RC drilling.
At Enoida AC drilling confirmed the continuity of the
mineralisation along strike from the Napelapera prospect
in Burkina Faso, with intersections including 10m @ 4.4g/t
(hole DPAC0862) and 6m @ 3.5g/t (DPAC0838). At Chegue,
AC drilling indicated mineralisation over approximately 2km
between two doleritic dykes. Select AC intersections are
highlighted below.
RC drilling commenced in fourth quarter at Kekeda and
Souwa prospects, with RC drilling planned for 2016 at the
Enoida, Chegue and Hinda prospects. Select intersections
from Kekeda include 4m @ 13.7g/t (hole DPRC0004), 2m @
29.1g/t (DPRC0015) and 9m @ 1.9g/t (DPRC0005).
Prospect
Kekeda
Hole
number
From
(m)
Interval
(m)
DPRC0003
DPRC0004
DPRC0005
DPRC0015
DPRC0016
27
92
60
17
19
18
4
9
2
2
Au
(g/t)
1.0
13.7
1.9
29.1
7.0
Côte d’Ivoire significant mineralised AC drill intersections,
downhole
Summary details in relation to the HSES aspects of exploring
in Côte d’Ivoire are set out in the CSR report.
Prospect
Kekeda
Hole
number
From
(m)
Interval
(m)
Au
(g/t)
Ethiopia
Exploration activities were ceased in Ethiopia, following a
review of the potential of the Una Derim prospect. Closure
of the projects and the subsequent wind up of the Sheba
Exploration holding entities and branch is in progress.
Exploration will focus on Centamin’s projects in West Africa.
DPAC0146
DPAC0147
DPAC0148
DPAC0149
DPAC0166
54
Centamin plc Annual report 2015
STRATEGIC REPORT
OPERATIONAL REVIEW continued
Wadaradoo significant mineralised RC and DD drill
intersections, downhole
Hole number
WDRC314
WDRC377
WDRC450
WDRC492
WDRC586
WDRD302
WDRD334W2
WDRD334W2
WDRD349
WDRD350
WDRD352
WDRD395
WDRD491
WDRD524
From
(m)
Interval
(m)
3
20
39
225
97
241
200
242
127
147
179
217
270
383
7
9
2
13
25
12
8
14
16
23
18
14
19
5
Au
(g/t)
12.7
8.4
34.6
8.2
3.5
6.3
8.0
4.4
6.5
3.4
5.8
5.3
3.3
Poni
Tokera
15.7
Tonior
At Napelapera, broad and consistent mineralised zones
have been identified over 4km which remain open along
strike. Higher grades are observed to the south where the
granodiorite has been brecciated, silicified and cross cut
by quartz veining. Intersections include 14m @ 6.4g/t (hole
NPRC432), 18m @ 4.0g/t (NPRC447) and 10m @ 5.0g/t
(NPRC437).
An application has been submitted to extend the
Napelapera permit up to the border with Côte d’Ivoire.
Centamin also holds the permits across the border in
Côte d’Ivoire, along the strike of this mineralised zone,
known as the Enoida prospect.
Napelapera significant mineralised RC and DD drill
intersections, downhole
Hole number
NPRC399
NPRC404
NPRC405
NPRC406
NPRC418
NPRC432
NPRC437
NPRC446
NPRC447
NPRD452
From
(m)
16
69
103
55
70
64
70
55
112
111
Interval
(m)
7
13
4
14
4
14
10
10
18
8
Au
(g/t)
12.3
5.0
12.3
1.7
6.2
6.4
5.0
3.1
4.0
5.8
Select higher‑grade results from other prospects within
the Burkina Faso licence holding are provided in the table
below. Follow‑up work is planned in these areas.
Significant mineralised RC and DD drill intersections,
downhole, from Farmstead, Poni, Tokera and
Tonior prospects
Prospect
Hole
number
From
(m)
Interval
(m)
Farmstead
FSRC001
PNRC005
PNRC023
PNRC035
PNRD012
TKRC087
TKRC088
TKRD085
TKRD090
TORC039
TORC085
TORC133
TORD129
41
—
15
21
80
155
3
125
179
4
18
128
162
4
14
3
6
8
6
10
11
5
16
7
16
8
Au
(g/t)
6.9
2.0
9.2
3.1
3.0
4.8
5.4
5.3
4.3
1.5
11.3
3.2
3.5
Essential components of our health and safety management
systems are being integrated into our operations at Batie
West. This process includes an orientation and induction for
employees and contractors to ensure adherence to our strict
policies and procedures. The Batie West camp site has a
well‑equipped clinic which includes a full‑time paramedic.
Summary details in relation to the HSES aspects of exploring
in Burkina Faso are set out in the CSR report.
Côte d’Ivoire
Centamin has four permits covering circa 1,517km2 area
across the border from Batie West in Burkina Faso (see
figure in the previous section). Six permits are under
application which are expected to be granted during
2016. Once awarded, exploration will focus on regional
surface geochemistry aimed at identifying anomalies for
first‑pass drilling.
Field work continues on the current licences with
reconnaissance geochemistry and geophysics, as well as
detailed follow‑up leading to first‑pass RC drilling.
Soil sampling has identified several coherent gold anomalies
which, together with magnetic anomalies, have been
targeted with follow‑up Auger drilling and trenching in order
to gain structural data on the controls of mineralisation.
Souwa
DPAC0346
DPAC0368
DPAC0404
DPAC0405
Tchouahinin DPAC0517
DPAC0540
Enoida
DPAC0862
DPAC0838
DPAC0826
DPAC0828
Chegue
DPAC1061
Hinda
DPAC1071
DPAC1078
DPAC1123
DPAC1112
DPAC1124
20
18
12
2
6
8
2
6
0
4
26
8
14
16
0
0
6
32
8
6
8
10
4
8
16
6
5
10
7
18
4
12
10
6
14
12
6
10
16
25
4
12
9.8
5.5
2.7
1.8
5.4
4.3
1.7
5.0
0.8
2.5
1.0
4.4
3.5
1.3
1.3
2.1
1.0
0.6
1.1
5.3
0.9
Exploration geologists
in Côte d’Ivoire
56
Centamin plc Annual report 2015
STRATEGIC REPORT
FINANCIAL REVIEW
Centamin has continued to return
strong earnings and cash flow
generation despite the weaker
gold price environment.
Pierre Louw Chief financial officer
The financial statements have been prepared in accordance
with International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board
(“IASB”) and adopted for use by the European Union and
in accordance with the Companies (Jersey) Law 1991.
The group financial statements comply with Article 4 of
the EU IAS Regulation.
Now in its seventh year of production, the Sukari Gold
Mine remains highly cash generative and this is reflected
in the group’s financial results for the year ended
31 December 2015:
• 2015 revenues of US$508 million were up
8% year‑on‑year as an 8% fall in realised gold prices
was offset by a 17% increase in gold sales;
• cash costs decreased to US$713 per ounce produced
from US$729 in 2014, driven by the decrease in fuel
price, although was marginally above guidance of
US$700 per ounce despite the higher production
than originally forecast;
• AISC of US$885 per ounce sold was below our original
forecast of US$950 per ounce mainly due to the
higher gold production base and the rescheduling of
certain capital cost items, as foreshadowed in the third
quarter results;
• EBITDA decreased by 8% to US$152 million, mainly
due to lower gross operating margins as a result of the
reduced gold price and also an increased production
cost associated with net changes in production
inventories;
• profit before tax decreased by 28% to US$58.4 million,
due to the factors affecting EBITDA as well as a
US$6.3 million write‑off due to the group’s decision
to cease exploration in Ethiopia;
• earnings per share of 4.51 US cents were down 37% on
7.21 cents per share in 2014, due to the factors affecting
profit before tax in addition to an income tax charge of
US$6.8 million in relation to foreign exchange gains on
its cash holdings within Australia; and
• operational cash flow of US$186 million was 59%
higher than 2014, due to the higher gold production
base achieved through the completion of the Stage 4
expansion completed in the second half of 2014 and
a positive movement in working capital balances
compared to 2014.
Centamin announced an interim dividend in August 2015
of 0.97 US cents per ordinary share (US$11.1 million total
distribution). Subject to shareholder approval at the AGM
on 11 May 2016, a final dividend of 1.97 US cents per share
(totalling approximately US$22.7 million) is proposed to
be paid on 27 May 2016 to shareholders on the register
as of 22 April 2016. The ex‑dividend date is 21 April 2016
for LSE listed shareholders and 20 April 2016 for TSX listed
shareholders. The final dividend would thus bring the total
full year dividend to 2.94 US cents per share (totalling
approximately US$33.8 million).
Centamin remains committed to its policy of being 100%
exposed to the gold price through its unhedged position,
and maintained a healthy cash, bullion on hand, gold sales
receivables and available‑for‑sale financial assets balance
of US$230.7 million as at 31 December 2015.
57
Centamin plc Annual report 2015
STRATEGIC REPORT
Year ended
Year ended
31 December 31 December
2014
2015
US$’000
508,396
472,581
US$’000
58,407
81,562
Cents
Cents
4.51
4.44
US$’000
152,189
US$’000
185,542
US$’000
199,616
Ounces
439,072
Ounces
437,571
7.21
7.11
165,474
116,402
125,659
377,261
375,300
729
Percentage
change
8%
(28%)
(37%)
(38%)
(8%)
59%
59%
16%
17%
(2%)
3%
Revenue(1)
Profit before tax(3)
Basic EPS(3)
Diluted EPS(3)
EBITDA(2)(3)
Net cash generated from operations(3)
Cash and cash equivalents
Group production
Attributable sales
Group cash operating costs(2)(3)
US$ per ounce
713
Total assets
US$’000 1,411,853
1,370,737
(1) See total revenue which is analysed in note 5 to the financial statements.
(2) EBITDA and cash operating costs are non‑GAAP financial performance measures with no standard meaning under International Financial Reporting
Standards (“IFRS”) as adopted by the European Union and Article 4 of the IAS Regulation IFRS.
(3) Results reflect an exceptional provision against prepayments to reflect the removal of fuel subsidies (refer to notes 3 and 6 to the financial statements for
further details).
Revenue
Revenue from gold and silver sales has increased by
8% to US$508 million (US$473 million in 2014), with
an 8% decrease in the average realised gold price to
US$1,159 per ounce (US$1,257 per ounce in 2014)
offset by a 17% increase in gold sold to 437,571 ounces
(375,300 ounces in 2014).
Cost of sales
Cost of sales represents the cost of mining, processing,
refinery, transport, site administration and depreciation
and amortisation, and movement in production inventory.
Cost of sales is inclusive of exceptional items of
US$46.7 million in relation to fuel charges (refer to note 6
to the financial statements for further information) and has
increased by 16% to US$416.2 million, as a result of:
(a) an increase in activity year‑on‑year with overall mined
tonnes increasing by 29% and processed tonnes
increasing by 26%, resulting in a 14% increase in total
mine production costs to from US$275.9 million to
US$314.8 million;
(b) a 12% increase in depreciation and amortisation from
US$84.2 million to US$93.9 million, a result of the higher
rates of depreciation associated with the Stage 4 plant
expansion; and
(c) a US$7.5 million adjustment for movement in production
inventories as a result of an overall decrease in mining
stockpiles and gold in circuit levels offset by an increase
in finished goods inventory.
Other operating costs
Other operating costs reported comprise expenditure
incurred for communications, consultants, directors’ fees,
stock exchange listing fees, share registry fees, employee
entitlements, general office administration expenses,
the unwinding of the restoration and rehabilitation
provision, foreign exchange movements, the share of
profit/loss in associates and the 3% production royalty
payable to the Egyptian government. Other operating
costs decreased by 8.5% to US$27.8 million, as a result of:
(a) a US$5.0 million decrease in net foreign exchange
movements from a US$2.9 million loss to a
US$2.1 million gain; offset by
(b) a US$1.0 million increase in royalty paid to the
government of the ARE in line with the increase
in gold sales revenue; and
(c) a US$1.3 million increase in corporate costs.
Other charges
Impairment charges of US$6.3 million relate the write off
of capitalised exploration costs in relation to the group’s
decision to close its Ethiopian operations.
Finance income
Finance income reported comprises interest revenue
applicable on the Company’s available cash and term
deposit amounts. The movements in finance income are
in line with the movements in the Company’s available cash
and term deposit amounts.
58
Centamin plc Annual report 2015
STRATEGIC REPORT
FINANCIAL REVIEW continued
Profit before tax
Financial position
As a result of the factors outlined above, the group recorded
a profit before tax for the year ended 31 December 2015 of
US$58.4 million (2014: US$81.6 million).
Tax
Australian tax rules govern the taxation of financial
arrangements (“TOFA”) and the realisation of foreign
exchange gains/losses. The TOFA rules provide that a
foreign exchange gain or loss will arise in relation to foreign
currency bank accounts to the extent funds have been
withdrawn from these accounts during the period. This
foreign exchange gain or loss is calculated by comparing
the A$ spot rate at the date of deposit to the A$ spot rate
at the date of withdrawal on a first‑in‑first‑out (“FIFO”) basis
(i.e. the first amounts deposited are the first amounts to
be withdrawn).
The group made foreign exchange gains for Australian
income tax purposes during the year which were assessable
when they were realised (i.e. when US$ cash balances
were withdrawn from Australian bank accounts). Australian
income tax rules (contained within subdivision 960‑D of
the Income Tax Assessment Act 1997) require that where
an amount is not in the taxpayer’s ‘applicable functional
currency’, the amount is to be converted into the ‘applicable
functional currency’ i.e. Australian dollars. Accordingly,
the withdrawal of US$ bank deposits gave rise to foreign
exchange gains for Australian income tax purposes, which
were assessable when realised.
31 December 31 December
2014
US$’000
2015
US$’000
Profit before income tax
58,407
81,562
Tax expense calculated at 0%
(2014: 0%) of profit before tax
Tax effect of amounts which are
not deductible/taxable in
calculating taxable income:
Effect of tax different tax rates
of subsidiaries operating in
other jurisdictions
Tax expense for the year
Earnings per share
—
—
(6,837)
(6,837)
—
—
Earnings per share of 4.51 US cents compare with
7.21 US cents in 2014. The decrease was driven by the
factors outlined above.
Comprehensive income
Other comprehensive income has increased by
US$0.1 million to US$0.2 million as a result of the
revaluation of available‑for‑sale financial assets.
At 31 December 2015, the group had cash and
cash equivalents of US$199.6 million compared to
US$125.7 million at 31 December 2014. The majority of
funds have been invested in international rolling short‑term
higher interest money market deposits.
Current assets have increased by US$66.1 million or 23% to
US$359.5 million, as a result of:
(a) an increase in net cash inflows of US$74.0 million net of
foreign exchange movements; offset by
(b) a US$1.2 million decrease in gold sale receivables;
(c) a US$1.6 million increase in stores inventory to
US$106.4 million;
(d) a US$0.5 million decrease in prepayments;
(e) a US$0.2 million increase in other available‑for‑sale
financial assets; and
(f) a US$7.5 million decrease in mining stockpiles and gold
in circuit levels, offset by an increase in finished goods
inventory, to US$28.3 million at period end.
Non‑current assets have decreased by US$24.9 million or
2% to US$1,052.4 million, as a result of:
(a) a US$93.9 million charge for depreciation and
amortisation; offset by
(b) a US$36.5 million cost for net capitalised
work‑in‑progress (comprising of plant and mining
equipment and rehabilitation asset);
(c) a US$28.1 million increase in exploration and evaluation
assets to US$152.1 million, as a result of the drilling
programmes in Sukari Hill, the Sukari tenement area,
Burkina Faso and Côte d’Ivoire. This increase is inclusive
of a US$6.3 million write‑off of expenditure in relation to
the Ethiopian operations; and
(d) a US$5.0 million increase in prepayments to EMRA in
relation to advance payments against future profit share.
Current liabilities have increased by US$17.0 million to
US$51.4 million with an increase of US$9.9 million in
payables, an increase of US$0.3 million in provisions and an
accrual of US$6.8 million for Australian tax payable on forex
gains, as outlined above.
Non‑current liabilities reported during the period have
increased by US$4.1 million as a result of a revision to
the assumptions used in the estimating of the inflation
and discount rates employed in the calculation of the
rehabilitation provision.
Issued capital has increased by US$4.0 million due to the
vesting of awards.
Share option reserves reported have decreased by
US$1.6 million to US$2.5 million as result of the forfeiture
and vesting of awards and the resultant transfer to
accumulated profits and issue capital respectively, offset by
the recognition of the share‑based payments expense.
59
Centamin plc Annual report 2015
STRATEGIC REPORT
Accumulated profits increased by US$17.6 million as a
result of:
(a) a US$51.6 million increase in the profit for the year
attributable to the shareholders of the Company;
offset by
(b) a US$33.8 million dividend payment to shareholders;
comprising a US$22.7 million final dividend payment for
2014 and a US$11.1 million interim dividend payment for
2015; and
The group has taken detailed legal advice on this matter
(and, in particular, on the opinion given by Legal Advice
Department of the Council of State) and in consequence
in June 2012 lodged an appeal against EGPC’s decision in
the Administrative Courts. Again, the group believes that
its grounds for appeal are strong and that there is every
prospect of success. However, as a practical matter, and
in order to ensure the continuation of supply, the group
has since January 2012 advanced funds to its fuel supplier,
Chevron, based on the international price for diesel.
As at the date of the financial statements, no final decision
had been taken by the courts regarding this matter.
Furthermore, the group remains of the view that an instant
move to international fuel prices is not a reasonable
outcome and will look to recover funds advanced thus far
should the court proceeding be concluded in its favour.
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$208.2 million to 31 December 2015, as an exceptional
item, of which US$42.4 million was provided for during 2015
as follows:
(a) a US$46.7 million increase in cost of sales
(2014: US$62.5 million increase);
(b) a US$1.3 million decrease in stores inventories
(2014: US$0.2 million increase); and
(c) a US$2.9 million decrease in mining
stockpiles, gold in circuit and finished goods
(2014: US$1.0 million decrease).
This has resulted in a net charge of US$46.7 million in the
profit and loss.
31 December 31 December
2014
2015
US$’000
US$’000
Included in cost of sales:
Mine production costs
Movement in inventory
(43,808)
(61,564)
(2,931)
(970)
(46,739)
(62,534)
(c) a US$0.2 million loss on available‑for‑sale financial
assets in relation to the Company’s shareholding in
KEFI Minerals plc.
Capital expenditure
The following table provides a breakdown of the total
capital expenditure:
31 December 31 December
2014
US$ million US$ million
2015
Stage 4 processing plant
Operational fleet expansion
Open pit development
Total expansion – Sukari
Underground mine
development – Sukari(1)
Other sustaining capital expenditure
Total sustaining
Exploration capitalised
—
—
—
—
31.4
5.1
36.5
34.4
3.4
4.5
20.7
28.6
31.1
8.6
39.7
64.2(2)
(1) Includes underground exploration drilling.
(2) Includes the Ampella Mining Ltd asset acquisition for a total
consideration of US$48.5 million (which includes a cash component of
US$9.3 million and additional assets of US$1.6 million), with the balance
representing exploration expenditure on other licence areas (excluding
Sukari underground drilling).
Exceptional items
In January 2012, the Company received a letter from
Chevron to the effect that Chevron would not be able to
continue supplying Diesel Fuel Oil (“DFO”) to the mine at
Sukari at local subsidised prices. It is understood that the
reason that this letter was issued was that Chevron had
received a letter instructing it to do so from the Egyptian
General Petroleum Corporation (“EGPC”). It is understood
that EGPC itself took the decision to issue this instruction
because it had received legal advice from the Legal Advice
Department of the Council of State (an internal government
advisory department) that the companies operating in
the gold mining sector in Egypt were not entitled to
such subsidies. In addition, during 2012 the Company
received a demand from Chevron for the repayment of fuel
subsidies received in the period from late 2009 through
to January 2012, amounting to some US$51 million
(EGP403 million).
60
Centamin plc Annual report 2015
STRATEGIC REPORT
FINANCIAL REVIEW continued
Cash flows
Net cash flows generated by operating activities comprise receipts from gold and silver sales and interest revenue, offset
by operating and corporate administration costs. Cash flows have increased by US$69.1 million to US$185.5 million,
primarily attributable to:
(a) an increase in revenue, due to higher gold sales offset by a lower average realised price;
(b) an increase in mine production costs as a result of increased gold production; and
(c) a decrease in cash outflows flows in relation to receivables and payables.
Net cash flows used in investing activities comprise exploration expenditure and capital development expenditures
at Sukari including the acquisition of financial and mineral assets. Compared to 2014, cash outflows have decreased
by US$8.1 million to US$70.6 million. The primary use of the funds during the year was for investment in underground
development and exploration expenditures incurred.
Net cash flows generated by financing activities comprise the dividends paid and advance payment against future profit
share to EMRA. During the year US$33.8 million was paid comprising the final dividend for 2014 of US$22.7 million
(following an interim dividend of US$9.9 million paid in 2014) and the interim dividend for 2015 of US$11.1 million.
An advance payment against future profit share of US$5.0 million was made to EMRA in 2015.
Effects of exchange rate changes have increased by US$0.6 million as a result of the performance of the US$ to the euro
and A$.
Pierre Louw
Chief financial officer
21 March 2016
61
Centamin plc Annual report 2015
STRATEGIC REPORT
Non-GAAP financial measures
Three non‑GAAP financial measures are used in this report:
(1) EBITDA
“EBITDA” is a non‑GAAP financial measure, which excludes the following from profit before tax:
• finance costs;
• finance income; and
• depreciation and amortisation.
Management believes that EBITDA is a valuable indicator of the group’s ability to generate liquidity by producing
operating cash flow to fund working capital needs and fund capital expenditures. EBITDA is also frequently used by
investors and analysts for valuation purposes whereby EBITDA is multiplied by a factor or “EBITDA multiple” that is based
on an observed or inferred relationship between EBITDA and market values to determine the approximate total enterprise
value of a company. EBITDA is intended to provide additional information to investors and analysts and does not have any
standardised definition under IFRS and should not be considered in isolation or as a substitute for measures of performance
prepared in accordance with IFRS. EBITDA excludes the impact of cash costs and income of financing activities and taxes,
and therefore is not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other
companies may calculate EBITDA differently. The following table provides a reconciliation of EBITDA to profit for the year
attributable to the Company.
Reconciliation of profit before tax to EBITDA
Profit before tax
Finance income
Depreciation and amortisation
EBITDA
Year ended
Year ended
Year ended
31 December 31 December 31 December 31 December
2014
including
exceptional
2015
including
exceptional
Year ended
2014
before
exceptional
items
US$’000
items(1)
US$’000
2015
before
exceptional
items
US$’000
105,146
58,407
144,096
(269)
(269)
(410)
(410)
94,051
94,051
84,232
84,232
198,928
152,189
227,918
165,384
items(1)
US$’000
81,562
(1) Profit before tax, depreciation and amortisation and EBITDA includes an exceptional provision to reflect the removal of fuel subsidies (refer to note 6 to the
financial statements for further details).
62
Centamin plc Annual report 2015
STRATEGIC REPORT
FINANCIAL REVIEW continued
63
Centamin plc Annual report 2015
STRATEGIC REPORT
Non-GAAP financial measures continued
Reconciliation of AISC per ounce
(2) Cash cost per ounce calculation:
“Cash costs per ounce” is a non‑GAAP financial measure. Cash cost per ounce is a measure of the average cost of
producing an ounce of gold, calculated by dividing the operating costs in a period by the total gold production over the
same period. Operating costs represent total operating costs less administrative expenses, royalties, depreciation and
amortisation. Management uses this measure internally to better assess performance trends for the Company as a whole.
The Company believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors
use such non‑GAAP information to evaluate the Company’s performance and ability to generate cash flow. The Company
believes that these measures provide an alternative reflection of the group’s performance for the current period and
are an alternative indication of its expected performance in future periods. Cash costs is intended to provide additional
information, does not have any standardised meaning prescribed by GAAP and should not be considered in isolation or
as a substitute for measures of performance prepared in accordance with GAAP. This measure is not necessarily indicative
of operating profit or cash flow from operations as determined under GAAP. Other companies may calculate these
measures differently.
Reconciliation of cash cost per ounce
Year ended
Year ended
Year ended
Year ended
31 December 31 December 31 December 31 December
2014
including
exceptional
items(1)
2014
before
exceptional
items
2015
before
exceptional
2015
including
exceptional
items(1)
items(1)
Year ended
Year ended
Year ended
Year ended
31 December 31 December 31 December 31 December
2014
including
exceptional
items(1)
2014
before
exceptional
items
2015
before
exceptional
2015
including
exceptional
items(1)
items(1)
Mine production costs (note 6)
US$’000
271,019
314,827
214,370
275,934
Royalties
Corporate and administration costs
Rehabilitation costs
Underground development
Other sustaining capital expenditure
By‑product credit
Change of inventories
All‑in sustaining costs
Gold sold – total
AISC per ounce
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
15,198
14,533
369
15,198
14,533
369
31,409
31,409
5,145
(1,433)
7,476
5,145
(1,433)
7,476
14,144
12,512
538
31,100
8,600
(806)
(1,869)
14,144
12,512
538
31,100
8,600
(806)
(1,869)
US$’000
343,716
387,524
278,589
340,153
(oz)
437,571
437,571
375,300
375,300
(US$/oz)
786
885
742
906
(1) Mine production costs, cash costs, AISC, AISC per ounce and cash cost per ounce, includes an exceptional provision against prepayments recorded since
Q4 2012 to reflect the removal of fuel subsidies (refer to note 4 of the Financial Statements for further details).
Mine production costs (note 6)
Less: refinery and transport
Cash costs
Gold produced – total
Cash cost per ounce
US$’000
271,019
314,827
214,370
275,934
(2) Includes refinery and transport.
US$’000
(1,840)
(1,840)
(1,063)
(1,063)
US$’000
269,179
312,987
212,307
274,871
(oz)
439,072
439,072
377,261
377,261
(US$/oz)
613
713
565
729
(3) Cash and cash equivalents, bullion on hand, gold sales receivables and available‑for‑sale financial assets:
This is a non‑GAAP financial measure any other companies may calculate these measures differently.
Reconciliation to cash and cash equivalents, bullion on hand, gold sales receivables and available‑for‑sale financial assets
(1) Mine production costs, cash costs and cash cost per ounce includes an exceptional provision against prepayments recorded commencing in Q4 2012 and
going forward to reflect the removal of fuel subsidies (refer to note 6 to the financial statements for further details).
In June 2013 the World Gold Council (“WGC”), an industry body, published a Guidance Note on the AISC metric, which
gold mining companies can use to supplement their overall non‑GAAP disclosure. AISC is an extension of the existing
‘cash cost’ metric and incorporates all costs related to sustaining production and in particular recognising the sustaining
capital expenditure associated with developing and maintaining gold mines. In addition, this metric includes the costs
associated with developing and maintaining gold mines, corporate office structures that support these operations, the
community and rehabilitation costs attendant with responsible mining and any exploration and evaluation costs associated
with sustaining current operations. AISC per ounce is arrived at by dividing the dollar value of the sum of these cost
metrics, by the ounces of gold produced.
Year ended
Year ended
31 December 31 December
2014
US$’000
2015
US$’000
Cash and cash equivalents (note 25)
Bullion on hand (valued at the year‑end spot price)
Gold sales receivable (note 9)
Available‑for‑sale financial assets (note 14)
Cash and cash equivalents, bullion on hand, gold sales
receivables and available‑for‑sale financial assets
199,616
125,659
10,492
20,472
163
12,685
24,057
409
230,743
162,810
64
Centamin plc Annual report 2015
DIRECTORS’ REPORT
INTRODUCTION
Josef El-Raghy Chairman
As chairman of the board I endorse the
values of good governance, and in my
view, board effectiveness is enhanced by
regular information being presented to
the board.
Dear shareholders
In my view, board effectiveness has been achieved by
ensuring that communication channels are open between all
board members and regular information is presented to the
board allowing all members to contribute knowledgeably
at board meetings and in discussions between the
executives and non‑executive directors. This has enabled
open discussion on the requirement and content of
public disclosures, to meet regulatory obligations as well
as ensuring shareholders are properly informed about
key events.
Having consulted with the non‑executive directors, I believe
that the format of the board, in conjunction with the
activities of the various board committees, allows open
debate. This format has allowed directors to engage on
matters of executive management policy and performance
and risk management and allows them to effectively monitor
the performance of management and develop proposals
on strategy.
Following the appointment of our new chief executive
officer (“CEO”), Andrew Pardey, the previously combined
roles of chairman/CEO are now separate. It should be noted
that, on appointment, Andrew received a full induction pack
and over the last year Andrew has met many of our key
shareholders. Andrew has also presented to investors and
analysts at key conferences throughout the year.
I am pleased to observe that, during Andrew’s first year as
CEO, the Company has continued to develop and realise its
next stages of growth, whilst maintaining its strategic focus
on cash flows, shareholder returns and social responsibility.
Our board composition and approach to leadership are set
out in detail on page 66. Within the directors’ report and,
where applicable, the strategic report, the directors provide
the required governance and regulatory assurances. These
are set out in the following areas:
Code compliance statement on page 65.
Directors’ responsibilities (C.1.1/C.1.3) on page 104.
Strategic report and risk management report) (C.1.2/
C.2.1/C.2.2.) on page 32.
Directors’ report (C.2.3.) set out in this section.
As described in my chairman’s statement, Centamin
made continued progress during 2015 in developing its
longer‑term growth objectives. In my role as chairman,
I look forward to continuing to work with the Company
towards delivering substantial shareholder value through
further development of our portfolio of assets.
Josef El-Raghy
Chairman
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Compliance statement
Leadership and effectiveness
The Company is incorporated in Jersey, Channel Islands.
The Company is by virtue of the Listing Rules, subject to the
Corporate Governance Code (the “Code”) issued by the
UK Financial Reporting Council and therefore the Company
must confirm that it has complied with all relevant provisions
of the Code or to explain areas of non‑compliance. The
Code can be found on the Financial Reporting Council’s
website www.frc.org.uk.
In addition, the Company is required to follow the principles
of corporate governance set out in the best practice
recommendations of the Toronto Stock Exchange, in
particular those recommendations in National Policy 58201
– Corporate Governance Guidelines (“NP 58‑201”).
Throughout the year ended 31 December 2015, the
Company has been in full compliance with the provisions set
out in the Code with the exception of the following matters:
The roles of chairman and chief executive officer were
both exercised by Josef El‑Raghy during 2014. This matter
was addressed on 1 February 2015 when Andrew Pardey
was appointed as the Company’s CEO. Josef El‑Raghy,
the Company’s interim CEO, will continue in his role as
Chairman.
It should be noted that both the Code and best practice
recommendations favour that the chairman be an
independent director on appointment. Josef El‑Raghy is not
an independent non‑executive chairman within the meaning
of the Code. As such, Edward Haslam will continue to take
an active role to ensure the board’s ongoing effectiveness
in all respects. As advised in the 2015 half‑year results,
Edward Haslam’s title was changed to deputy chairman
and senior independent non‑executive director, which is
reflective of his role and activities.
It is noted that in the case of the directors’ remuneration
report, the disclosures have exceeded the obligations on
the Company given its incorporation in Jersey. However,
the Company considers such enhanced disclosure is
appropriate to allow shareholders to compare the Company
with UK incorporated FTSE 350 listed companies. It has also
incorporated many additional and voluntary disclosures in
its strategic report.
This report sets out the key areas the board has focused on
during the year, together with details of the roles of the key
board members and an assessment of the effectiveness of
the board.
How the board of directors operates
The board sets and implements the strategic aims and
values of the Company, providing strategic direction to
management. See the strategic report
Detailed below are the key activities and standing agenda
items for the board.
Key activities of the board in 2015:
• approval of the appointment of the chief
executive officer;
• declaration of the interim and annual dividend;
• approval of the updated reserve and resource statement;
• review and approval of the capital markets day
presentation;
• reports and updates from the chairmen of the respective
board committees;
• Sukari operational review and monthly reporting;
• exploration updates for the sites in Burkina Faso and
Côte d’Ivoire;
• review of business development opportunities;
• setting budgets and production guidance for the year;
• review of operational performance and efficiency;
• litigation updates on the Company’s ongoing court
hearings (details of which can be found in note 4);
• review and approval of the Company’s quarterly, half
yearly and annual financial statements;
• review of the AGM circular, dividend proposals and
compliance reports and policies;
• review of the Company’s principal risks and orchestrating
the ongoing development of the Company’s
risk appetite;
• review of material contracts, policies and procedures;
• review of KPIs for the executive directors and senior
management and reviewing performance appraisals; and
• review of succession planning, diversity and board
performance and evaluation.
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INTRODUCTION continued
How the board of directors operates continued
Key activities of the board in 2015 continued
Further to the introduction of the revised UK Corporate
Governance Code in 2014, the board spent time discussing
the changes to the Code and the guidance from the FRC on
implementing the new Code requirements. In particular, the
board and audit and risk committee spent time reviewing
their internal control environment, risk management
processes and internal and external reporting.
The board has delegated certain matters to its committees
and their reports are presented within the strategic or
directors’ report:
Health, safety, environmental and
sustainability committee – strategic report page 38
Compliance and
corporate governance – directors’ report page 74
Nomination committee – directors’ report page 76
Audit and risk committee – directors’ report page 98
Remuneration committee – directors’ report page 80
Leadership
The Chairman, Josef El‑Raghy, is responsible for ensuring
the business is run in accordance with the board’s strategy.
Following the appointment of the new CEO, responsibility
for implementing strategy and overseeing the day‑to‑day
running of the business is with Andrew Pardey.
The management team and board are relatively few in
number and are, therefore, actively involved in, and made
aware of, all the major activities of the group. They can
therefore ensure the Company’s actions are aligned with
the strategic aims of the group.
Areas of focus for the board in 2016
Strategic planning – the board regularly reviews and
approves strategic plans and initiatives put forward by
management and the executive, including geographical
diversification. Details of the strategic objectives for
cash generation, shareholder return, growth and social
responsibility can be found in the strategic report.
Communications – the board oversees the Company’s
public communications with shareholders and other
stakeholders and plans to develop the financial statements,
presentations and other forms of communication, such as
the Company’s website, over 2016.
Risk assessment – the board has primary responsibility for
identifying the principal risks in the Company’s business
and to ensure the implementation of appropriate systems
to manage these risks. The board will continue to review its
processes for risk identification and evaluation, improving
internal communication and external reports in this area.
Internal control – the board, with assistance from the
audit and risk committee oversees the group’s internal
control and management information systems. Following
the appointment of the internal auditor, the board will be
reviewing progress on the recommendations put forward
by the internal auditor.
Reporting and audit – the board, through the audit
and risk committee, is reviewing proposals to upgrade
the accounting systems. Internal system upgrades in the
accounting and financial reporting areas will also be closely
monitored by the board as well as recommendations from
the external auditor on areas for improvement.
Relationship with stakeholders – the board will continue
to maintain, develop and monitor relationships with key
stakeholders including EMRA in relation to Sukari and other
governmental bodies in Burkina Faso and Côte d’Ivoire.
The responsibilities of the board and key roles within the
organisation are set out below:
The chairman:
• leads the board to ensure it operates effectively;
• sets the agenda and ensures all matters are given due
consideration and that directors have the opportunity
to contribute to board discussions;
• communicates with shareholders in relation to the
Company’s strategic aims and policies; and
• represents the group before key stakeholders including
government officials (including EMRA).
Chief executive officer:
• develops and implements, short, medium and long term
corporate strategies;
• is responsible for day‑to‑day management of the
business and the implementation of the board’s strategic
aims; and
• promotes the highest standards of safety, corporate
compliance and adherence to codes of conduct.
Non‑executive directors:
• challenge and help develop the group’s strategy;
• participate as members of the board on their respective
committees;
• monitor the performance of management;
• need to be satisfied as to the adequacy and integrity
of financial and other reporting;
• determine appropriate levels of remuneration for
executive directors; and
• raise any concerns with the board or with management.
For senior management roles and responsibilities please see
page 72 of the directors’ report.
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Detailed knowledge of the group’s activities is essential and,
each year, the board visit Sukari where they are shown the
underground operation, open pit site and the operations
plant, accompanied by the heads of department based at
Sukari. In addition to regular site visits to Sukari, the senior
members of the management team and executive visit the
exploration sites in Burkina Faso and Côte d’Ivoire to ensure
the activities in these regions are aligned with the corporate
objectives of the group.
The nomination committee and the board also considered
and approved that Josef El‑Raghy, interim CEO, continue in
his role as chairman of the board.
In January 2015, Trevor Schultz, a non‑executive director
(but not independent having served with the Company as
an executive director), was appointed chairman of the HSES
committee. This appointment followed the retirement of
Bob Bowker.
Board effectiveness
Each committee carries out a self‑assessment evaluation
of its effectiveness over the year. This review compares the
responsibilities and objectives of the committee against
the activities carried out during the year. This evaluation
is submitted to the board for review. The internal annual
performance evaluation of the board was completed
in March 2015 for the year ended 31 December 2014.
The internal annual performance evaluation for 2015 was
completed in March 2016 by the board. The non‑executive
directors meet at least annually, without the chairman or
CEO present and evaluate their performance during the
year. The board is assisted by the nomination committee
on its evaluation of the non‑executive directors. An external
facilitator will be appointed in May 2016 to assess the
effectiveness of the board. The last review by an external
facilitator was carried out in May 2013.
Following the evaluation process, there were no proposed
changes to the membership of the committees or the
composition of the non‑executive directors or executive
directors. The nomination committee and the board
discussed the need for any new appointments to the
board, either through the process of succession planning
or external appointments. Discussions of this nature will
continue in 2016.
Board appointments and independence
During the course of 2015, the vacancy for the position
of CEO, an executive director appointment, was filled.
The nomination committee, through the process of
succession planning, had ensured that adequate support
and development were given to Andrew Pardey to prepare
him for the role of CEO. After a thorough assessment
of the experience and expertise of Andrew Pardey and
his performance as COO, the nomination committee
recommended, and the board unanimously agreed, to
appoint Andrew Pardey as the Company’s new CEO
effective from 1 February 2015.
The Company remains compliant with the provisions of
the Code that the board should have a greater number of
non‑executive directors than executive directors.
When determining whether a director is independent, the
board has established a directors’ test of independence
policy, which is based predominantly on the definition
of independence in Canadian Securities Administrators’
National Instrument 52‑110 – Audit Committees. The criteria
set out in the instrument are mandatory and are more
stringent in certain respects than the independence criteria
suggested by the Code. Based on this policy, the majority of
the board are considered by the board to be independent
non‑executive directors.
Managing risks and internal controls
The board is responsible for satisfying itself that
management has developed and implemented a sound
system of risk management and internal control. Assisted
by the audit and risk committee, management reports to
the board on the group’s key risks and the extent to which
it believes these risks are being appropriately managed
and mitigated.
Full details of the risk environment can be found in the risk
management report on page 32.
The board are pleased to confirm that the Company
remains in compliance with best practice guidelines, with
the UK Corporate Governance Code and relevant Canadian
requirements, and the systems in place to manage risk and
the internal control environment have been in place for the
year under review, up to the date of approval of the annual
report and accounts.
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Centamin plc Annual report 2015
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INTRODUCTION continued
Managing risks and internal controls continued
Board committees
Employees
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Information relating to employees is contained in the CSR
report together with details of the number of employees
at Sukari. The Company abides by anti‑discrimination
legislation in all jurisdictions in which it operates. These
principles are also set out in the Company’s code of conduct
which sets out the framework in which the Company
expects all staff to operate.
For a summary of the social conditions in Egypt and the
Middle East and an explanation as to the gender balance in
the workforce, please see the CSR report on page 41.
Environmental compliance
The directors are aware of their commitment to
environmental, community and social responsibility,
details of which can be found in the CSR report. The
group is currently complying with relevant environmental
regulations in the jurisdictions in which it operates and has
no knowledge of any environmental orders or breaches
against the group.
Political donations
The Company does not make donations to any
organisations with stated political associations.
Supplier and payment policy
It is the Company’s policy that, subject to compliance
with trading terms by the supplier, payments are made in
accordance with terms and conditions agreed in advance
with the supplier. Further details on trade creditors are
provided in note 15 to the financial statements.
During the year, the Company conducted an assessment of
the control environment of the group, summarised by the
following key headings:
• corporate governance framework;
• management reporting framework;
• material contracts and contract management;
• procedures for forecasting and budgeting;
• external reporting obligations and procedures;
• information technology environment; and
• corporate and operational principal risk assessment.
The board made the following recommendations to
enhance the internal control environment following the
review and these are summarised below:
• carry out an upgrade of the finance accounting software
and an overhaul of the accounting handbook;
• recommendations on the areas of focus for the internal
auditor as set out in section 100 of the audit and risk
committee report; and
• updates to the risk reporting framework as set out on
page 32 of the risk management report.
It was noted that the review of the internal control
environment and subsequent recommendations were not
seen as significant failings or weaknesses, but are reflective
of the detailed review that was undertaken.
The board committees are a valuable part of the Company’s
corporate governance structure. The workload of the board
committees is far greater than the table of scheduled
meetings would indicate, as ad‑hoc meetings and
communications occur frequently between the directors and
management. Details of each of the board committees is set
out below.
CSR report – see the HSE committee report on page 38.
Succession planning – see the nomination committee
report on page 76.
Directors’ remuneration report – see the remuneration
committee report on page 80.
Risk and control environment – see audit and audit and
risk committee on page 98.
Policies, procedures and ongoing regulatory disclosures
– see compliance and corporate governance committee on
page 74.
Board composition and re-election
It is proposed at the date of this annual report that all
directors will be put forward for re‑election at the AGM.
All directors are subject to annual re‑election.
The board of directors
At the date of this report the board is made up of a
chairman, CEO, four independent non‑executive directors
and one non‑executive director. See directors’ details
on pages 70 and 71.
The following table sets out the number of board and
committee meetings held during the year and the number
of meetings attended by each director.
Name and title
Attendance
Josef El‑Raghy
Chairman
Andrew Pardey
CEO
Edward Haslam
Deputy chair/SNED
Trevor Schultz
NED
Mark Arnesen
Independent NED
Mark Bankes
Independent NED
Kevin Tomlinson
Independent NED
Attended (C.)
4 of 4
Attended
4 of 4
Attended
4 of 4
Attended
4 of 4
Attended
4 of 4
Attended
3 of 4
Attended
4 of 4
Audit
and risk
Health, safety,
environmental
and sustainability
Compliance
and corporate
governance
Remuneration/
nomination
Attended
9 of 9
Attended (C.)
9 of 9
Attended
9 of 9
Attended (C.)
4 of 4
Attended
4 of 4
Attended
4 of 4
Attended
5 of 5
Attended (C.)
4 of 4, 3 of 3
Attended
5 of 5
Attended (C.)
5 of 5
Attended
4 of 4, 3 of 3
Attended
4 of 4, 3 of 3
This table excludes meetings held by written resolution or sub‑committees and reflects the membership during 2015.
C. means chairman of the board or of the committee.
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Centamin plc Annual report 2015
DIRECTORS’ REPORT
BOARD OF DIRECTORS
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Centamin plc Annual report 2015
DIRECTORS’ REPORT
Josef El-Raghy
Chairman
(and CEO until January 2015)
Josef El‑Raghy has been
responsible for overseeing
the transition of the Company
from small explorer, through
construction and into
production.
Andrew Pardey
Chief executive officer
(CEO since February 2015)
Andrew Pardey was appointed
CEO and director of the board
of Centamin plc on 1 February
2015. Andrew served as general
manager – operations at the
Sukari Gold Mine before his
previous appointment as chief
operating officer in May 2012.
Edward Haslam
Deputy chairman
and senior independent
non‑executive director
In addition to his role as
senior independent director,
Edward Haslam has carried
out additional corporate
governance functions over the
past few years for Centamin,
while the roles of CEO and
chairman were combined.
Trevor Schultz
Non‑executive director
(since 1 May 2014)
Trevor Schultz has made an
invaluable contribution to the
establishment of Sukari as a
globally significant gold mining
operation, and in particular for
his recent role in overseeing
the construction of the Stage 4
process plant. He was executive
director of operations from
20 May 2008.
Mark Bankes
Independent
non‑executive director
Mark Arnesen
Independent
non‑executive director
Kevin Tomlinson
Independent
non‑executive director
Mark Bankes is an international
corporate finance lawyer. Mark
specialises in international
securities, mining policy and
agreements, mergers and
acquisitions and international
restructurings for the
resource sector.
Mark Arnesen has extensive
expertise in the structuring
and negotiation of finance for
major resource projects. Mark
is a chartered accountant with
over 20 years’ experience in the
resources industry.
Kevin Tomlinson was previously
managing director of Investment
Banking at Westwind Partners/
Stifel Nicolaus Weisel where he
advised a number of gold, base
metal and nickel companies,
including Centamin.
Director since
26 August 2002
CEO since
1 February 2015
Director since
23 March 2011
Director since
20 May 2008
Director since
24 February 2011
Director since
24 February 2011
Director since
17 January 2012
Board meetings attended
4/4
Board meetings attended
4/4
Board meetings attended
4/4
Board meetings attended
4/4
Board meetings attended
3/4
Board meetings attended
4/4
Board meetings attended
4/4
Experience
Josef holds a Bachelor of
Commerce degree from the
University of Western Australia
and subsequently became
a director of both CIBC
Wood Gundy and Paterson
Ord Minnett.
Experience
Edward has been non‑executive
director (and chairman) from
June 2007 to April 2012 of the
LSE listed Talvivaara plc and
since 1 May 2004 has been
a non‑executive director of
Aquarius Platinum Ltd. In 1981,
Edward joined Lonmin, he was
appointed a director in 1999
and chief executive officer in
November 2000 before retiring
in April 2004. Edward is a Fellow
of the Institute of Directors (UK).
Experience
With more than 40 years’
experience at executive and
board level, Trevor has a
Masters Degree in Economics
from Cambridge University, a
Masters of Science degree in
mining from the Witwatersrand
University and has completed
the Advanced Management
Program at Harvard University.
Experience
Andrew was a major driving
force in bringing Sukari into
production, having joined
during the mine’s construction
phase and was instrumental in
the successful transition of the
operation through construction
and into production.
Andrew holds a BSc in
Geology and has over 25 years’
experience in the mining and
exploration industry, having
previously held senior positions
in Africa, Australia and other
parts of the world with Guinor
Gold Corporation, AngloGold
Ashanti and Kalgoorlie
Consolidated Gold Mines.
Experience
Mark has an MA from
Cambridge University and
joined Norton Rose in 1984.
He worked in both London and
Hong Kong and was a partner
at Norton Rose LLP from 1994
to 2007 before starting his own
business, Bankes Consulting
EURL, in October 2007.
Experience
Mark is currently the sole
director of ARM Advisors
Proprietary Limited and has
also been on the board of Gulf
Industrials Limited. Mark holds
a Bachelor of Commerce and
Bachelor of Accounting degrees
from the University of the
Witwatersrand.
Experience
Kevin holds a Master of Science
degree in Geology from the
University of Melbourne in
Victoria, Australia. He began
his career as a geologist
30 years ago and has worked
with various Australian and
Canadian based natural
resources companies, where
he has held the positions of
chief executive officer and
exploration manager.
Committee membership
HSES committee (chair)
Committee membership
Audit and risk committee
Remuneration committee (chair)
Nomination committee (chair)
Compliance and corporate
governance committee
Committee membership
Compliance and corporate
governance committee (chair)
HSES committee
Audit and risk committee
Committee membership
Audit and risk committee (chair)
Compliance and corporate
governance committee
Remuneration committee
Nomination committee
Committee membership
HSES committee
Remuneration committee
Nomination committee
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DIRECTORS’ REPORT
SENIOR MANAGEMENT
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Centamin plc Annual report 2015
DIRECTORS’ REPORT
Finance and business development
Legal and compliance
Lynne Gregory
General counsel
Before joining Centamin, Lynne
was a legal director at Charles
Russell LLP, prior to which she
was a solicitor at top law firms
in London, Allen & Overy and
Baker & McKenzie. Lynne has
worked for over 20 years as a
lawyer specialising in complex
international commercial
litigation and arbitration for
corporate clients in a variety of
sectors. Lynne holds a degree
in Law from University College
London as well as professional
qualifications from the College
of Law.
Doaa Abou Elailah
Group sustainability and
business development manager
Doaa has worked closely with
Centamin for ten years initially
as an adviser before joining
the Company in 2013. Doaa
has more than 18 years of
experience as a consultant in
health and safety, environment
and community affairs. Doaa
has provided technical support
to numerous industries and
facilities in Egypt and the
Middle East across a broad
range of sectors including
mining, oil and gas, industrial
production, infrastructure
and tourism. Doaa holds MSc
and BSc honours degrees in
Chemical Engineering from the
University of Cairo.
Darren Le Masurier
Company secretary
Darren is a member of the
Association of Chartered
Certified Accountants and
has over 15 years’ experience
in corporate administration,
governance and offshore
regulation in Jersey. Prior to
joining Centamin, Darren
worked at the fiduciary and law
firm Ogier in Jersey for over ten
years, providing professional
company secretarial,
accounting, administration and
director services for a diverse
range of corporate clients
and structures.
Heidi Brown
Subsidiary director and
company secretary
Heidi is a Fellow Chartered
Secretary (FCIS, FGIA)
and GAICD. Heidi holds a
Graduate Certificate of Applied
Finance and Investment and a
Diploma of Financial Advising
from the Financial Services
Institute of Australasia. Heidi
was the company secretary
of Centamin from 2004
until 2012, and continues
to act as company secretary
and director of Centamin’s
Australian subsidiaries.
Since 1 September 2013
Since 1 May 2013
Since 8 July 2013
Since 23 January 2003
Pierre Louw
Chief financial officer
Pierre is a senior manager with
broad experience gained over
25 years in the mining industry
in both major and mid‑tier
gold and copper producing
companies. He has a National
Diploma in Financial Accounting
from the University of
Johannesburg and is a member
of the South African Institute of
Professional Accountants. Pierre
has extensive international
experience having worked in
Tanzania, Australia, Zambia
and his native South Africa. His
professional experience include
working at AngloGold Ashanti,
Equinox and JCI.
Andy Davidson
Head of investor relations
Prior to joining Centamin in
August 2012, Andy worked for
nine years as a mining analyst,
including three years as an
equity research director at the
London‑based investment bank
Numis Securities. Before this,
Andy was a senior exploration
geologist within the mining
industry, including six years
with Ashanti Goldfields where
he was closely involved in the
discovery and development of
the world class Geita project in
Tanzania. Andy holds an MSc in
Mineral Project Appraisal from
the Royal School of Mines and
a BSc in Geology. He is also
a member of the Institute of
Materials, Minerals and Mining.
Richard Osman
Business development manager
Richard is a geologist and holds
a Master’s degree in Mining
Geology from the Camborne
School of Mines. He has over
16 years’ experience in the
mining industry, having worked
in exploration, open pit mining
and the evaluation of mineral
properties internationally.
Richard previously worked at
the Company’s Sukari mine
in Egypt for over twelve
years in exploration, resource
development and as open pit
mine manager. Prior to this
Richard was employed for five
years at the Big Bell operation
in Western Australia owned by
Harmony Gold.
Since 19 April 2011
Since 13 August 2012
Since 3 February 2014,
previously open pit mine
manager at Sukari
Operations
Youssef El-Raghy
GM – Egyptian operations
Terry Smith
GM – Sukari
An officer graduate of the
Egyptian Police Academy,
Youssef El‑Raghy held senior
management roles within the
Egyptian police force for a
period in excess of ten years,
having attained the rank of
captain, prior to joining the
group. He has extensive
contacts within the government
and industry and maintains
excellent working relationships
with all of the Company’s
stakeholders within Egypt.
Terry Smith is a qualified
mining engineer and member
of the Australasian Institute
of Mining and Metallurgy.
Terry has 35 years’ experience
in the mining industry and
over 20 years’ experience in
general management and site
management roles. Terry has
worked in both open pit and
underground operations for
both owners and contracting
firms. His experience covers
the gold, copper, lead, zinc,
diamonds and coal industries
in Australasia, Africa and
South America.
Chris Boreham
Underground mine manager
Chris Boreham holds a BEng
(Mining) degree from the
University of Sydney and a
Graduate Diploma of Business,
First Class Mine Manager’s
Certificate in WA, Queensland
and New South Wales. He is a
member AusIMM and has over
27 years’ experience in the
mining industry, having worked
predominantly in gold and
copper mines. Chris’ significant
experience in the design and
operation of hard rock mining,
extends to managing personnel,
risk mitigation and operational
health and safety.
Since 13 April 2006
Since 14 June 2012
Since January 2010
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Centamin plc Annual report 2015
DIRECTORS’ REPORT
CORPORATE GOVERNANCE
Fundamental to the group’s corporate
governance policy and practice is that
all directors and employees reflect the
Company’s key values of accountability,
fairness, integrity and openness.
Mark Bankes
Chairman of the compliance and
corporate governance committee
Dear shareholders
I am presenting this corporate governance report in my
capacity as chairman of the compliance and corporate
governance committee, a committee established by
the board of the Company whose function is to make
recommendations to the board on matters such as:
(a) the implementation, maintenance and monitoring of
the Company’s corporate compliance programme
and its code of conduct, taking account of applicable
government and industry standards, legal and business
trends and public policy issues; and
(b) the Company’s activities in the area of corporate
compliance that might impact upon its business
operations or public image.
Fundamental to the group’s corporate governance policy
and practice is that all directors and employees reflect the
Company’s key values of accountability, fairness, integrity
and openness.
The key areas of activity for the development of the
Company’s approach to corporate governance are
listed below:
Compliance/corporate governance committee
As at the date of this report, the compliance/corporate
governance committee is chaired by Mark Bankes and its
members are Edward Haslam and Mark Arnesen.
The committee’s primary functions and responsibilities
are set out in the charter which can be found on the
Company’s website.
The activities undertaken during the year included
the following:
• review of progress in respect to the concession
agreement court hearing and the DFO litigation (as
detailed further in note 20 to the financial statements);
• developments in the legislation and regulatory
framework that impact the business;
• monitoring of government relations relating to both the
concession agreement and exploration permits;
• review of the reporting and disclosure requirements
required by the LSE and TSX;
• assisting the board and management on the
requirements to make public disclosures; and
• review of the updates to the Company’s policies
• appointment of BDO LLP for the provision of internal
and procedures.
audit (see audit and risk committee report);
• appointment of the new CEO and separate role
of chairman and appointment of the new CFO
(see nomination report);
• development of the executive remuneration and further
disclosure (see remuneration report); and
• evaluation of board and committee composition
(see nomination report).
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Centamin plc Annual report 2015
DIRECTORS’ REPORT
The board of directors aims to ensure that shareholders are provided
with important information in a timely manner via written and
electronic communications.
Shareholder communication
All shareholders are encouraged to attend our AGM on
11 May 2016, which will be held in Jersey. This will be an
excellent opportunity to meet board members and our
senior management team.
The board of directors aims to ensure that shareholders are
provided with important information in a timely manner via
written and electronic communications.
The chairman, CEO, other directors and our head of
investor relations communicate with major shareholders
on a regular basis through face‑to‑face meetings,
telephone conversations, and analyst and broker briefings
to help better understand the views of the shareholders.
Any material feedback is then discussed at board level.
In particular the feedback from the certain of the proxy
advisory companies, which provide guidance and voting
recommendations to shareholders, were discussed by
the board.
Shareholder communication policy encompasses:
• the annual report;
• the annual information form;
• quarterly and half‑yearly reports;
• continuous disclosure requirements and regulatory
announcements;
• webcasts on quarterly results;
• the annual general meeting;
• the Company’s website;
• registrar services; and
• electronic and postal notifications.
Key shareholder and investor relations activities throughout
the year:
Date
Activity
January/
February 2015
•
•
Investor conference, London
Investor conference, South Africa
March/
April 2015
May/
June 2015
•
Investor marketing, North America
• Analyst and investor conference calls
•
Investor marketing, London
• Analyst and investor conference,
capital markets day
July/August/
September 2015
• Marketing, Zurich
• Conference, Denver
October/
November 2015
•
Investor marketing, London
The board recognises the importance of keeping the market
fully informed of the group’s activities and of communicating
openly and clearly with all stakeholders. The Company has
a formal continuous disclosure policy to ensure this occurs.
A sub‑committee of the board monitors and advises on the
Company’s continuous disclosure obligations. All actions
and decisions of the sub‑committee are presented to the
compliance and corporate governance committee at the
next available meeting.
Details of the Company’s policies and procedures can be
found on the Company’s website.
Mark Bankes
Chairman of the compliance and corporate
governance committee
21 March 2016
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Centamin plc Annual report 2015
DIRECTORS’ REPORT
NOMINATION REPORT
77
Centamin plc Annual report 2015
DIRECTORS’ REPORT
The Company continued to grow
and mature this year and at the
heart of this growth was continued
focus on executive recruitment and
succession planning
As part of our succession planning, we will continue to appoint
and encourage female professionals to ensure a progressive
pipeline of talent within the Company’s management and senior
management team
G Edward Haslam
Chairman of the nomination committee
Dear shareholders
I am presenting this report as chairman of the nomination
committee, a committee established by the board of
the Company.
The committee played an active role in succession planning
during 2015 and this culminated in the appointment of our
chief executive officer, Andrew Pardey. Andrew Pardey, at
the recommendation of the committee, was appointed a
director and CEO on 1 February 2015. The committee also
had oversight of the induction process, ensuring that he
received the support that he needed and understood his
responsibilities as a director of a listed Company.
The committee was involved in detailing the role and scope
of the executive chairman, Josef El‑Raghy, who resumed
the role of chairman of the Company in February 2015.
Having previously undertaken the dual role of CEO and
chairman, the orderly handover of responsibilities to the
new CEO was critical and this process was overseen by the
nomination committee.
This year, the committee has been actively involved in
the recruitment process to identify and appoint a new
chief financial officer (“CFO”). This process followed the
resignation of our current CFO, Pierre Louw, who will hand
over responsibilities in April 2016.
Following a short, but thorough recruitment exercise, I am
pleased to advise that Ross Jerrard will join Centamin as
CFO with effect from 18 April 2016. Ross was selected
from a shortlist of candidates, all of whom were highly
qualified individuals, who were either CFOs within the
mining industry, or individuals who held senior positions
within audit and assurance or as commercial accountants.
The committee are fully supportive of the appointment of
Ross, who will bring a wealth of experience, enthusiasm
and leadership to the CFO role. Ross was lead audit partner
with Deloitte Touche Tohmatsu Perth, where he was based
for the last thirteen years. Ross previously served as the
engagement partner for the audit of Centamin’s Australian
subsidiaries (these subsidiaries are now audited by PwC) and
the appropriate clearance procedures have been followed
in relation to his appointment with Centamin. Ross has led
many teams providing audit and related financial advisory
services to public companies, and national and international
groups. Prior to moving to Australia, Ross worked in
southern Africa and the Middle East providing services
for a range of resource companies. Specifically relevant
to Centamin is that he spent three‑and‑a‑half years in
Egypt, based in Cairo, acting for multinational companies
operating in the region.
The committee also recommended the appointment
of Trevor Schultz, as chairman of the HSES committee,
following the retirement of Bob Bowker. Following Bob’s
retirement, the committee evaluated the board composition
as well as the experience, balance and skill set on each of
the committees.
In 2015, the nomination committee and the board discussed
the need for any new appointments to the board, either
through the process of succession planning or external
appointments. Discussions of this nature will continue
in 2016.
The report provides more detail on the activities, decisions
and policies of the nomination committee and the board.
Edward Haslam
Chairman of the nomination committee
21 March 2016
The committee met three times during the year and also
carried out the following activities:
• made recommendations as to the structure, size and
composition of the board and board committees;
• reviewed the competencies, skills, knowledge and
experience of directors;
• reviewed the board succession plans;
• made recommendations for the appointment and
re‑election of directors to the board;
• considered the requirements for board diversity
(including gender diversity); and
• updated the policy on senior and executive recruitment
and succession planning.
Within the remit of the nomination committee, there is a
requirement to ensure adequate succession planning is
routinely discussed. Reviews of management capabilities
and potential are performed on a routine basis and
resources allocated to assist with this.
79
Centamin plc Annual report 2015
DIRECTORS’ REPORT
The committee and the board were involved in ensuring
an orderly handover of certain responsibilities that
Josef El‑Raghy assumed whilst acting in the joint role
of chairman and CEO.
The board is assisted by the nomination committee on
its evaluation of the non‑executive directors. An external
facilitator will be appointed in May 2016 to assess the
effectiveness of the board. The last review by an external
facilitator was carried out in May 2013.
The performance of all directors is constantly reviewed
by the chairman and, periodically, by the nomination
committee. The Company deployed a formal process for
evaluation of the board, the board members, the board
committees and the chairman during the relevant period led
by the senior independent non‑executive director.
The board has also had training sessions on various topics
during the year, carried out by PricewaterhouseCoopers LLP
– topics included corporate governance updates and
identification of risks and risk management processes.
78
Centamin plc Annual report 2015
DIRECTORS’ REPORT
NOMINATION REPORT continued
Nomination committee
Performance evaluation
As at the date of this report, the nomination committee
comprises Edward Haslam (chairman), Mark Arnesen
and Kevin Tomlinson, all of whom are independent
non‑executive directors of the Company. All appointed
members attended all three committee meetings held
during the year.
Board diversity
The board set out its updated policy on recruitment, the
selection process and succession planning in the 2014
annual report.
The board has further considered the recommendations
of the nomination committee both in connection
with recruitment policy, selection process and
succession planning.
In particular, in connection with board diversity, the board’s
position is that, whilst all appointments should be continued
to be made on merit, female candidates will be considered
routinely as part of the recruitment process. It remains the
board’s intention to identify a suitable female candidate as
part of the recruitment process as and when the need arises
for a new appointment at board level.
In addition, and as part of our succession planning, we will
continue to appoint and encourage female professionals to
ensure a progressive pipeline of talent within the Company’s
management and senior management team.
In this last context the committee noted that a number of
females already hold senior positions within the Company,
in the areas of legal, accountancy, HSES and subsidiary
directorships. However, as set out in the CSR report, mining
is traditionally a male‑dominated industry and, of our
Egyptian workforce, only 1% are female. This is mainly due
to social conditions in Egypt and in the Middle East where
in general female employees are not encouraged to work at
remote sites. A greater percentage of females are employed
throughout the group in the administrative offices and at
the Company’s headquarters.
In developing the Company’s policy on diversity, the board
has considered the requirements of the Code and National
Instrument 58‑101.
The board, through the recommendations of the nomination
committee, will provide an update on the recruitment
process in future reporting disclosures.
Details of the current composition of the board and the
wider management team are set out in the directors’ report.
The senior independent non‑executive director held
meetings with the non‑executive directors without the
executive directors present, providing feedback to the full
board. These meetings focused primarily on the evaluation
of the board’s performance, a performance evaluation of
the chairman and CEO, discussing the quality of reporting
and information flows to the board and discussions on the
strategic aims and objectives for the group.
The non‑executives also discussed openly with the
executive directors, the areas they could assist further with
in relation to business development.
An evaluation of the board and its committees was
undertaken during the year and was concluded in March
2016. The board, in conducting its evaluation, reviewed
the activity, composition and expertise of the committees
and considered their effectiveness taking account of
the following:
• the responsibilities set out in their respective charters;
• activities carried out during the year, taking account of
their mandated duties and responsibilities;
• progress made in respect of their duties and
responsibilities;
• attendance and contribution to the committees; and
• reporting and updates provided to the board.
The board noted in particular that the committees had
become more streamlined and the timely delivery of
committee and board papers had allowed the board to
spend more time discussing key issues.
The board reviewed its own membership and performance
and this review was concluded in March 2016.
The nomination committee had recommended that Trevor
Schultz be appointed to replace Bob Bowker as HSES
committee chair. The board, whose views were supported
by the nomination committee, agreed that the board
continued to have the required breadth of expertise and
there was no immediate need to seek a replacement for
Bob Bowker.
The board discussed in detail the scope and remit of the
new CEO, Andrew Pardey, and specifically the KPIs and
areas of focus for Andrew Pardey. Key to the success of
the new CEO would be to ensure Andrew Pardey had the
required resources, induction and support of the board.
80
Centamin plc Annual report 2015
DIRECTORS’ REPORT
REMUNERATION REPORT
Our remuneration structure remains
simple, but effective, motivating our
executives, senior management and
employees to deliver our strategic aims.
G Edward Haslam
Chairman of the remuneration committee
Executive directors’ remuneration at a glance
Josef El-Raghy
Total remuneration
Andrew Pardey
Total remuneration
Salary
$’000
763
Benefits
$’000
Annual Long term
incentive
bonus
$’000
$’000
Pension
$’000
Total
$’000
38
908
Nil
153
1,862
Salary
$’000
592
Benefits
$’000
Annual Long term
incentive
bonus
$’000
$’000
Pension
$’000
Total
$’000
81
391
399
Nil
1,463
The bonus calculations are made by reference to a
balanced scorecard which comprises of a combination of
the following performance criteria:
Josef
El-Raghy
Josef
El-Raghy
Centamin’s bonus structure
17
17
20
20
%
%
%
%
30 %
30 %
%
1
2
%
1
2
Target 100%
Achieved 70%
Target 100%
Achieved 70%
%
0
%
0
%
7
%
7
5
1
1
%
%
0
0
20%
2
2
% 1 0 % 1
% 1 0 % 1
20%
5
14%
14%
2
2
5
5
%
%
30%
30%
Target 100%
Achieved 68%
Target 100%
Achieved 68%
%
1
2
%
1
2
1
1
0
0
%
%
9
9
10%
10%
% 10%
% 10%
%
4
%
4
2 5 %
2 5 %
1
1
Financial
Operational
Strategic
Corporate objectives
Individual KPIs
Achieved
(1) These figures are detailed in full on pages 88 and 89.
The performance measures for bonus awards relate to the following strategic focus areas:
Key measures
Cash generation
Gold production
Operating costs per ounce
All‑in sustaining cost per ounce
Shareholder returns
Growth
Social responsibility
Dividend policy
UG development
Safety record
Share price performance
relative to peers
Open pit development
Training
Burkina exploration
Côte d’Ivoire exploration
Government relations
Community initiatives
81
Centamin plc Annual report 2015
DIRECTORS’ REPORT
Salary reviews
The committee undertook salary reviews for both of the
executive directors. The review took into consideration
the directors’ personal performance, their updated roles
and responsibilities and industry benchmarking data.
Consideration was also given to the fact that the base salary
for Josef El‑Raghy (chairman) has remained unchanged for
over four years. The committee proposed an increase of 3%
for Josef El‑Raghy from 1 January 2016. On appointment
as CEO, Andrew Pardey received a 10% salary increase and
a further 7% increase for Andrew Pardey is proposed, with
effect from 1 April 2016. As disclosed in last year’s report,
Andrew Pardey’s salary has been increased in incremental
steps, as Andrew transitions into the role of CEO. These
increases realign his remuneration package from the
position before joining the board to the appropriate market
rate now that Andrew is CEO and a director of the board.
Recommended and approved salary increases
Base salary
Increase
New base salary
Josef El‑Raghy
(chairman)
£500,000
3%
Andrew Pardey
(CEO)
£430,000
7%
£515,000
(effective
1 January 2016)
£460,000
(effective
1 April 2016)
The executive directors’ contracts were reviewed
and updated this year ensuring they were up to date
with any legal developments and aligned with best
practice guidelines.
Fee reviews
Reviews of the non‑executive directors’ fees were
undertaken. There were no proposed changes to the
structure of the non‑executive directors’ fees. A reduction
in the fee for the role of deputy chairman and senior
independent non‑executive director took effect in July 2015.
This fee reduction was due to Josef El‑Raghy resuming his
sole role as chairman and assuming responsibility for all
chairmanship duties (further details are set out below).
New RSP
Andrew Pardey (CEO) now participates in the new RSP.
Josef El‑Raghy (chairman) does not currently participate in
the scheme and as a shareholder with a 6.2% interest in the
Company, Josef El‑Raghy remains aligned with the interests
of shareholders. Josef El‑Raghy’s participation in the new
scheme will be reviewed in 2016 to consider if participation
in 2017 would be appropriate.
New 2015 restricted share plan (“RSP”)
During 2015 a new restricted share plan was implemented
to incentives executives and senior employees over the
long term.
The RSP received shareholder approval in 2015 and the
scheme is structured as follows:
June 2015 grant – restricted share plan
Performance conditions:
• 20% of the assessed by reference to a target total
shareholder return;
• 50% of the award shall be assessed by reference to
absolute growth in earnings per share; and
• 30% of the award shall be assessed by reference to
compound growth in gold production.
April 2016 grant – restricted share plan
Performance conditions:
• 20% of the award shall be assessed by reference
to a target total shareholder return;
• 30% of the award shall be assessed by reference
to reserve replacement and growth;
• 20% of the award shall be assessed by reference
to EBIDTA; and
• 30% of the award shall be assessed by reference
to compound growth in gold production.
2015
grant
2016
grant
2018
(vesting of award)
2019
(release of 50% of award)
2019
(vesting of award)
2020
(release of 50% of award)
Details of the awards are set out on pages 96 and 97 of
this report.
1. Introduction and annual statement
As chairman of the remuneration committee, I am pleased
to present the remuneration report and policy for 2015/16.
The committee made good progress on its planned
objectives during 2015, which saw the introduction of a new
long term incentive scheme. The scheme was presented to
shareholders at the AGM and 99% of votes were in favour of
the new restricted share plan.
Changes in the board
Andrew Pardey was appointed chief executive officer
(“CEO”) on 1 February 2015 with Josef El‑Raghy, interim
CEO, standing down as CEO and continuing in his role as
executive chairman. The committee undertook a thorough
review of the roles and responsibilities of both executives
and as a result recommended changes to Andrew Pardey’s
remuneration package and an update to their balance
scorecards, which are used to determine the annual bonus.
Centamin’s bonus structure
Vesting periods
82
Centamin plc Annual report 2015
DIRECTORS’ REPORT
REMUNERATION REPORT continued
1. Introduction and annual statement continued
Growth:
Shareholder consultation
I have taken the views of shareholders and proxy advisory
services, following which we developed our new restricted
share plan to include claw back provisions. Further details of
the share plan can be found on pages 96 and 97. We would
like to thank shareholders for their constructive feedback on
the remuneration report and share scheme. I will continue
to engage with shareholders, proxy advisory firms and other
stakeholders throughout 2016.
Simple approach to remuneration
The committee remains wedded to a simple approach to
remuneration and the introduction of the new restricted
share plan will help ensure both executives have a
meaningful actual shareholding to directly link their interests
with those of the shareholders. There is no better union
of interest between shareholder and executives than for
executives to be substantial shareholders in their own right.
Delivering the strategic aims of the Company
As set out in the business model, Centamin creates value
through the process of gold exploration and production,
maximising production at the lowest possible cash
operating and all‑in sustaining cost. The gold/silver doré
bars produced at Sukari are sold to our appointed refiners
who in turn refine the doré bars and sell the near‑pure gold
at the price determined by the London bullion markets. As
set out in the risk matrix, the Company is exposed to the
daily fluctuations in the price of gold, receiving the market
rates on the day of sale. Consequently, revenue cannot be
directly linked with the performance of the executive and
therefore the remuneration committee uses other metrics
to measure the success of the executive directors, which are
set out below.
Background to remuneration decisions
Cash generation:
• 439,072 ounces produced (re‑guided upwards during the
year) representing a 16% increase on 2014;
• 2015 production at US$713/oz cash operating costs and
US$885/oz AISC;
• exploration/development to be funded from cash
reserves after dividend;
• significant Sukari reserve expansion potential, especially
via high grades from the underground operation; and
• advanced exploration in Burkina Faso; highly prospective
tenements in Côte d’Ivoire.
Social responsibility:
• LTIFR rates at Sukari for 2015 of 0.12 per 200,000 a
reduction of 70% on 2014;
• training and staff development;
• community projects; and
• government relations.
Bonus structure
The executive bonus opportunity and structure for 2015 will
remain the same in 2016. For the executives the maximum
bonus opportunity is 175%. This bonus opportunity
for executives will be reduced to a maximum bonus
opportunity of 125% in any year where an award under the
new restricted share plan (“RSP”) is made.
Summary
The Company performed well in 2015, and 2016 should
see further increases in gold production and a reduction in
cash operating costs and all‑in sustaining costs. There are
still challenges in respect of the litigation, details of which
are set out in note 20 to the financial statements. However,
from an operational and financial perspective this has been
another successful year and it is within this context that the
key remuneration decisions for 2015 described below have
been taken by the remuneration committee.
The following report has been made available to the
auditors; PricewaterhouseCoopers LLP, and section 4 (where
indicated), ‘annual remuneration report’ has been audited
by PricewaterhouseCoopers LLP.
Edward Haslam
Chairman of the remuneration committee
• further production upside/lower cash costs at Sukari for
21 March 2016
no material capex; and
• US$200 million in cash at 31 December 2015.
Shareholder returns:
• dividend returns, with free cash flow to fund the next
stage of growth;
• no debt, no hedging and Sukari capex complete; and
• share price performance relative to peers.
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Centamin plc Annual report 2015
DIRECTORS’ REPORT
2. Summary of executive remuneration
Chairman
Base salary for Josef El‑Raghy, which is paid in sterling,
remained unchanged for the fourth consecutive year at
GBP500,000 for 2015 and will rise by 3% effective from
1 January 2016.
The bonus outcome for Josef El‑Raghy for 2015 was 70%
of the maximum opportunity which equates to GBP612,500
and represents 122.5% of base salary. As Josef El‑Raghy
does not participate in any long term incentive plan, no
awards were either granted or vested and hence the
annual bonus plan is the sole incentive arrangement for
Josef El‑Raghy. The bonus calculation is made by reference
to a balanced scorecard which comprises of a combination
of financial, operational and individual performance criteria.
Full details are on pages 90 and 91.
Chief executive officer
Base salary for Andrew Pardey, which is paid in sterling,
increased from GBP390,000 to GBP430,000 (10% increase)
following his appointment as CEO. A further increase of 7%
(the second stage of the realignment of his remuneration
following appointment as CEO) will be effective from
1 April 2016.
The bonus outcome for Andrew Pardey for 2015, whilst
undertaking the role of executive director, was 68% of the
maximum opportunity, which equates to GBP285,600 and
represents 68% of base salary. Andrew Pardey participated
in the new restricted share plan receiving 900,000 awards
(representing 150% of base pay) in June 2016, and these
awards remain subject to the performance conditions set
out in the scheme. A further grant of awards under the
terms of the RSP are to be made in April 2016 in accordance
with the rules of the scheme and our remuneration policy.
Awards made to Andrew under the terms of the DBSP,
issued prior to his appointed as CEO, will vest over the next
two years. The bonus calculation is made by reference to
a balanced scorecard which comprises of a combination of
financial, operational and individual performance criteria.
Full details are on pages 91 and 92.
3. The committee
The committee membership
The remuneration committee is a committee of the
Company represented by three non‑executive directors,
namely, Edward Haslam (chairman of the committee), Mark
Arnesen and Kevin Tomlinson, all of whom are regarded
as independent.
No member of the committee has any financial interest,
other than as shareholder, in the matters decided by
the committee. None of the members of the committee
participate in any bonus scheme, long term incentive,
pension or other form of remuneration other than the fees
disclosed below and the statutory superannuation for the
Australian resident directors. There is no actual or potential
conflict of interest arising from the other directorships held
by members of the committee.
All members of the committee attended the four meetings
held during 2015, with Mark Arnesen chairing the meeting
where Edward Haslam’s remuneration was discussed
(Edward Haslam was not present during these discussions).
Full details of the attendance at the board and committee
meetings are detailed on page 68.
Josef El‑Raghy may attend meetings of the committee to
make recommendations relating to the performance and
remuneration of his direct reports but neither he nor the
company secretary are in attendance at meetings when
their own remuneration is under consideration.
Activities of the committee
The committee met four times in the year and holding
one meeting by way of written resolution. The business
conducted is set out below.
Committee
meeting date
Activity
12 March
2015
• Finalise the terms of the new restricted share
plan (“RSP”).
• Review the DRR for the annual report and
finalise the 2015 remuneration policy.
• Review the balanced scorecards and key
performance measures for the executive
directors and senior management team to
ensure they were appropriate and consistent
with the ongoing business objectives.
• Make recommendations to the board to
grant shares to Andrew Pardey and senior
management under the RSP.
• Review of CEO/chairman salaries.
• Finalise the CEO/chairman contracts.
• Review of SNED fees (chaired by
Mark Arnesen).
• Adopt the new restricted share plan (“RSP”)
following shareholder approval.
• Make adjustments to the RSP to include claw
back provisions.
• Finalise and grant awards to the new and
existing members of the RSP.
21 May
2015
1 June
2015
(written
resolution)
3 September
2015
• Review carried out of the roles of the CEO/
chairman.
9 December
2015
• Assessment of the objectives and
achievements of the CEO/chairman against
the balanced scorecards.
• Performance reviews for the executive and
management team, taking account of the
balanced scorecards, industry benchmarking
and making recommendations to the board
for executive and management bonuses.
• Review of non‑executive director fees.
• Evaluation of the committee and charter.
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Centamin plc Annual report 2015
DIRECTORS’ REPORT
REMUNERATION REPORT continued
3. The committee continued
Terms of reference
The responsibilities of the committee are set out in the
charter and include:
• the remuneration, recruitment, retention, termination,
superannuation and incentive policies and procedures for
executives and senior management; and
• the performance conditions, criteria and policies for the
group’s employee and executive incentive share plans.
Advisers to the committee
During the year the committee was supported by the
company secretary. MEIS executive compensation data
was appointed as adviser to the committee in respect of its
work on executive remuneration. MEIS does not provide
any other service to the Company and is regarded as
independent by the committee. MEIS is engaged on an
annual retainer for GBP8,000 for a twelve‑month period.
MEIS was originally appointed on the recommendation
of the remuneration committee and is regarded by the
committee as providing independent advice as it has no
connections with the directors and officers of the Company
other than this engagement.
4. Our remuneration policy
Introduction
The remuneration report and the remuneration policy were
put to shareholders on an advisory basis at the AGM on
18 May 2015 and the resolutions were passed by a majority
of 98% and 99%, respectively. The remuneration policy
and application of the policy will be subject to separate
non‑binding advisory vote at the AGM on 11 May 2016.
The remuneration policy will be effective following the
AGM until the next AGM in 2017.
Remuneration policy for executive directors
The policy that was put to shareholders on 18 May 2015
on an advisory basis remains in force until the conclusion of
the AGM in 2016. A copy of the policy is available on the
Company’s website. There are no proposed changes to the
policy in 2016, however, as the policy was on a non‑binding
vote we will continue to put our policy to shareholders on
an annual basis. The remuneration policy is set out below
and the application of the policy in 2016 is detailed below.
In developing its remuneration policy, the committee has
had regard to the fact that the business of the Company is
operated outside the UK and in a market which requires the
engagement, motivation and retention of very particular
operational and managerial personnel and skills. The
remuneration policy therefore seeks to:
• position remuneration packages to ensure that they
remain competitive, taking account of all elements of
remuneration and be reflective of the performance
of the Company;
• use external benchmark data on a transparent and open
basis using comparator groups that reflect the industry
and size of the Company;
• provide incentive arrangements for relevant employees
that are based upon pre‑agreed performance criteria
against which individuals will then be tested. Such
incentives should be relevant and stretching;
• provide long term incentives that encourage the
involvement, in the long term, of the performance of the
Company; and
• encourage executives, and in particular executive
directors, to build and then maintain a meaningful
shareholding in the Company.
Element
Base Pay
Objective
Base pay to be
set competitively
so as to allow
the motivation
and retention of
key executives of
the calibre and
skills necessary to
support Centamin’s
short and long term
objectives.
Details
For 2015
For 2016
Pay is reviewed annually and any change
ordinarily takes effect from 1 January.
The base salary for 2015
was as follows:
Josef El-Raghy
GBP500,000
Andrew Pardey
GBP390,000
(from 1 February 2015) and
GBP430,000 (from 1 April 2015)
Salaries are benchmarked against a number
of comparator groups as described below
to provide a balanced approach. Increases
will take account of those of the general
workforce.
Increases will take account of the performance
of the individual and the benchmarked data
but any increase which exceeds that of the
general workforce may only normally be
awarded in cases of a change in responsibility,
complexity and nature of the role or size of the
organisation or when the pay level becomes
out of line with the market data.
There is no intended change
in the policy for 2016. A 3%
increase has been awarded
for Josef El‑Raghy effective
from 1 January 2016 and a 7%
increase has been awarded for
Andrew Pardey effective from
1 April 2016.
Josef El-Raghy (Chairman):
Base salary
Increase
New base salary
(effective 1 January 2016)
GBP500,000
3%
GBP515,000
Andrew Pardey (CEO):
GBP430,000
Base salary
7%
Increase
New base salary GBP460,000
(effective 1 April 2016)
85
Centamin plc Annual report 2015
DIRECTORS’ REPORT
Remuneration policy for executive directors
Element
Benefits
Objective
Benefits may be
provided where
necessary to
ensure competitive
remuneration
packages are
consistent with
the market.
Pension
Objective
Positioned to
ensure competitive
packages and
provision of
appropriate income
for executives in
retirement.
Annual bonus
Objective
To provide a
driver and reward
for the delivery
of short term
performance goals,
normally over
the course of the
financial year.
Details
For 2015
For 2016
A proportion of benefits were
utilised in 2015.
Benefits to remain within the
policy.
Josef El‑Raghy receives a cash
payment in lieu of a pension
equivalent to 20% of his
base salary.
Bonus maximum opportunity of
175%. Actual outcome for Josef
El‑Raghy was 70% of maximum.
Bonus maximum opportunity
of 100%. Actual outcome for
Andrew Pardey was 68% of
maximum.
There is no intended change
to the pension contribution
for Josef El‑Raghy. There is no
current pension contribution
for Andrew Pardey, however
a pension contribution for
Andrew Pardey, in line with the
policy, will be considered by the
remuneration committee in 2016.
Bonus maximum opportunity of
175%, reducing to a maximum
opportunity of 125% of base
salary in any year an award is
made to an executive under the
new RSP.
The normal benefits that may be provided
include such items as car or car allowance,
life assurance, private medical provision,
subscriptions and phones. Normal benefits will
not currently exceed 5% of base pay.
Where necessary, due to the location
of operations of the business, it may be
necessary to provide additional benefits
such as private security, accommodation and
reasonable travel costs or enhanced provision
of other benefits. Additional benefits may not
exceed 10% of base pay.
Therefore normal benefits and additional
benefits will not currently exceed 15% of
base pay.
A payment in lieu of pension will be made
between 10% and not more than 20% of base
pay. Where any payment is required to be
made under a statutory provision then this
amount will be included within the above limit.
No director has a prospective entitlement
to a defined benefit pension by reason of
qualifying services.
Performance criteria, which are set at the
beginning of each year, are based upon a
balanced scorecard approach. The balanced
scorecard shall be based 70% on financial,
operational and strategic targets and 30% on
individual key tasks.
The performance measures are selected to
provide an appropriate balance between
incentivising executive directors to meet
financial/operational targets for the year and
incentivising them to achieve specific strategic
objectives. In selecting the performance
conditions for each year, consideration will
be given to market expectations and the
performance measures that are generally
regarded as reflective of the performance of
the industry. These will normally be selected
from financial performance measures
(profitability, cost against budget and
operational efficiency), strategic measures
(M&A opportunities, exploration and project
delivery), corporate measures (health and
safety and corporate governance) and
individual tasks.
For executive directors, the maximum
annual bonus opportunity is 175% of base
salary, however a lower amount will be set
for executive directors who participate in
the new RSP. On target bonus is just above
half of the maximum opportunity at 57% of
the maximum.
The committee may apply claw back to any
bonus where the committee is of the view
that facts have come to light, which had they
been known at the time, would have affected
the committee’s decision to pay part or all of
any bonus.
86
Centamin plc Annual report 2015
DIRECTORS’ REPORT
REMUNERATION REPORT continued
4. Our remuneration policy continued
Introduction continued
Remuneration policy for executive directors
Element
Details
For 2015
For 2016
The new RSP was approved at the AGM
in 2015. Executive directors and senior
employees may participate in the new scheme
at the recommendation of the committee.
Details of the new RSP are set out on pages
96 and 97.
For management, but not directors, the
Company has a deferred bonus share plan
(“DBSP”) as part of the annual bonus. The
Company can require up to 100% of a bonus
to be deferred into shares. Such shares will
then be released typically as to a third at the
end of each 12, 24 and 36 month period.
Executive directors are required to build a
holding of shares in the Company equivalent
to 150% of base salary over a five year period
from appointment. Vested and unvested
shares are to be included in the calculation.
Long term
incentives
Objective
To align the
interests of
the executive
with those of
shareholders
through a
meaningful
ownership of shares.
Share ownership
requirement
Objective
To encourage
ownership of
shares and thereby
create a link of
interest between
shareholder and the
executives.
900,000 awards were granted
to Andrew Pardey in June 2015
under the terms of the RSP.
5,145,000 awards in total
were granted in June 2015 to
employees. No awards were
made under the DBSP in 2015.
Awards under the terms of the
RSP are to be made to Andrew
Pardey in April 2016. The RSP is
available to all executives (and
senior management), however
there are no current plans to
make awards to Josef El‑Raghy.
There are no changes to
the policy.
Josef El‑Raghy (and family)
hold an interest of 6.2% in the
Company which represents a
value of 9,144% of base salary.
Andrew Pardey holds 2,968,800
shares in the Company (including
unvested awards under the
DBSP and RSP) which represents
a value of 440% of base salary.
Values are based on the share
price at 31 December 2015.
Policy if a new director is appointed
The Company has a track record of succession planning and
growing and promoting talent internally as demonstrated by
the appointment of the new CEO.
The committee may, where necessary and in the interest of
shareholders, also offer recruitment incentives to facilitate
the recruitment of an appropriate individual subject to the
following limits:
When hiring a new executive director, or promoting an
individual to the board, the committee will offer a package
that is sufficient to attract and motivate while aiming to pay
no more than is necessary taking account of market data,
the impact on other existing remuneration arrangements,
the candidate’s location and experience, external market
influences and internal pay relativities.
The structure of the remuneration package of a new
executive director will follow the policy above, however
in certain circumstances, the committee may use other
elements of remuneration if it considers it appropriate with
due regard to the best interests of the shareholders. In
particular, a service contract that contains a longer initial
notice period, tapering down to twelve months over a
set period of time, the buy‑out of short and or long term
incentive arrangements (taking account of the performance
measures on such incentives) as close as possible on a
comparable basis, the provision of long term incentives
and the provision of benefits such as housing allowance or
similar particularly where it is an expatriate appointment.
• annual bonus plus buy‑out short term incentives as
described above will not exceed 175% of base pay; and
• long term incentives will be limited to an aggregate of
250% in the first year or where there is a buy‑out of long
term incentives as described above to 150%.
The limits of 175% and 250% (as set out above) are the
limits that cover all awards, be they standard or recruitment
awards. Specifically the remuneration committee cannot
make standard awards plus these awards, as the limits of
175% and 250% are the absolute limits.
To facilitate the buy‑out awards outlined above the
committee may grant awards to a new executive director
under Listing Rule 9.4.2. The total package offered to a
new recruit will not exceed the overall limits set out in the
Company’s remuneration policy.
87
Centamin plc Annual report 2015
DIRECTORS’ REPORT
Policy on payment for loss of office
The Company’s approach to payment on loss of office
will take account of the circumstances of the termination
of employment. In the case of a good leaver then the
individual will be expected to work through the notice
period and will be entitled to all the benefits under the
service agreement during that period.
In the case of a termination as a result of poor performance
or a breach of any of the material terms of the agreement,
then the Company may terminate with immediate effect
without notice and with no liability to make any further
payment to the individual other than in respect of amounts
accrued due at the date of termination.
Where the Company wishes to terminate the agreement
and make a payment in lieu of notice, this payment shall be
phased in monthly or quarterly instalments over a period of
no longer than twelve months (or the notice period if less)
and any payment should be reduced in accordance with the
duty on the executive to mitigate his loss. The Company
will consider if any bonus amount is to be included in the
calculation when determining the payment in lieu of notice.
Any bonus (if included at all) would be restricted to the
director’s actual period of service only.
In the case of notice given in connection with and shortly
following a change of control then the executive directors
are entitled to payment in lieu of an amount equal to twelve
month’s basic salary plus bonus. Any bonus that may be
due to him at the completion of the change of control, shall
be determined by the remuneration committee and such
bonus (if any) would be based on the period only up to the
completion of the change of control, taking account of all
the relevant key performance indicators.
Claw back provisions for executive directors relate to bonus
and holiday taken in advance.
Remuneration policy for non‑executive directors
In relation to the RSP, the Company’s approach to payment
on loss of office will take account of the circumstances
of the termination of employment. In the case of a good
leaver then the individual will be expected to work through
the notice period and will be entitled to all the benefits
under the service agreement during that period. In the
case of a termination as a result of poor performance or a
breach of any of the material terms of the agreement then
all unvested awards and all vested but unreleased awards
will lapse.
A new claw back provision has been included in the RSP,
since the approval of the RSP at the AGM. This provision
relates to the dismissal of an eligible employee for gross
misconduct, fraud or matters materially adversely affecting
the group’s reputation. If an award holder ceases to be an
eligible employee under this provision, in the period after
the award has vested, but before the settlement of the
deferred shares, any subsisting rights in the award shall
immediately lapse upon the date of such cessation.
In the case of death, annual bonus will be determined
by the remuneration committee, which shall determine
the bonus to be paid taking account of the duration in
employment and performance of the Company and long
term incentives shall be treated in the same way as a
good leaver.
Policy on external board appointments
The Company encourages the executive directors to
have non‑executive external appointments provided that
such appointments do not adversely impact on the duties
required to be performed to the Company. Where there are
external appointments the director will retain any fees for
such appointments and will not be liable to account to the
Company for such fees.
Element
Details
For 2015
For 2016
Non‑executive
director fees
Objective
To attract and
retain high calibre
non‑executive
directors by
the provision of
competitive fees.
Incentives
Objective
No incentives.
Non‑executive directors receive annual
fees within an aggregate directors’ fee pool
limited to an amount which is approved by
shareholders.
Fees are reviewed every two years against
the same comparator groups as used for the
executive directors.
Non‑executive directors do not participate in
any incentive arrangements.
Deputy chairman and senior independent
non‑executive director (“SNED”). The fees
for the SNED were reduced in 2015 due
to Josef El‑Raghy resuming his sole role as
chairman and assuming responsibility for all
chairmanship duties.
The non‑executive directors do not participate
in any short or long term incentive plans.
The fees were reviewed in 2013
and the following applied from
1 April 2013:
• basic fee GBP65,000;
• chair of a committee
GBP10,000; and
• member of a committee
GBP5,000.
The fees payable to the SNED
are subject to an annual
review. The fees for the other
non‑executives will next be
reviewed in 2016. Otherwise the
fees will remain as for 2013.
There is no intended change in
the policy for 2016.
88
Centamin plc Annual report 2015
DIRECTORS’ REPORT
REMUNERATION REPORT continued
4. Our remuneration policy continued
Remuneration arrangement across the Company
Our remuneration policy for executive directors is consistent
with that across the Company and aims to attract and
retain high performing individuals and to reward success.
Base pay and benefits are set competitively taking account
of the individual’s performance and market data. Annual
incentives are typically linked to local business performance
with a focus on performance against key strategic business
objectives. Key management team members may also
receive some of their annual bonus in shares which are
deferred. At this time there are no all employee share
arrangements but this is kept under review on a regular basis
taking account of the locations the Company operates in and
the appropriateness of share base rewards in such locations.
All employees of Sukari Gold Mine Company (the majority
of whom are based at the Sukari mine site) are subject to a
performance‑related bonus which is linked to the underlying
operation performance, and cost control measures at the
mine. Further details on employee relations can be found in
the CSR report.
For Josef El‑Raghy the graphs assume a base salary
as disclosed in this report of GBP500,000, pension
contributions of 20% of base being GBP100,000 and bonus
from zero at the minimum, to 50% of 175% at target, and
175% of base for the maximum. There are no benefits or
long term incentive elements.
For Andrew Pardey, the graphs assume a base salary
of GBP430,000, pension contributions of up to 20% of
base and bonus from zero, to 50% of 125% at target and
125% of base for the maximum. The graph assumes that
Andrew Pardey will be awarded shares under the terms of
the new RSP of 150% of his base salary with an initial award
of up to 150% of his base salary. For the LTI the assumed
values are zero for minimum, to 50% of the face value of
the award at target and the face value of the award for
the maximum.
Implementation of policy
The Company intends to implement the remuneration
policy for 2016 as detailed in this report on remuneration.
Josef El-Raghy
Andrew Pardey
£875,000
£437,500
£100,000
£100,000
£37,500
£100,000
£75,000
£500,000
£500,000
£500,000
17%
83%
41%
9%
4%
46%
56%
7%
5%
32%
17%
£645,000
28%
36%
£322,500
£268,750
£86,000
£32,250
£537,500
£86,000
£64,500
83%
£86,000
£430,000
£430,000
£430,000
£390,000
24%
7%
3%
38%
30%
5%
4%
25%
Min
Mid
Max
Min
Mid
Max
Min
Mid
Max
Min
Mid
Max
Long term incentive
Annual incentive
Pension
Benefits
Base
89
Centamin plc Annual report 2015
DIRECTORS’ REPORT
5. Annual remuneration report
What did the executive and non‑executive directors earn in 2015?
Single figure table US$ (audited)
Executives
Salary
2015
Salary
2014
Benefits
2015
Benefits
2014
Bonus
2015
Bonus
2014
Josef El‑Raghy
763,372 821,582
38,347
— 907,945 1,087,294
LTI
2015
Nil
LTI
2014
Pension
2015
Pension
2014
Total
2015
Total
2014
Nil 152,674 164,316 1,862,338 2,073,192
Andrew Pardey
591,996
N/A
80,752
— 390,600
N/A 399,421
N/A
Nil
N/A 1,462,769
N/A
Total
1,355,368 821,582 119,099
— 1,298,545 1,087,294 399,421
— 152,674 164,316 3,325,107 2,073,192
Non‑executives
Fees
2015
Fees
2014
Benefits
2015
Benefits
2014
Bonus
2015
Bonus
2014
LTI
2015
LTI
2014
Pension
2015
Pension
2014
Total
2015
Total
2014
Edward Haslam
208,289 244,228
Mark Bankes
128,651 138,396
Mark Arnesen
120,223 126,535
Kevin Tomlinson
113,516 122,114
Trevor Schultz
113,516
72,357
Total
684,195 703,630
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 208,289 244,228
— 128,651 138,396
8,429
11,862 128,651 138,397
—
—
— 113,516 122,114
— 113,516
72,357
8,429
11,862 692,623 715,492
1. Josef El‑Raghy is paid in sterling and his base salary remained unchanged for the fourth consecutive year at GBP500,000 per annum.
2. The pension payable to Josef El‑Raghy represents a cash payment in lieu of contributions to a pension scheme.
3.
Andrew Pardey was appointed CEO and a director of the board on 1 February 2015, the remuneration in this table reflects his remuneration for the
eleven months in 2015.
4. Superannuation contributions are payable with respect to Mark Arnesen and this is included in the pension column.
5.
Directors’ remuneration paid in foreign currency was converted at an average rate during the year. The average A$:US$ exchange rate for 2015 is 0.7493
and the average GBP:US$ exchange rate for 2015 is 1.5267. Bonus accruals for 2015 applied an exchange rate of A$:US$0.7287 and GBP:US$1.4823.
Non‑executive director fees (audited)
Non‑executive directors receive annual fees within an aggregate directors’ fee pool limited to an amount which is approved
by shareholders. The committee reviews and recommends, for board approval, remuneration levels and policies for
directors within this overall directors’ fee pool. The fees which are paid are also periodically reviewed. The current annual
fee rate for non‑executive directors is as follows:
Annual base fee
Chairman of a board committee
Member of a board committee
As at
31 December 2014
As at
31 December 2015
GBP65,000 (US$101,674) GBP65,000 (US$96,353)
GBP10,000 (US$15,642) GBP10,000 (US$14,824)
GBP5,000 (US$7,821)
GBP5,000 (US$7,412)
Deputy chairman and senior independent director (see note 1)
GBP150,000 (US$222,353) GBP125,000 (US$185,295)
1.
With effect from 1 April 2013, the fees payable to Edward Haslam in his capacity as senior independent director were increased to take account of the
additional duties undertaken while the roles of CEO and chairman were combined. Following the changes to the board in 2015, these fees were reduced
from GBP150,000 to GBP125,000 per annum. This fee remains subject to an annual review and given that the Company has an executive chairman,
Edward Haslam will continue with an enhanced role with fees commensurate with that role. Edward Haslam’s title was changed to deputy chairman and
senior independent non‑executive director during the year to reflect this ongoing enhanced role. In keeping with the Company’s policy, Edward Haslam did
not and will not participate in any meeting discussing his fees.
2. These amounts include any statutory superannuation payments where applicable.
3. The Company reviewed the NED fees during 2015 and no increases in NED fees were proposed in 2015.
4. The non‑executive directors do not participate in any of the Company’s share plans or incentive plans.
90
Centamin plc Annual report 2015
DIRECTORS’ REPORT
REMUNERATION REPORT continued
5. Annual remuneration report continued
Base pay
Remuneration of the executive directors and the senior
management team is considered against three criteria
– general pay levels and pay increases throughout the
Company, the performance and skills of the individual
and market data.
Annual bonus
The bonus plan for the executive directors is based upon
a balanced scorecard approach designed to encourage
and reward the delivery of operational performance.
For Josef El‑Raghy the bonus is split 70% business and
30% individual targets as follows:
• 70% – the business targets are based on:
In respect of market data for the executive directors and
the senior management team, a selection of five different
comparator groups are used in order to gain a balanced
view of the market data. These comparator groups consist
of a bespoke list of UK and international mining companies,
companies with a similar market capitalisation, companies
with a similar turnover, the mining sector and the FTSE 250.
Any increase which exceeds that of the general workforce
may only normally be awarded as a result of change in
responsibility or change in the complexity and nature of
the role or the size of the organisation or the pay level
becoming out of line with market data. Pay is reviewed
annually and any changes ordinarily take effect from
1 January.
Base salary for Josef El‑Raghy, which is paid in sterling,
remains unchanged for the fourth consecutive year at
GBP 500,000 for 2015 and will rise by 3% effective from
1 January 2016.
Base salary for Andrew Pardey, which is paid in sterling,
increased from GBP390,000 to GBP430,000 (10% increase)
following his appointment as CEO. A further increase of 7%
will be effective from 1 April 2016.
Over the last four years (the same period since Josef
El‑Raghy last received a salary increase), employee salaries
have increased significantly more than the proposed
marginal increase for Josef El‑Raghy.
• 20% – financial (profitability/financial position, total
cost against budgeted total cost);
• 20% – operational (meeting production guidance,
CSR development and implementation of plan);
• 20% – strategic measures (M&A opportunities,
strategic management, M&A opportunities formalise
the business strategy); and
• 10% corporate (maintain sound corporate governance
and structure, board leadership and effective
management of the board, executive development
and succession planning).
• 30% – the individual tasks are based on building
management team and motivation, formalisation
and communications of business strategy, in country
stakeholder management and shareholder relations.
For Andrew Pardey, the bonus is split 70% business and
30% individual targets as follows:
• 70% – the business targets are based on:
• 25% – financial (profitability/financial position, cost
against budget and operational efficiency);
• 25% – operational (meeting production guidance,
health safety and environment, CSR development,
open pit and underground mining, resource and
reserve growth);
• 10% strategic measures (exploitation success in
Egypt and elsewhere, M&A opportunities including
geographical diversification); and
• 10% corporate (corporate governance improvements,
senior staff development, shareholder relations,
in‑country stakeholder management).
• 30% – the individual tasks are based on building the
management team and taking on the new responsibilities
as CEO.
2015 – bonus achieved for Josef El‑Raghy
Business targets
Individual targets
Performance
measure
Financial
Operational
Strategic
Corporate
Individual KPI
Target
Maximum
Awarded
opportunity
Achieved of
the maximum
bonus
20%
20%
20%
10%
30%
35%
35%
35%
17.5%
52.5%
175%
85%
85%
50%
50%
70%
17%
17%
10%
5%
21%
70%
Total
100%
91
Centamin plc Annual report 2015
DIRECTORS’ REPORT
In reviewing performance against the criteria and in arriving at the decision, the committee considered the key milestones
achieved during the year which Josef El‑Raghy was instrumental in delivering. These included the following:
Josef El‑Raghy
Achieved
Range
Financial and operational
Financial and operational
• 439,072 ounces produced (re‑guided upwards during the year),
• Guidance of 420,000 was revised during the year to 430,000 to
a 16% increase on 2014.
440,000 ounces for 2015.
• Cash operating cost of US$713 per ounce.
• All‑in sustaining cost of US$885 per ounce.
• Profitability/financial position – maintaining dividend flows to
• Cash operating cost forecast of US$700 per ounce.
• All‑in sustaining cost of US$950 per ounce.
• Annual dividend of between 15‑30% net cash flow after sustaining
shareholders in line with the dividend policy.
capital and profit share.
• Profitability/financial position improved throughout 2015
• Strong financial position US$200 million cash and cash equivalents
at year end after the payment of an interim dividend.
Strategic
Strategic
• Replacement and expansion of the Sukari underground reserve.
• Exploration programme over licence areas in Burkina Faso.
• Exploration programme over licence areas in Côte d’Ivoire.
• Resource/reserve replacement and expansion at Sukari, with a
focus on the high‑grade underground.
• Drilling on priority targets in Burkina Faso and Côte d’Ivoire,
providing the foundation for further resource development.
Corporate
Corporate
• Corporate governance improvements – engagement programme
• Maintain sound corporate governance and structure, board
with shareholders.
• Seamless hand over of roles and responsibilities to the newly
leadership and effective management of the board, executive
development and succession planning.
appointed CEO.
Individual KPIs
Individual KPIs
• Presenting at key seminars and investor conferences throughout
the year.
• Formalisation and communications of business strategy.
•
In‑country stakeholder management and shareholder relations.
• M&A opportunities reviewed and assessed.
• Maintaining good relations with the authorities in Egypt and
administration of the Concession Agreement.
• Building relations with the authorities in Burkina Faso and
Côte d’Ivoire.
On this basis, the committee determined that 70% of the maximum bonus, of 175% of Josef El‑Raghy’s 2015 base salary
had been achieved. This resulted in a payment of GBP612,500 (US$907,945).
As set out in the risk matrix, the Company is exposed to the daily fluctuations in the price of gold, receiving the market
rates on the day of sale. Consequently, revenue cannot be directly linked with the performance of the executive and
therefore the remuneration committee use other metrics to measure the success of the executive directors, which are
set out below.
Further details on performance targets cannot be disclosed as these are commercially sensitive.
2015 – bonus achieved for Andrew Pardey
Business targets
Individual targets
Performance
measure
Financial
Operational
Strategic
Corporate
Individual KPI
Achieved of
the maximum
bonus
Target
Maximum
opportunity
25%
25%
10%
10%
30%
25%
25%
10%
10%
30%
14%
14%
10%
9%
21%
68%
Total
100%
100%
92
Centamin plc Annual report 2015
DIRECTORS’ REPORT
REMUNERATION REPORT continued
5. Annual remuneration report continued
In reviewing performance against the criteria and in arriving at the decision the committee considered the key milestones
achieved during the year which Andrew Pardey was instrumental in delivering. These included the following:
2015 bonus (audited)
Andrew Pardey
Achieved
Financial and operational
Range
Financial and operational
• Operational efficiency – nameplate capacity of 11Mtpa achieved
in Q4 2015.
• Plant throughput rates of 11Mtpa forecast for 2015.
• Guidance of 420,000 was revised during the year to 430,000 to
• Production achievement of 439,072 ounces produced (re‑guided
440,000 ounces for 2015.
upwards during the year), a 16% increase on 2014.
• Cash operating cost of US$713 per ounce.
• All‑in sustaining cost of US$885 per ounce.
• Profitability/financial position – maintaining dividend flows to
shareholders in line with the dividend policy.
• Cash operating cost forecast of US$700 per ounce.
• All‑in sustaining cost of US$950 per ounce.
• Annual dividend of between 15‑30% net cash flow after sustaining
capital and profit share.
• Strong financial position US$200 million cash and cash equivalents
• Profitability/financial position improved throughout 2015.
at year end after the payment of an interim dividend.
Strategic
Strategic
• Sukari: 8.8Moz reserve and 13Moz resource, with upside from
• Sukari reserve expansion potential, especially via high grades from
exploration.
• circa 2,200km2 licence area in Burkina Faso.
• circa 1,520km2 licence area in Côte d’Ivoire.
• circa 1,800km2 under application.
underground.
• Exploration programme over licence areas in Burkina Faso.
• Exploration programme over licence areas in Côte d’Ivoire.
Corporate
Corporate
• Health and safety – safety record of 0.12 LTIFR in 2015.
• Labour costs – reduction in labour costs per ounce of gold
• A reduction of our yearly LTIFR and aiming for a zero‑harm safety
record throughout the group’s operations.
produced $77 per ounce.
• Labour productivity has improved with Sukari expansion.
Individual KPIs
• Moving forward key objectives as the newly appointed CEO.
On this basis, the committee determined that 68% of the
maximum bonus of 100% of Andrew Pardey’s 2015 base
salary had been achieved. This resulted in a payment of
GBP263,500 (US$390,600) for eleven months in 2015.
Further details on performance targets cannot be disclosed
as these are commercially sensitive.
The objectives for 2016 set against the balance scorecard
are as follows:
2016 bonus
For Josef El‑Raghy the bonus for 2016 will be based upon
the balanced scorecard approach, as follows:
For Andrew Pardey the bonus for 2016 will be based upon
the balanced scorecard approach, as follows:
• 70% – the business targets are based on:
• 25% – financial (profitability/financial position, cost
against budget and operational efficiency);
• 25% – operational (meeting production guidance,
health safety and environment, CSR development,
open pit and underground mining, resource and
reserve growth);
• 10% strategic measures (exploitation success in
Egypt and elsewhere, M&A opportunities including
geographical diversification); and
• 70% – the business targets are based on:
• 10% corporate (corporate governance improvements,
• 40% – financial (an improvement in profitability, cost
against budget and operational efficiency);
• 20% strategic measures (M&A opportunities,
exploration in Egypt and other locations, project
delivery); and
• 10% corporate (corporate governance improvements,
health and safety, production guidance CSR
development).
• 30% – the individual tasks are based on building the
management team and motivation, formalisation
and communication of business strategy, in‑country
stakeholder management and shareholder relations.
senior staff development, shareholder relations,
in‑country stakeholder management).
• 30% – the individual tasks are based on building the
management team and taking on the new responsibilities
as CEO).
Further details on performance targets for 2016 cannot be
disclosed as these are commercially sensitive. However, the
performance achieved during the year will be disclosed in
the 2016 annual report in similar detail to the 2015 bonus
performance metrics set out in this report.
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Centamin plc Annual report 2015
DIRECTORS’ REPORT
Pension arrangements (audited)
Josef El‑Raghy is entitled to a payment in respect of pension entitlement equal to 20% of base pay. Andrew Pardey has
a pension entitlement of up to 20% of base pay, subject to recommendation by the committee. Other than statutory
superannuation for Australian resident director, Mark Arnesen and the payments in lieu of pension above, no pensions
or payments in lieu of pensions are made.
Long term incentives – shares award table (audited)
Josef El‑Raghy does not currently participate in any long term incentive arrangement. There is a deferred bonus share plan
(“DBSP”) for senior management and a shareholder approved restricted share plan for directors and senior management.
Andrew Pardey has been granted 900,000 awards under the new restricted share plan. Andrew has not received any new
grants under the DBSP as he is not eligible to receive new grants as a director. Grants awarded under the DBSP prior to
Andrew becoming a director will vest over the next two years. Vested awards received by Andrew Pardey in 2015 under
the DBSP amounted to 720,000 shares. The participant receives the vested shares by virtue of their continued employment
with the Company on anniversary of the award over the three year vesting period.
Award
Granted
(per share)(1)
Value of award at
grant date in US$
Total
vested
Total
unvested
Total
vested
in 2015
Performance
conditions
DBSP 11 October 2012
500,000
DBSP 4 June 2013
1,260,000
DBSP 4 June 2014
400,000
1.6265
0.5886
1.0526
500,000
—
166,666
Service conditions
840,000
420,000
420,000
Service conditions
133,334
266,666
133,334
Service conditions
DBSP TOTAL
2,160,000
1,473,334
686,666
720,000
RSP 4 June 2015
900,000(2)
(2)
—
900,000
—
Performance conditions
(1) The fair value of the DBSP was calculated using the closing share price on the grant date (converted from GBP:US$) and no other factors were taken into
account in determining the fair value. See note 27 to the financial statements for details of the RSP valuation.
(2) The value of award grant date (per share for the RSP is 20% TSR: 0.7894; 50% EPS: 0.9994; 30% production: 0.9994).
Scheme summary
DBSP scheme
Type: deferred bonus share award.
Award: discretionary bonus award.
RSP award in June 2015
Type: restricted share plan.
Award: based on 150% of salary.
Value: see note 27 to the financial statements.
Value: see note 27 to the financial statements.
Performance period: vesting in trances over three years from date
of grant.
Performance period: 31 December 2015 to 31 December 2018.
Performance measures: see note 27 of the financial statements.
Performance measures: service conditions.
Payment to past directors (audited)
There are no payments to directors for loss of office.
Payment for loss of office (audited)
There are no payments to past directors of the Company.
Service agreements for directors (audited)
Service agreements for executive directors
Consistent with current best practice the executive directors have rolling contracts with notice periods of twelve months
or less.
Letters of appointment for non‑executive directors
Under the Articles of Association adopted by the Company all directors are now subject to annual re‑election. All members
of the board offered themselves for either election or re‑election at the last annual general meeting of the Company.
Copies of the appointment letters including the terms of service are available at the Company’s registered office or at the
annual general meeting. Each of the non‑executive directors have formal letters of appointment and there is no provision
for payments for loss of office.
94
Centamin plc Annual report 2015
DIRECTORS’ REPORT
REMUNERATION REPORT continued
5. Annual remuneration report continued
Service agreements for directors continued
Letters of appointment for non‑executive directors continued
Date of agreement
8 May 2015
Josef El‑Raghy
Andrew Pardey
8 May 2015
Notice period
Twelve months’ notice from either party.
Twelve months’ notice from either party.
Expiry date
Pension
Benefits
Annual bonus
No fixed expiry date as rolling contract.
No fixed expiry date as rolling contract.
Entitlement to 20% of base pay.
Entitlement to 20% of base pay, subject to
committee discretion.
Entitlement in accordance with the
remuneration policy.
Entitlement in accordance with the
remuneration policy.
Eligible to participate in an annual bonus
arrangement as determined by the committee from
time to time.
Eligible to participate in an annual bonus
arrangement as determined by the committee from
time to time.
Long term incentives
Eligible to participate in the new RSP.
Eligible to participate in the new RSP.
Termination payment
Entitled to be paid salary and pension in respect
of the relevant notice period. In the case of notice
given in connection with and shortly following a
change of control, Josef El‑Raghy will be entitled
to payment in lieu of an amount equal to twelve
month’s basic salary together with any bonus that,
in the opinion of the remuneration committee,
would have been due to him at the time of the
completion of the change of control taking into
account all the relevant performance indicators.
Entitled to be paid salary and pension in respect
of the relevant notice period. In the case of notice
given in connection with and shortly following a
change of control, Andrew Pardey will be entitled
to payment in lieu of an amount equal to twelve
month’s basic salary together with any bonus that,
in the opinion of the remuneration committee,
would have been due to him at the time of the
completion of the change of control taking into
account all the relevant performance indicators.
To encourage ownership of shares and thereby create a link of interest between shareholder and the executives, the
remuneration policy (adopted in 2014 and recommended in 2015) requires executive directors to build a holding of shares
in the Company equivalent to 150% of base salary over a five year period from appointment. Vested and unvested shares
are to be included in the calculation.
The following table shows the current shareholding of each of the directors at the date of this report.
Name
Executive directors(2)
Josef El‑Raghy
Andrew Pardey
Non-executive directors(2)
Trevor Schultz
Edward Haslam
Mark Bankes
Mark Arnesen
Kevin Tomlinson
As at
31 December
2015
Percentage
of base
salary/fees(3)
71,445,086
2,968,800(1)
9144%
440%
30,000
102,056
150,000
49,000
24,400
26%
44%
113%
37%
21%
(1) Details of the awards granted under the DBSP and RSP to Andrew Pardey are set out in the long term incentives shares award table above.
No other executive directors or non‑executive directors hold shares, share options or awards that are subject to performance measures.
(2) There have been no changes to directors‘ shareholdings from 31 December 2015 to the date of this report.
(3) The valuation of the shareholdings are based on the share price at 31 December 2015.
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DIRECTORS’ REPORT
6. Comparative remuneration data (audited)
Performance graph and CEO remuneration table
The graph below compares the TSR of the Company to the FTSE 250 and the FTSE 350 Mining indices. The graphs show
the return for the last five years.
Centamin plc
FTSE Gold Mine
FTSE 250
200
150
100
50
0
2011
2012
2013
2014
2015
The remuneration committee considers that these indices are appropriate comparators of the Company. We have reflected
details of the CEO pay from 2011, when Centamin plc was incorporated.
Chairman – Josef El‑Raghy
2011 (chair/CEO)
2012 (chair/CEO)
2013 (chair/CEO)
2014 (chair/CEO)
2015 (chairman)
CEO – Andrew Pardey
2015 (11 months as CEO)
Single figure
remuneration
US$1,290,742
US$1,920,644
US$2,020,562
US$2,073,192
US$1,862,338
Annual
bonus as %
of maximum
Long term
incentives
65%
80%
75%
80%
70%
Nil
Nil
Nil
Nil
Nil
Single figure
remuneration
Annual
bonus as %
of maximum
US$1,462,789
68%
Long term
incentives
RSP award
150% of
base salary
The CEO pay from 2012 to 2014 reflects the total remuneration for Josef El‑Raghy while he held the position of CEO and
Chairman. Andrew Pardey was appointed CEO from 1 February 2015.
Percentage change in remuneration (unaudited)
The Company has chosen the comparator group as all the employees of the Centamin group (excluding
non‑executive directors).
Comparator group(1)
CEO (eleven months in 2015)
Total
remuneration
2015
Total
remuneration
2014
Shareholder
dividend(2)
US$41,767,881 US$50,985,000 US$32,650,379
US$1,495,531 US$2,073,192
(1) The total number of individuals employed by the Centamin group in 2015 was 1,462 (2014: 1,413 employees).
(2) Total reflects the dividends declared in respect to the year ended 2014. The dividends declared for the year ended 2015 amount to US$33.7 million.
Other than the paid and declared dividends during the year, there have been no other shareholder related returns of
capital or share buy backs by the Company.
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Centamin plc Annual report 2015
DIRECTORS’ REPORT
REMUNERATION REPORT continued
7. Long term incentive arrangements
Introduction
Centamin introduced a new long term incentive scheme,
which was approved by shareholders at the AGM on
18 May 2015. The aim of the plan is to introduce a long
term incentive plan that can provide a suitable recruitment
and retention tool for any new or promoted executives,
senior management and individuals at executive director
level. The plan, which complies with best practice
guidelines, is to provide a platform, as part of the
remuneration policy, to be used to provide a long term
reward tool for participants.
New long term incentive plan
New restricted share plan (“RSP”)
The RSP was approved by the shareholder at the AGM on
18 May 2015. Full details of the plan are set out in the 2014
directors’ remuneration report.
Following the adoption of the new restricted share plan,
the Company has granted 5,145,000 conditional awards
to employees of the group (900,000 awards were made
to Andrew Pardey, executive director). 21 employees
participate in the RSP, including heads of department and
senior personnel based onsite, as well as members of the
senior management team located at the head office.
The remuneration committee also proposed an amendment
to the scheme rules, following feedback from shareholders
and the proxy advisory organisation and the Company
subsequently applied an amendment to the published
scheme rules to include a malus claw back provision. In
summary, the additional clause has been included so that
an award holder who ceases to be an eligible employee for
cause (see definition below) in the period after the award
has vested but before the settlement of the deferred shares
(i.e. during the two year holding period) shall immediately
forfeit his/her rights in the award from the date of cessation.
Cause is defined as “ceasing to be an eligible employee by
reason of dismissal for gross misconduct, fraud or materially
adversely affecting the group’s reputation”.
The awards granted on 4 June 2015 will vest in three years
(with 50% of the vested shares deferred for a further two
years) and will be subject to satisfaction of the performance
conditions which are set out below and divided into three
tranches:
• 20% of the award shall be assessed by reference to a
target total shareholder return (“TSR”). If the top end of
the TSR target is met (currently anticipated to be if the
Company is ranked equal to or better than the upper
quarter total shareholder return of selected comparator
companies, see below) all 20% of the award tranche shall
vest. If the Company is ranked at the median level in a
table of comparator companies by reference to TSR, 25%
of the award tranche shall vest (i.e. 5% of the award).
Proportionate amounts of the award tranche will vest for
results in between;
The comparator group is as follows: Agnico Eagle Mines
Ltd, AngloGold Ashanti, Centerra Gold, Eldorado Gold,
Gold Fields Ltd, Kinross Gold Corporation, IAMGOLD
Resources Inc, Petropavlovsk, Polyus Gold, Randgold
Resources, Yamana Gold, Inc, Acacia Mining plc/
African Barrick, Alacer Gold, B2 Gold Corp and
Endeavour Mining;
• 50% of the award shall be assessed by reference to
absolute growth in earnings per share (“EPS”). If a
compound annual growth rate in EPS of the Company
of 12% is achieved, all 50% of the award tranche shall
vest. If a compound annual growth rate in EPS of the
Company of 8% is achieved 25% of the award tranche
shall vest (i.e. 12.5% of the award). Proportionate
amounts of the award tranche will vest for results in
between. With the onset of profit share (expected
from 2017) likely to impact the growth of EPS, the
remuneration committee will have the discretion to make
a fair and equitable adjustment, if necessary, to reflect
the impact of profit share when assessing the growth
over the period of the grant. Any such adjustment will be
discussed with key shareholders at the time; and
• 30% of the award shall be assessed by reference to
compound growth in gold production. If a compound
annual growth rate of 10% of gold production is
achieved, all 30% of the award tranche shall vest. If a
compound annual growth rate of 6% of gold production
is achieved 25% of the award tranche shall vest (i.e. 7.5%
of the award). Proportionate amounts of the award
tranche will vest for results in between.
Further awards are intended to be made in April 2016. The
awards granted in April 2016 will vest following the passing
of three years. Vesting will be subject to the satisfaction of
the following performance conditions (and the two year
holding period for 50% of the vested award) which are
divided into four tranches, as follows:
• TSR: 20% of the award shall be assessed by reference to
a target total shareholder return (“TSR”). If the top end
of the TSR target is met (currently anticipated to be if the
Company is ranked equal to or better than the upper
quarter total shareholder return of selected comparator
companies, see below) all 20% of the award tranche shall
vest. If the Company is ranked at the median level in a
table of comparator companies by reference to TSR, 25%
of the award tranche shall vest (i.e. 5% of the award).
Proportionate amounts of the award tranche will vest for
results in between.
The comparator group is as follows: Agnico Eagle
Mines Ltd, AngloGold Ashanti, Centerra Gold, Eldorado
Gold, Gold Fields Ltd, Kinross Gold Corporation,
IAMGOLD Resources Inc, Petropavlovsk, Randgold
Resources, Yamana Gold, Inc, Acacia Mining plc, Alacer
Gold, B2 Gold Corp and Endeavour Mining;
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Centamin plc Annual report 2015
DIRECTORS’ REPORT
• Mineral reserves: 30% of the award shall be assessed
by reference to mineral reserve replacement and
growth. Reserve replacement is calculated based on the
cumulative reserve estimates (from June 2015 to the
most recent reserve estimate prior to vesting) compared
with the cumulative reserves mined from 31 December
2015 to 31 December 2018. All 30% of the award will
vest if the ratio is 105%. 25% of the award tranche will
vest if the ratio is at least 75% (i.e. 7.5% of the award);
• EBITDA: 20% of the award shall be assessed by
reference to compound growth in EBIDTA. If a
compound annual growth rate of 10% of EBITDA is
achieved, all 20% of the award tranche shall vest. If a
compound annual growth rate of 9% of EBITDA is
achieved, 25% of the award tranche shall vest (i.e. 5% of
the award). Proportionate amounts of the award tranche
will vest for results in between; and
• Gold production: 30% of the award shall be assessed by
reference to compound growth in gold production. If a
compound annual growth rate of 8% of gold production
is achieved, all 30% of the award tranche shall vest. If a
compound annual growth rate of 4% of gold production
is achieved 25% of the award tranche shall vest (i.e.
7.5% of the award). Proportionate amounts of the award
tranche will vest for results in between.
As Sukari reaches optimum production rates, the relative
year‑on‑year rate of growth slows. Maintaining production
rates at this optimum level still represents an award, with an
appropriate incentive to further improve production rates
through efficiency and optimisation.
The above 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.
Deferred bonus scheme (not for directors)
This plan, introduced in 2012, allowing the annual bonus to
be matched with shares which are then ordinarily released
in three annual tranches, conditional upon the continued
employment with the group. The plan was introduced as a
review of annual bonus arrangements for management with
the objectives of:
• increasing the variable pay element of remuneration;
• introducing a new retention element in the remuneration
package; and
• linking part of that reward to the medium term share
performance of the Company.
On 4 June 2013, the Company offered participants of
existing plans the opportunity to replace awards with an
initial one‑off award under the deferred bonus share plan.
In June 2014, the participants who met the vesting criteria
received their first tranche, representing one‑third of the
original award. An additional grant was awarded in June
2014 to new and existing participants which also vests in
thirds over three years.
The plan is not open to directors of the Company and any
shares used for the plan are not newly issued shares.
The DBSP, now in its fourth year, provides a simple yet
effective incentive to senior management and senior
employees below board level, motivating and retaining
individuals over the longer term. 31 employees participate
in the DBSP, including heads of department and senior
personnel based onsite, as well as members of the senior
management team located at the head office.
Historic long term incentive plan summary
The historic plans, namely the executive directors loan
funded share plan (“EDLFSP”) and employee loan funded
share plan (“ELFSP”) 2011 Employee Option Scheme
(“2011 EOS”) are no longer in use and all shares awarded
have either being forfeited, lapsed or transferred to other
schemes. The residual accrual in relation to these schemes
has been expensed to the profit and loss.
Statement of shareholder voting
At the AGM of the Company on 18 May 2015 the
following votes for and against the adoption of the
remuneration report were as follows:
Approval of the remuneration report
773,804,348 (98.9%)
8,577,410 (1.1%)
For
Against
Withheld
601,609
Approval of the remuneration policy
775,161,361 (99.37%)
4,875,294 (0.63%)
2,946,713
This report was approved by the board of directors and signed on its behalf by:
Edward Haslam
Chairman of the remuneration committee
21 March 2016
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Centamin plc Annual report 2015
DIRECTORS’ REPORT
AUDIT AND RISK COMMITTEE REPORT
The committee has had a full agenda
this year, finalising the scope of the
newly appointed internal auditors,
developing the relationship with
the external auditors and managing
oversight of the risk reporting framework
Mark Arnesen
Chairman of the audit and risk committee
Dear shareholders
Committee activity in 2015
This report provides you with a summary of the activities
undertaken by our independent audit and risk committee
during 2015. The report looks at the involvement of
the committee in respect of the work carried out by the
external auditors, the appointment and scope of the new
internal audit function and the development of the control
environment in compliance with the Corporate Governance
Code (the “Code”).
Audit committee composition and effectiveness
The audit and risk committee is made up of three
independent non‑executive directors, myself as chairman,
Mark Bankes and Edward Haslam. Biographies of the
members of the committee can be found on pages 70
and 71.
In accordance with the Ontario Securities Commission
requirements, all members of the committee are considered
financially literate (pursuant to section 1.5 of the Multilateral
Instrument 52‑110) and in compliance with the Code, I am
the member with the required relevant financial experience
as a professionally qualified accountant.
The board conducted an evaluation of the committee,
its composition, experience and activities during the year.
The findings concluded that the committee had made
a significant contribution during the year to enhance
the control environment within the finance team and in
establishing a detailed scoping and action plan in respect
to the provision of internal audit services.
Committee
attendance
Date
joined
Attendance
Attendance
in 2015
Mark Arnesen
(Chairman of the committee)
February 2011
Edward Haslam
(Member)
Mark Bankes
(Member)
March 2011
February 2011
9 of 9
meetings
9 of 9
meetings
9 of 9
meetings
100%
100%
100%
The committee meetings are regularly attended, by
invitation, by the Chairman, CEO and CFO along with
the company secretary and general counsel. PwC are also
invited to attend relevant committee meetings. Separate
discussions outside of formal committee meetings are
regularly held between the external audit partner, the
committee chairman and the CFO.
The committee meets in person for four scheduled
meetings during the year. The committee also meet, by way
of conference call, at least once a quarter to review the draft
quarterly and annual financial statements. A summary of the
committee’s main duties and activities carried out during
2015 is set out below:
External auditor: The committee reviewed the audit
planning and completion documents and assessed
the effectiveness of the external auditor, taking into
consideration the perceptiveness of the auditor in handling
key judgments and estimates.
Financial reporting: The committee reviewed the quarterly,
half‑year and annual results and reviewing the application
of the accounting policies, making recommendations and
highlighting any matters to the board.
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Centamin plc Annual report 2015
DIRECTORS’ REPORT
Risk reporting: The committee reviewed the risk
management process and periodic review of the corporate,
strategic and operational risks. See risk management and
reporting on page 32 for full details of the risk management
structure. The committee developed further the internal and
external reporting to take account of updates to the Code.
Internal controls: The committee reviewed the internal
control environment, to include controls over financial
reporting, budgeting and reporting obligations. The
committee also finalised the appointment of the internal
auditor and assisted in the scoping of services for 2015
and 2016 (see below for details of the process and work
undertaken by the internal auditor). Details of the risk
management and internal controls are summarised in the
corporate governance report together with the assessment
which was undertaken by the board during the year.
Accounting for transactions: The committee reviewed,
among other reports, the cost recovery model, the
accounting treatment for SGM and PGM together with
the procedures for maintaining the PPE register and
asset allocation. The committee considered the timing
and modelling of future profit shares with government.
The committee also reviewed the accounting policies for
the write down of exploration expenditure during the year
in respect to Sheba (Ethiopian exploration) which ceased
operations late in 2015. Details of the financial forecasting
can be found in the risk management section and
viability statement.
General: The committee maintained oversight for the
preparation of accounts for the major subsidiaries, the
repatriation of funds through the corporate structure,
the treasury policy and the reorganisation of the Ampella
group structure which holds the Burkina Faso and
Côte d’Ivoire assets.
External audit
At the AGM in May 2015, the shareholders approved the
appointment of PricewaterhouseCoopers LLP (“PwC”)
as the Company’s external auditor. PwC’s appointment
followed a tender process in 2014, conducted in compliance
with best practice guidelines, and there were no matters
raised in connection with the subsequent resignation
of the previous auditor, Deloitte LLP. PwC has, since its
appointment on 23 June 2014, carried out the review
engagement for the half year ended 30 June 2014 and
30 June 2015 as well as the statutory audit for the years
ended 31 December 2014 and 31 December 2015.
The committee have been instrumental in ensuring an
orderly handover of the audit engagement to PwC and the
process was compliant with relevant auditing standards.
During 2015, PwC attended meetings with the committee
and the management team, presenting their detailed audit
plan, their findings and recommendations in respect to
the issue of their audit review and statutory opinions. PwC
has open access to the board of directors at all times and
the audit partner and certain of the audit management
team attend and present at relevant committee meetings
throughout the year.
The committee, having considered the audit plans put
forward by PwC, assessed the content and scope of the
audit to ensure the key areas have been identified. The
approach to the audit and identification of the significant
focus areas were considered appropriate by the committee,
based on their detailed understanding of the business and
the control environment and procedures in place.
PwC has visited the Sukari mine site and audited stock take,
as well as spending time at our finance and administrative
offices in Alexandria, Egypt and Jersey. PwC has also met
with our legal advisers in Cairo.
PwC has arranged training and Q&A sessions during
the year, attended by management and members of
the committee to cover topics including governance,
accounting and risk management updates.
Non‑audit fees
There was no significant non‑audit work carried out by PwC
during the year, with the majority of the tax advisory services
continuing to be provided by the Deloitte LLP tax teams
in the UK and Australia. The group’s policy for non‑audit
services sets out the categories which the external auditor
will and will not be allowed to provide to the group and
those engagements that need pre‑approval of the group.
Fees for audit services incurred during the year amounted
to US$345k, there were non‑audit services carried out by
PwC during the year. Full details are set out in note 22 to
the financial statements.
Our policy on non‑audit services and auditor independence
can be found on our website.
Audit rotation
There has been no rotation of audit partner since PwC’s
appointment. The Company’s policy is to tender the
external audit every ten years.
Auditor objectivity and independence
The committee continues to monitor the auditor’s objectivity
and independence and are satisfied that PwC and the group
have appropriate policies and procedures in place to ensure
that these requirements are not compromised.
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Centamin plc Annual report 2015
DIRECTORS’ REPORT
AUDIT AND RISK COMMITTEE REPORT continued
External audit continued
External auditor effectiveness
The group has an established control environment which
ensures regular reporting by its operating mine and
exploration projects through to the Company’s headquarters
in Jersey. Progress was made in 2015 to make better use of
the existing financial reporting programmes, to streamline
reporting and therefore remove processes which could
be subject to human error. These improvements in
the reporting environment have been recognised and
encouraged by PwC.
The committee undertakes a review of the effectiveness
of the external auditor at the half‑year review and annual
statutory audit. This review compares the original audit
plan against the delivery of the audit. The committee
also reviews the process, taking account of the views of
the senior members of the finance team and the CFO.
An evaluation of auditor’s findings and recommendations
are considered, to ensure that all key areas have been
identified. Where applicable, an action plan and control
sheet is set up to ensure recommendations are addressed.
There has been open communication between the
committee and the auditor. Management has also worked
well with PwC during the half‑year and full year audit.
Having carried out the evaluation, the committee is satisfied
that the audit engagement for the financial year ended
2015 was both effective and added value to the group.
Appointment of the internal auditor
In 2015, the committee assisted management to complete a
tender process for the provision of internal audit services.
Having approached a number of firms, including mid‑tier
and the big four audit firms, BDO LLP was selected based
on its experience and industry knowledge. There were
no matters which might otherwise compromise their
independence and objectivity. The committee assisted
management in developing the scope of the audit for 2015
and 2016. BDO LLP reports its findings primarily to the
committee and discussions are regularly held between the
audit partner and the chairman of the committee.
In 2015, representatives of BDO LLP visited the mine in
Egypt and met with the senior heads of department. Having
carried out an initial assessment, it concentrated the internal
audit on the core financial controls and corporate risk
management, as set out below.
Audit review: core financial controls
Control
framework
General
ledger
Sales and accounts
receivables
Accounts
payable
Cash and
bank
Fixed
assets
Financial reports
Management
accounts
Audit review: risk management
Risk
governance
Risk assessment
and mitigation
Risk monitoring
and reporting
BDO LLP provided a list of recommendations to the
committee to make further improvements to the control
environment and to meet best practice guidelines. The
action plan and progress updates, following the initial
internal audit review, will be monitored by the committee
throughout 2016.
The scope of work for 2016, which was developed after
consultation with the management team, the committee
and BDO LLP, is set out below:
2016 scoping schedule
Warehouse, purchasing
and tendering
Contract management
Budgetary controls
• Procurement strategy, policy
and procedures.
• Contract signing.
• Contract spend analysis and
• Ordering.
• Stock management.
• Good requisition and issue.
• Quotations and tendering
procedures, including
obtaining value for money.
• Receipting and return
of goods.
reporting.
• Contractor performance
management.
• Contractor training
completion.
• Budget setting and approval.
• Budget monitoring.
• Changes to budgets.
• Management information
and reporting.
Compliance with the
concession agreement
• Compliance with the
concession agreement.
• Controls in place to prevent
breaches of the agreement.
• Ongoing monitoring of
compliance.
• Payment to EMRA.
• Compliance testing of a
sample of CA items.
The committee will also monitor the auditor’s progress this year and ensure they have access to the required resources and
information to complete their scope in 2016.
101
Centamin plc Annual report 2015
DIRECTORS’ REPORT
Significant issues highlighted during the year by the committee
The following significant issues were highlighted during the year by the committee (full details and analysis are set out in
note 4 to the financial statements).
Topic
Internal
audit
Accounting
for
transactions
Significant
issue
Appointment
of an internal
auditor
Impairment
of assets
(other than
financial
assets)
How the committee addressed these issues
Completion of the tender for the provision of internal audit services.
Details of the appointment of BDO LLP and the work carried out and scope for 2016 are set out above.
Management have concluded that there is no
indication that an impairment exists, nor have any
indicators arisen after the reporting period and are
therefore not required to perform a full impairment
review under IAS 36.
In making the assessment as to the possibility of
whether impairment losses have arisen, management
considered the following indications:
•
internal sources of information;
• external sources of information;
•
litigation;
•
the key assumptions applied in the 31 December
2015 impairment review;
forecast gold prices;
•
• discount rate;
• production volumes;
•
• costs and recovery rates.
reserves and resources report; and
The committee reviewed the papers presented
by management in respect to IAS 39 and are in
agreement with the conclusions set out above.
Litigation
Accounting
for
transactions
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 20 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 the financial settlement.
The details of this litigation, which relate to the loss of the Egyptian national subsidy for Diesel Fuel Oil and
the ability of the group to operate outside the area of 3km2 determined by the Administrative Court of first
instance to be the area of the Sukari exploitation lease, are given in note 20 to the financial statements and in
the most recently filed Annual Information Form (“AIF”) which is available on SEDAR at www.sedar.com.
The committee has reviewed the external legal opinions, the opinions of the Company’s general counsel and
the facts associated with the litigation and are in agreement with management on the accounting judgments
and agree that, 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.
Accounting
for
transactions
Going
concern
Under guidelines set out by the UK Financial Reporting Council (“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.
Based on a detailed cash flow forecast prepared by management, in which any reasonably possible change in
the key assumptions on which cash flow forecast is based, the directors considered it appropriate to prepare
the financial statements on the going concern basis. Key assumptions underpinning this forecast include:
litigation as discussed in note 20 to the financial statements;
•
forecast gold price;
•
• production volumes; and
• costs and recovery rates.
These financial statements for the year ended 31 December 2015 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 the financial statements.
Accounting
for
transactions
Accounting
treatment
of Sukari
Gold Mines
(“SGM”) and
profit share.
SGM is consolidated within the Centamin group of companies, reflecting the substance and economic reality
of the Concession Agreement (see note 21 to the financial statements). The group, in considering the relevant
activities of SGM, its power over these activities and exposure to the variable returns has concluded that the
group consolidate this interest. A non‑controlling interest is recorded in relation to the equity in the subsidiaries
that are not attributable to the group. Note 21 to the financial statements sets out in detail the accounting
treatment for all the assets, liabilities, income and expense of SGM. The committee reviewed papers from
management and agree with the accounting treatment as set out above.
Due to the cessation of exploration activity in Ethiopia during the year, an impairment of US$6.3 million was
recorded. The committee reviewed the papers presented by management in respect to IFRS 6 and are in
agreement with the accounting treatment.
As detailed in note 7 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 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. In the event that 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.
The internal auditor will make an assessment each year of any significant changes to the risk profile of the organisation
and consider any areas of focus for the provision of internal audit services. The committee will ultimately be seeking an
independent viewpoint and assurance over internal control environment from BDO LLP.
Risk
reporting
Jurisdictional
taxation
matters
102
Centamin plc Annual report 2015
DIRECTORS’ REPORT
AUDIT AND RISK COMMITTEE REPORT continued
Fair, balanced and understandable
• Is the annual report clear and understandable?
The committee was satisfied that the controls over the
accuracy and consistency of the information in the 2015
annual report were sufficiently robust. The committee
reviews the control environment and is in receipt of monthly,
quarterly and annual financial and budgetary information.
The committee is also involved in the review of all key
accounting policies and matters requiring judgment
and estimation.
• Do we clearly show our business model and strategy
to the reasonably informed reader of the report?
• Have we identified the key metrics and explained the
significance of these results?
• Have we reflected the link between our strategy,
performance and financials?
• Are our risk and governance presented clearly?
The committee has, at the request of the board, also
considered whether the annual report is fair, balanced
and understandable. In arriving at that decision, the
committee has been involved in reviewing, at an early
stage, the content of (both) the financial statements and
the strategic report (including the business model), the
performance review and governance reporting throughout
the report (including the directors’ report). The assessment
of each component by the committee can be summarised
as follows:
• Is the annual report fair and balanced?
• Have the group’s activities been presented fairly in
all respects?
• Does the narrative reporting fairly represent
financial results?
• Have we disclosed key indicators of performance?
• Have we applied the appropriate emphasis on the
material matters?
• Do the chairman and CEO reports reflect the
full story?
The committee considered these questions (and more) and
as an example, the committee considered the reporting of
both the positive and less favourable outcomes this year.
For example, the increase in ounces of gold produced was
sufficiently weighted against the backdrop of a low gold
price environment. In addition, the ongoing litigation was
given prominence in the chairman’s statement. The narrative
reporting also explained the write down of exploration
expenditure following the decision to relinquish the licence
areas in Ethiopia with sufficient narrative relating to the
ongoing investment at our advanced and early stage
exploration in Burkina Faso and Côte d’Ivoire.
The committee recommended an update on how we
present our risk management process and business model
this year, which has been implemented in this report (see
page 32). The additional sign posting and clear presentation
of the strategic objectives, and how these link to operational
and exploration activity has also been modified to help the
user of the report.
The committee concluded that the annual report was ‘fair’,
‘balanced’ and ‘understandable’ having considered the
activity of the Company during the period and that users
of the report would be able to understand our position,
strategy, business model and overall performance which
were presented consistently throughout the annual report.
Control environment
Full details of the risk management and control environment
are set out in the strategic report on page 32. The risk
management report concludes by identifying the principal
risks for the business and the Company’s statements on risk
appetite and long term viability.
While the board has overall responsibility for risk
management and internal controls, the board has delegated
certain responsibilities to this committee. These include
responsibility over the adequacy of the internal control
policies and procedures and the effectiveness of internal
financial controls and risk management systems.
The key features of the control environment are to ensure
compliance with laws, regulations and other requirements
relating to external reporting by the Company of financial
and non‑financial information. The purpose of the risk
management framework is to understand the risks the
group faces and to manage them appropriately to enhance
the Company’s ability to improve its decision making
process, deliver on its objectives and subsequently improve
its performance as a mining company.
During the year, the committee reviewed the overall
control environment, including specific financial controls
and procedures. The committee also recommended the
adoption of a new risk framework agreement to formalise
the existing information and reporting flows between
the operation, the executive management team and the
committees and board.
103
Centamin plc Annual report 2015
DIRECTORS’ REPORT
Overview
As a result of its work during the year, the committee
has concluded that it has acted in accordance with its
terms of reference and has ensured the independence
and objectivity of the external auditor. A member of the
committee will be available at the annual general meeting
along with the CFO to answer any questions in relation to
this report.
During the year, the committee carried out an evaluation
of its own performance, taking into consideration the
contribution to the quarterly and annual accounts and the
risk review and risk assessment process. The committee also
considered its composition, the competency, availability and
contribution of its members and did not recommend any
further changes to the board.
Mark Arnesen
For and on behalf of the audit and risk
committee of Centamin plc
21 March 2016
As part of the review process, it was necessary to update
the existing corporate policy on risk and the board adopted
a revised and updated risk management framework
agreement. The risk management framework includes
additional detail about the scope and structure of an
executive risk management working group, which will be
preparing quarterly reports on an ongoing basis to help
implement the suggested improvements following the last
review and internal audit recommendations.
The appointment of the internal auditor, BDO LLP, was an
important step in the Company’s growth strategy, and will
help the Company and the committee identify any potential
weaknesses in the control environment and recommend
improvements for the future.
Controls over financial reports and financial statements
The consolidated financial statements and annual report
are prepared at the Company’s head office in Jersey, where
the group financial controller and chief financial officer
are based. The accounting information from the group’s
operations is provided to the head office where the ledgers
are consolidated. Appropriate reconciliations and reviews
are performed at the level of the operation and at the
group’s head office by way of the performance of monthly,
quarterly and annual reconciliations.
Going concern and long term viability
The directors considered it appropriate to continue to
adopt the going concern basis of accounting in preparing
the financial statements. The going concern statement is
detailed in full in note 3 to the financial statements. The
statements in relation to the group’s viability, over the longer
term, are set out in the risk management report on page 37.
External auditor
So far as each current director of the Company is aware,
the auditor has had full access to all relevant information
and the committee has answered any questions raised by
the auditor allowing the auditor to carry out its duties.
The committee recommends to the board the appointment
of PwC as auditor at the forthcoming annual general
meeting. PwC has expressed its willingness to continue
in office as auditor.
104
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
DIRECTORS’ RESPONSIBILITIES
Directors’ responsibilities in respect of the annual report
and financial statements
The directors are responsible for preparing the annual report and
financial statements in accordance with the Companies (Jersey)
Law, 1991 (the “Law”) and applicable laws and regulations. The
Law requires the Company to prepare financial statements in
accordance with generally accepted accounting principles and the
Company has chosen to prepare the accounts in accordance with
International Financial Reporting Standards (“IFRS”) as adopted
by the European Union and applicable law.
Under the Law, the directors must not approve the accounts
unless they are satisfied that they give a true and fair view of
the state of affairs of the group and of the profit or loss of the
group for that period. In preparing these financial statements,
accounting standards require that directors:
• select suitable accounting policies and apply them
consistently;
• make judgments and accounting estimates that are reasonable
and prudent;
• provide additional disclosures when compliance with the
specific requirements in IFRS are insufficient to enable users to
understand the impact of particular transactions, other events
and conditions on the entity’s financial position and financial
performance; and
• make an assessment of the Company’s ability to continue as a
going concern.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the group and
Company’s transactions and disclose with reasonable accuracy
at any time the financial position of the group and Company and
enable them to ensure that the financial statements comply with
the Law. They are also responsible for safeguarding the assets of
the Company and for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website. Due to the Company’s place of incorporation
and its dual listing, it is subject to legislation in the United
Kingdom, Canada and Jersey governing the preparation and
dissemination of financial statements, which may differ from
legislation in other jurisdictions.
The directors are also responsible for the preparation of the
strategic report (including the business model and risk management
report), directors’ report, directors’ remuneration report, nomination
report and corporate governance statement. These reports are
contained within the annual report and financial statements.
These financial statements for the year ended 31 December 2015
have 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 the financial statements.
The directors consider that the annual report and financial
statements, when taken as a whole, are fair, balanced and
understandable and provide the information necessary for
shareholders to assess the Company’s performance, business
model and strategy.
The board receives written assurances from the CEO and CFO
that to the best of their knowledge and belief, the group’s financial
position presents a true and fair view and that the financial
statements are founded on a sound system of risk management,
internal compliance and control. Further, they confirm that the
group’s risk management and internal compliance is operating
efficiently and effectively. The board recognises that internal control
assurances from the CEO and CFO can only be reasonable rather
than absolute, and therefore they are not and cannot be designed
to detect all weaknesses in control procedures.
The financial statements have been audited by the independent
audit and accounting firm, PricewaterhouseCoopers LLP, who
were given unrestricted access to all financial records and related
information, including minutes of all shareholder, board and
committee meetings.
The financial statements were approved by the board of directors
on 21 March 2016 and signed on their behalf by:
Andrew Pardey
Chief executive officer
Pierre Louw
Chief financial officer
21 March 2016
21 March 2016
105
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards
on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”).
We designed our audit by determining materiality and assessing
the risks of material misstatement in the financial statements.
In particular, we looked at where the directors made subjective
judgments, for example in respect of significant accounting
estimates that involved making assumptions and considering future
events that are inherently uncertain. As in all of our audits we also
addressed the risk of management override of internal controls,
including evaluating whether there was evidence of bias by the
directors that represented a risk of material misstatement due
to fraud.
The risks of material misstatement that had the greatest effect on
our audit, including the allocation of our resources and effort, are
identified as “areas of focus” in the table on page 106. We have
also set out how we tailored our audit to address these specific
areas in order to provide an opinion on the financial statements
as a whole, and any comments we make on the results of our
procedures should be read in this context. This is not a complete
list of all risks identified by our audit.
Changes in areas of focus
In 2015, one addition was made to our areas of focus whilst two
others were removed. Taxation was added as an area of focus as
the Group made taxable foreign exchange gains that gave rise to
a material tax liability. The Group also continues to invest within
multiple jurisdictions where tax practices are evolving, and therefore
has to adopt tax positions that can be uncertain.
The first area of focus removed was accounting for the Group’s
interest in the Sukari Gold Mine. Our work last year led us to
concur with the directors’ determination that the Group satisfied
both the control and exposure to variable returns requirements for
consolidation under IFRS 10 ‘Consolidated financial statements’
(“IFRS 10”). We considered whether any material facts or
circumstances underlying this conclusion had changed in 2015, and
satisfied ourselves that they had not. As a result, this was not an
area of audit focus this year.
Impairment of the Sukari Gold Mine was also not an area of
focus this year. Our work last year identified that the gold price
would have to fall significantly below current levels to trigger an
impairment if other variables remained constant. During 2015,
management performed an impairment indicator analysis and
concluded that no indicators existed. We concurred with this view,
and consequently did not focus our audit work on this area.
INDEPENDENT AUDITOR’S REPORT
to the members of Centamin plc
Report on the Group financial statements
Our opinion
In our opinion, Centamin plc’s Group financial statements (the
“financial statements”):
• give a true and fair view of the state of the Group’s affairs as at
31 December 2015 and of its profit and cash flows for the year
then ended;
• have been properly prepared in accordance with International
Financial Reporting Standards (“IFRS”) as adopted by the
European Union; and
• have been prepared in accordance with the requirements of the
Companies (Jersey) Law 1991.
What we have audited
The financial statements, included within the Annual
Report, comprise:
• the consolidated statement of financial position as at
31 December 2015;
• the consolidated statement of comprehensive income for the
year then ended;
• the consolidated statement of cash flows for the year then
ended;
• the consolidated statement of changes in equity for the year
then ended; and
• the notes to the financial statements, which include a summary
of significant accounting policies and other explanatory
information.
The financial reporting framework that has been applied in the
preparation of the financial statements is applicable law and IFRSs
as adopted by the European Union.
Our audit approach
Context
Centamin plc is listed on the London Stock Exchange and its
principal operation is the Sukari Gold Mine in Egypt. Although
production of gold has increased in 2015, following the completion
of the Stage 4 expansion in 2014, weakening of the gold price has
resulted in lower profitability than in the prior period. In addition
to the operation of Sukari, the Group continues its exploration
program in Burkina Faso and Côte d’Ivoire, having decided in
2015 to conclude its exploration activities in Ethiopia.
Overview
Overall Group materiality: $5.4 million which represents 5% of
three‑year average profit before tax, after exceptional items
(2014: $7.7 million). The lower materiality in 2015 reflects the lower
profitability of the Group, principally due to the fall in gold price.
• We focused our audit procedures on the Sukari Gold Mine, as
well as performing full scope audits over the Group’s significant
exploration and corporate operations. This resulted in six
components (2014: three) being subject to an audit of their
complete financial information and involved performing the
related audit work in Egypt and Jersey.
• As a consequence of the lower Group materiality and increased
exploration activity, we brought additional business units into
scope this year and performed extended audit procedures
at in‑scope business units to maintain audit coverage levels
comparable with the prior year.
• All audit work on the areas of focus was performed by the
Group audit engagement team.
106
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT continued
to the members of Centamin plc
Area of focus
Taxation
Refer to page 127 (note 7 to the financial statements) and
page 34 (Principal risks).
The Group operates across a number of jurisdictions and, like
most Groups, is subject to periodic challenges by local tax
authorities on a range of tax matters during the normal course
of business.
Where the amount of tax payable is uncertain, the Group
establishes provisions based on management’s best judgment
of the probable amount of the liability.
In addition, as at 31 December 2015 the Group has current tax
payable of $6.8 million as the result of taxable foreign exchange
gains realised during the year, which we considered merited
our focus.
How our audit addressed the area of focus
We held discussions with management regarding their calculation
of taxes payable and obtained management’s calculation. Where
management had obtained independent tax advice, we obtained
that advice and our own tax specialists in the relevant jurisdictions
evaluated it, using their relevant experience and knowledge.
We also used our specialists to assist in the audit of the calculation
of current tax payable in note 7 to the financial statements and
determined that it was accurate and complete. We also reviewed
the disclosure of taxes payable in note 7 and determined that it
was consistent with the requirements of IFRS and the results of
our audit work.
For matters where the amount of tax payable was uncertain, we
tested management’s assessment of the probable amount of the
liability, involving our tax specialists to satisfy ourselves that tax
provisions had been appropriately recorded where required.
The appeal before the Supreme Administrative Court in Egypt
concerning the validity of the Sukari Concession Agreement
Refer to page 134 (note 20 to the financial statements) and page
34 (Principal risks).
We discussed the legal case with the Group’s legal team, and
considered appropriate documentation to understand the
legal position and the basis of the directors’ assessment of the
outcome of the court case.
The Group is in the process of appealing a ruling passed by the
Egyptian Administrative Court in October 2012.
If the ruling is upheld, the Group’s operations at the Sukari site will
be significantly reduced and there is, therefore, a risk of material
impairment in property, plant and equipment at Sukari, which had
a carrying value of $961.5 million at 31 December 2015.
The outcome of this case is subject to significant uncertainty due
to ongoing political, social and economic volatility in Egypt.
We assessed the competence, capability and objectivity of
internal and external legal counsel by considering professional
qualifications, fee arrangements and other relevant factors. These
procedures satisfied us internal and external legal counsel were
competent, capable and objective.
We also obtained and read a copy of the Concession Agreement,
as signed by the relevant parties.
The directors assessed that the Group’s case has strong legal
merit and will ultimately be successful. Based on our work,
we determined that the directors had reflected all available
information in their assessment.
We tested the disclosures in note 20 to the financial statements
and determined that they were consistent with the requirements
of IFRS and the results of our audit work.
The claim before the Administrative Court concerning diesel
fuel disputes
Refer to page 133 (note 20 to the financial statements) and page
34 (Principal risks).
We discussed the legal fuel subsidy cases with the Group’s legal
team, and considered appropriate documentation to understand
the legal position and to evaluate the directors’ assessment of the
outcome of the case.
The Group is involved in an ongoing legal case relating to
historical and current fuel subsidies. The potential amount that
could be recouped by the Group relating to the current subsidy
case is $208.0 million and the potential amount that the Group
could have to pay if they lose the historical case is EGP403 million
(approximately US$51 million at current exchange rates).
To date, the Group has not provided for the historical case, based
on internal and external assessments of the merits of the case,
but has made disclosure of a contingent liability.
We assessed the competence, capability and objectivity of
internal and external counsel, by considering professional
qualifications, fee arrangements and other relevant factors. These
procedures satisfied us internal and external legal counsel were
competent, capable and objective.
The results of the procedures we performed, as described above,
supported the directors’ accounting treatment, under which no
liability was recognised in respect of the historical case and no
asset was recognised in respect of the current subsidy case.
In 2015, the Group has disclosed the impact of the current
subsidy case, being the difference between international
and subsidised diesel price that has impacted the Group’s
results for the year, as an exceptional item in the consolidated
statement of comprehensive income. No contingent asset has
been recognised.
We considered whether any new factors had arisen this year
that would impact the appropriateness of continuing to disclose
this item as exceptional. There were no new developments of
this nature.
We also considered the sufficiency of the disclosure regarding
the case and found that it was consistent with the requirements of
IFRS and gave a balanced description of the case.
107
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the geographic structure
of the Group, the accounting processes and controls, and the
industry in which the Group operates.
Our Group audit was scoped by obtaining an understanding of the
Group and its environment, including Group‑wide controls, and
assessing the risks of material misstatement at Group level. The
Group is headquartered in Jersey and has production operations
in Egypt, with exploration activity in Ethiopia, Burkina Faso and
Côte d’Ivoire.
Based on that assessment, our Group audit scope focused primarily
on the Sukari Gold Mine in Egypt, the Group’s principal operation,
which was subject to a full‑scope audit, as was Pharaoh Gold Mines,
which holds the Group’s interest in Sukari. In addition the Group’s
principal exploration asset Ampella Mining Ltd was subject to a full
scope audit this year reflecting the increased activity in 2015, whilst
the reduced profit this year meant that Centamin Group Services,
which incurs some of the Group’s operating expenses, was also
subject to a full scope audit this year. We visited the Sukari Gold
Mine and conducted audit fieldwork in Alexandria and Jersey.
During these visits, we observed and discussed mining operations
with local management and met with the Group’s external
in‑country legal counsel in Cairo.
Furthermore, we performed work over the consolidation of the
Group’s components and significant head office and consolidation
adjustments. This approach enabled us to have greater than 90%
coverage of profit before tax, revenue and total assets within the
consolidated financial statements. All audit work was performed by
the Group audit team.
Materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to
determine the scope of our audit and the nature, timing and extent
of our audit procedures on the individual financial statement line
items and disclosures and in evaluating the effect of misstatements,
both individually and on the financial statements as a whole.
Based on our professional judgment, we determined materiality for
the financial statements as a whole as follows:
Overall Group materiality
$5.4 million (2014: $7.7 million).
How we determined it
Rational for
benchmark applied
5% of three‑year average profit
before tax, after exceptional items.
We used the profit before tax after
exceptional items benchmark, a
generally accepted auditing practice
and took a three‑year average
to eliminate the effects of gold
price volatility.
We agreed with the audit committee that we would report to
them misstatements identified during our audit above $270,000
(2014: $385,000) as well as misstatements below that amount that,
in our view, warranted reporting for qualitative reasons.
Going concern
The directors have voluntarily complied with Listing Rule 9.8.6(R)
(3)(a) of the Financial Conduct Authority and provided a statement
in relation to going concern, set out on page 103, required for UK
companies with a premium listing on the London Stock Exchange.
The directors have requested that we review the statement on
going concern as if the company were a premium listed UK
company. We have nothing to report having performed our review.
Under ISAs (UK & Ireland) we are required to report to you if we
have anything material to add or to draw attention to in relation
to the directors’ statement about whether they considered it
appropriate to adopt the going concern basis in preparing the
financial statements. We have nothing material to add or to draw
attention to.
As noted in the directors’ statement, the directors have concluded
that it is appropriate to adopt the going concern basis in preparing
the financial statements. The going concern basis presumes that
the Group has adequate resources to remain in operation, and
that the directors intend it to do so, for at least one year from the
date the financial statements were signed. As part of our audit we
have concluded that the directors’ use of the going concern basis
is appropriate. However, because not all future events or conditions
can be predicted, these statements are not a guarantee as to the
Group’s ability to continue as a going concern.
108
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT continued
to the members of Centamin plc
Other required and voluntary reporting
Consistency of other information
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:
We have no exceptions to report.
•
information in the Annual Report is:
i) materially inconsistent with the information in the audited financial statements; or
ii) apparently materially incorrect based on, or materially inconsistent with, our
knowledge of the Group acquired in the course of performing our audit; or
iii) otherwise misleading.
• the explanation given by the directors on page 104, in accordance with provision
C.1.1 of the UK Corporate Governance Code (the “Code”), as to why the Annual
Report does not include a statement that they consider the Annual Report taken as a
whole to be fair, balanced and understandable and provides the information necessary
for members to assess the Group’s position and performance, business model and
strategy is materially inconsistent with our knowledge of the Group acquired in the
course of performing our audit.
• the explanation given by the directors on page 98, as required by provision C.3.8 of
the Code, as to why the Annual Report does not include a section that appropriately
addresses matters communicated by us to the Audit Committee is materially
inconsistent with our knowledge of the Group acquired in the course of performing
our audit.
The directors’ assessment of the prospects of the Group and of the principal risks
that would threaten the solvency or liquidity of the Group
Under ISAs (UK & Ireland) we are required to report to you if we have anything
material to add or to draw attention to in relation to:
• the directors’ confirmation on page 104 of the Annual Report, in accordance with
provision C.2.1 of the Code, that they have carried out a robust assessment of the
principal risks facing the group, including those that would threaten its business model,
future performance, solvency or liquidity.
• the disclosures in the Annual Report that describe those risks and explain how they are
being managed or mitigated.
• the directors’ explanation on page 37 of the Annual Report, in accordance with
provision C.2.2 of the Code, as to how they have assessed the prospects of the
Group, over what period they have done so and why they consider that period to be
appropriate, and their statement as to whether they have a reasonable expectation
that the Group will be able to continue in operation and meet its liabilities as they fall
due over the period of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
We have no exceptions to report.
We have no exceptions to report.
We have nothing material to add or to
draw attention to.
We have nothing material to add or to
draw attention to.
We have nothing material to add or to
draw attention to.
109
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
Under the Listing Rules, we are required to review the directors’
statement that they have carried out a robust assessment of
the principal risks facing the Group, and the directors have
requested that we review the directors’ statement in relation to
the longer‑term viability of the Group required under the Listing
Rules for UK companies with a premium listing on the London
Stock Exchange.
Our review was substantially less in scope than an audit and only
consisted of making inquiries and considering the directors’ process
supporting their statements; checking that the statements are in
alignment with the relevant provisions of the Code; and considering
whether the statements are consistent with the knowledge acquired
by us in the course of performing our audit. We have nothing to
report having performed our review.
Adequacy of information and explanations received
Under Companies (Jersey) Law 1991 we are required to report to
you if, in our opinion, we have not received all the information and
explanations we require for our audit. We have no exceptions to
report arising from this responsibility.
Corporate governance statement
Under the Listing Rules we are required to review the part of the
corporate governance statement relating to ten further provisions of
the Code. We have nothing to report having performed our review.
Opinions on additional disclosures
Directors’ remuneration report
The company voluntarily prepares a directors’ remuneration report
in accordance with the provisions of the Companies Act 2006.
The directors have requested that we audit the part of the directors’
remuneration report specified by the Companies Act 2006 to be
audited as if the company were a UK‑quoted company.
In our opinion, the part of the directors’ remuneration report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
Corporate governance statement
The company prepares a corporate governance statement that
includes the information with respect to internal control and risk
management systems and about share capital structures required
by the Disclosure Rules and Transparency Rules of the Financial
Conduct Authority. The directors have requested that we report on
the consistency of that information with the financial statements.
In our opinion, the information given in the corporate governance
statement set out on pages 67 and 68 with respect to internal
control and risk management systems and about share capital
structures is consistent with the financial statements.
Opinion on other matters
In our opinion the information given in the strategic report and
the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and ISAs (UK &
Ireland). Those standards require us to comply with the Auditing
Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only
for the parent company’s members as a body in accordance with
Article 113A of the Companies (Jersey) Law 1991 and for no other
purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
What an audit of financial statements involves
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of:
• whether the accounting policies are appropriate to the
Group’s circumstances and have been consistently applied and
adequately disclosed;
• the reasonableness of significant accounting estimates made by
the directors; and
• the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the
directors’ judgments against available evidence, forming
our own judgments, and evaluating the disclosures in the
financial statements.
We test and examine information, using sampling and other
auditing techniques, to the extent we consider necessary to provide
a reasonable basis for us to draw conclusions. We obtain audit
evidence through testing the effectiveness of controls, substantive
procedures or a combination of both.
In addition, we read all the financial and non‑financial information
in the Annual Report to identify material inconsistencies with the
audited financial statements and to identify any information that is
apparently materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of performing the
audit. If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.
Richard Spilsbury
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Recognized Auditor
London
21 March 2016
Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the directors’ responsibilities statement
set out on page 104, the directors are responsible for the
preparation of the financial statements and for being satisfied that
they give a true and fair view.
(a) The maintenance and integrity of the Centamin plc website is the
responsibility of the directors; the work carried out by the auditors does
not involve consideration of these matters and, accordingly, the auditor
accepts no responsibility for any changes that may have occurred to the
financial statements since they were initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
110
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
111
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2015
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2015
31 December 2015
31 December 2014
Before
exceptional
items
US$’000
508,396
Exceptional
items(1)
US$’000
Total
US$’000
Before
exceptional
items
US$’000
Exceptional
items(1)
US$’000
Total
US$’000
—
508,396
472,581
—
472,581
(369,503)
(46,739)
(416,242)
(295,763)
(62,534)
(358,297)
138,893
(46,739)
92,154
176,818
(62,534)
114,284
(27,722)
—
(6,294)
269
—
—
—
—
(27,722)
(30,368)
(436)
(2,328)
410
(6,294)
269
—
—
—
—
(30,368)
(436)
(2,328)
410
105,146
(46,739)
58,407
144,096
(62,534)
81,562
(6,837)
—
(6,837)
—
—
—
98,309
(46,739)
51,570
144,096
(62,534)
81,562
—
—
—
—
—
—
Notes
5
6
6
14
13
6
7
3
98,309
(46,739)
51,570
144,096
(62,534)
81,562
98,309
(46,739)
51,570
144,096
(62,534)
81,562
14
(212)
(212)
—
—
(212)
(212)
(80)
(80)
—
—
(80)
(80)
98,097
(46,739)
51,358
144,016
(62,534)
81,482
24
24
8.590
8.467
(4.084)
(4.025)
4.506
4.441
12.735
12.567
(5.527)
(5.454)
7.208
7.113
Revenue
Cost of sales
Gross profit
Other operating costs
Impairment of available‑for‑sale
financial assets
Impairment of exploration and
evaluation assets
Finance income
Profit before tax
Tax
Profit after tax
EMRA profit share
Profit for the year after
EMRA profit share
Profit for the year attributable to:
– the owners of the parent
Other comprehensive income
Items that may be reclassified
subsequently to profit or loss:
Losses on available‑for‑sale
financial assets (net of tax)
Other comprehensive
income for the year
Total comprehensive income
attributable to:
– the owners of the parent
Earnings per share:
Basic (cents per share)
Diluted (cents per share)
(1) Refer to note 6 for further details.
Non-current assets
Property, plant and equipment
Exploration and evaluation asset
Prepayments
Other receivables
Total non-current assets
Current assets
Inventories
Available‑for‑sale financial assets
Trade and other receivables
Prepayments
Cash and cash equivalents
Total current assets
Total assets
Non-current liabilities
Provisions
Total non-current liabilities
Current liabilities
Trade and other payables
Tax liabilities
Provisions
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share option reserve
Accumulated profits
Total equity attributable to:
– owners of the parent
Total equity
31 December 31 December
2014
US$’000
2015
US$’000
Notes
12
13
11
9
10
14
9
11
25
16
15
7
16
17
18
871,467
152,077
28,750
60
928,964
123,999
23,750
645
1,052,354
1,077,358
134,775
140,628
163
23,784
1,161
199,616
359,499
409
24,973
1,710
125,659
293,379
1,411,853
1,370,737
7,139
7,139
3,015
3,015
43,969
34,042
6,837
576
51,382
58,521
—
307
34,349
37,364
1,353,332
1,333,373
665,590
661,573
2,469
4,098
685,273
667,702
1,353,332
1,333,373
1,353,332
1,333,373
The consolidated financial statements were approved by the board of directors, authorised for issue on 21 March 2016 and signed on its
behalf by:
Andrew Pardey
Chief executive officer
Pierre Louw
Chief financial officer
112
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
113
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2015
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2015
Balance as at 1 January 2015
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Issue of shares
Transfer of share‑based payments
Recognition of share‑based payments
Dividend paid
Balance as at 31 December 2015
Balance as at 1 January 2014
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Issue of shares
Own shares acquired
Transfer of share‑based payments
Recognition of share‑based payments
Dividend paid
Balance as at 31 December 2014
Issued
capital
US$’000
661,573
—
—
—
38
3,979
—
—
Share
options Accumulated
profits
reserve
US$’000
US$’000
Total
US$’000
4,098
667,702
1,333,373
—
—
—
—
(3,979)
2,350
51,570
51,570
(212)
(212)
51,358
51,358
—
—
—
38
—
2,350
—
(33,787)
(33,787)
665,590
2,469
685,273
1,353,332
Issued
capital
US$’000
612,463
—
—
—
48,218
(1,743)
2,635
—
—
Share
options Accumulated
profits
reserve
US$’000
US$’000
Total
US$’000
5,761
594,624
1,212,848
—
—
—
—
—
(4,156)
2,493
—
81,562
81,562
(80)
81,482
—
—
1,521
—
(9,925)
(80)
81,482
48,218
(1,743)
—
2,493
(9,925)
661,573
4,098
667,702
1,333,373
31 December 31 December
2014
US$’000
2015
US$’000
Notes
Cash flows from operating activities
Cash generated in operating activities
Finance income
Net cash generated by operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Exploration and evaluation expenditure
Cash acquired through AML asset acquisition
Proceeds from sale of available‑for‑sale financial assets
Finance income
Net cash used in investing activities
Cash flows from financing activities
Own shares acquired during the period
EMRA prepayment
Dividend paid
Net cash provided by financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effect of foreign exchange rate changes
Cash and cash equivalents at the end of the period
25(b)
185,811
116,812
(269)
(410)
185,542
116,402
14
6
17
(36,554)
(34,372)
—
—
269
(62,305)
(26,201)
9,254
91
410
(70,657)
(78,751)
—
(5,000)
(33,787)
(38,787)
76,099
(1,743)
(4,800)
(9,925)
(16,468)
21,183
125,659
105,979
(2,141)
(1,503)
25
199,616
125,659
114
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2015
1. General information
Centamin plc (the “Company”) is a listed public company,
incorporated in Jersey and operating through subsidiaries
and jointly controlled entities operating in Egypt, Ethiopia,
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 directors’ report and the strategic report of the
annual report.
2. Adoption of new and revised accounting standards
Standards not affecting the reported results nor the
financial position
In the current year, the new and revised Standards and
Interpretations that have been adopted have not had a significant
impact on the amounts reported in these financial statements.
New standards, amendments and interpretations not yet adopted
Standards and interpretations issued but not yet effective up to
the date of issuance of the financial statements are listed below.
This listing of standards and interpretations issued are those that
the group reasonably expects to have an impact on disclosures,
financial position or performance when applied at a future date.
IFRS 15 ‘Revenue from contracts with customers’. The new standard
replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’
and provides a five step framework for application to customer
contracts: identification of customer contract, identification of the
contract performance obligations, determination of the contract
price, allocation of the contract price to the contract performance
obligations, and revenue recognition as performance obligations
are satisfied. A new requirement where revenue is variable
stipulates that revenue may only be recognised to the extent that
it is highly probable that significant reversal of revenue will not
occur. The group is currently assessing the impact of IFRS 15 but
as the majority of gold sales are not subject to pricing adjustments,
a significant impact is not anticipated. The new standard will be
effective for annual periods beginning on or after 1 January 2018.
IFRS 9 ‘Financial instruments’. IFRS 9 addresses the financial
reporting of financial assets and financial liabilities. This
standard replaces IAS 39 ‘Financial instruments: recognition and
measurement’. IFRS 9 requires financial assets to be classified into
two measurement categories: those measured at fair value and
those measured at amortised cost. The determination is made
at initial recognition. The classification depends on the entity’s
business model for managing its financial instruments and the
contractual cash flow characteristics of the instrument. For financial
liabilities, the standard retains most of the IAS 39 requirements.
The main change is that, in cases where the fair value option is
taken for financial liabilities, the part of a fair value change due
to an entity’s own credit risk is recorded in other comprehensive
income rather than in net earnings, unless this creates an
accounting mismatch. The impairment model and hedging rules
have also been amended under IFRS 9 but the derecognition
rules remain the same. The group does not expect a significant
impact from IFRS 9 at the moment as it does not enter into formal
hedge accounting arrangements, has no long‑term trade or other
receivables and does not hold financial liabilities at fair value.
However, the group will need to consider the accounting for
assets currently held as available‑for‑sale. The new standard will be
effective for annual periods beginning on or after 1 January 2018.
IFRS 16 ‘Leases’. The new standard will replace IAS 17 ‘Leases’
and eliminates the classification of leases as either operating or
finance leases by the lessee. Classification of leases by the lessor
under IFRS 16 continues as either an operating or a finance lease,
as was the treatment under IAS 17 ‘Leases’. The treatment of
leases by the lessee will require capitalisation of all leases resulting
in accounting treatment similar to finance leases under IAS 17
‘Leases’. Exemptions for leases of very low value or short‑term
leases will be applicable. The new standard will result in an increase
in lease assets and liabilities for the lessee. Under the new standard
the treatment of all lease expense is aligned in the statement of
earnings with depreciation, and an interest expense component
recognised for each lease, in line with finance lease accounting
under IAS 17 ‘Leases’. The group’s office building leases will come
on balance sheet on adoption of IFRS 16 but this is not expected
to have a significant impact on either the balance sheet or KPI
reporting. IFRS 16 will be applied prospectively for annual periods
beginning on or after 1 January 2019.
3. Summary of significant accounting policies
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 except for the
UK subsidiaries which are denominated in Great British pounds
(“GBP”) and the Australian subsidiaries which are denominated
in Australian dollars (“A$”). All financial information presented in
United States dollars has been rounded to the nearest thousand
dollars, unless otherwise stated.
The financial statements have been prepared in accordance with
International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board (“IASB”) and
adopted for use by the European Union and interpretations
issued from time to time by the IFRS Interpretations Committee
(“IFRS IC”) both as adopted by the European Union (EU) and which
are mandatory for EU reporting as at 31 December 2015, the
Companies (Jersey) Law 1991, and IFRS as issued by the IASB and
interpretations issued from time to time by the IFRS IC which are
mandatory as at 31 December 2015, therefore the group financial
statements comply with Article 4 of the EU IAS Regulation. 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 available‑for‑sale financial assets, and financial assets
and financial liabilities (including derivative) instruments at fair value
through profit and loss.
The group’s financial statements have been prepared on the
basis of accounting policies consistent with those applied in
the financial statements for the year ended 31 December 2014
except for the implementation of a number of minor amendments
issued by the IASB and endorsed by the EU which applied for
the first time in 2015. These new pronouncements do not have
a significant impact on the accounting policies, methods of
computation or presentation applied by the group and therefore
prior‑period financial statements have not been restated for these
pronouncements.
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 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.
115
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
Sukari Gold Mines (“SGM”) is jointly owned by PGM and EMRA
on a 50% equal basis. For accounting purposes, SGM is wholly
consolidated within the Centamin group of companies reflecting
the substance and economic reality of the Concession Agreement
(see note 21) and will therefore recognise a non‑controlling
interest (“NCI”) for EMRA’s participation. Furthermore based on
the requirements of the Concession Agreement, payments to NCI
meet the definition of a liability and will be recorded in the income
statement and statement of financial position (below profit after
tax), as the EMRA profit share, on the date that a net production
surplus becomes available. Payment made to EMRA pursuant to
the provisions of the Concession Agreement is based on the net
production surplus available as at 30 June, being SGM’s financial
year end. Pursuant to the Concession Agreement, PGM solely
funds SGM’s activities. PGM is also entitled to recover the following
costs and expenses payable from sales revenue (excluding the
royalty payable to the Arab Republic of Egypt (“ARE”): (a) all current
operating expenses incurred and paid after the initial commercial
production; (b) exploration costs, including those accumulated to
the commencement of commercial production (at the rate of 33.3%
of total accumulated cost per annum); and (c) exploitation capital
costs, including those accumulated prior to the commencement of
commercial production (at the rate of 33.3% of total accumulated
cost per annum).
EMRA is entitled to a share of 50% (except for, in accordance
with the terms of the Concession Agreement, in the first four
years where it shall be 40% for the first two years and 45% for the
following two years) of SGM’s net production surplus (“EMRA Profit
Share”) (defined as revenue less payment of the fixed royalty to
ARE and recoverable costs). Based on the Company’s calculation
there was no net profit share due to EMRA as at 31 December
2015, nor is any likely to be due as at 30 June 2016. Accordingly,
no EMRA entitlement has been recognised to date. Any payment
made to EMRA pursuant to these provisions of the Concession
Agreement will be recognised as a variable charge in the income
statement (below profit after tax) of Centamin, which will lead to a
reduction in the earnings per share.
Going concern
These financial statements for the year ended 31 December 2015
have been prepared on a going concern basis, which contemplate
the realisation of assets and liquidation of liabilities during the
normal course of operations.
The group meets its day‑to‑day working capital requirements
through existing cash resources. As discussed in note 20, during
2012 the operation of the mine was affected by two legal actions.
The first of these followed from a decision taken by EGPC to charge
international, not local (subsidised) prices for the supply of Diesel
Fuel Oil to Sukari, and the second arose as a result of a judgment
of the administrative court in relation to, amongst other matters,
the Company’s 160km2 exploitation lease. With regard to the first
decision, the Company remains confident that in the event that it is
required to continue to pay international prices, the mine at Sukari
will remain commercially viable. Similarly, the Company remains
confident that the appeal it has lodged in relation to the decision of
the Administrative Court will ultimately be successful, although final
resolution of the matter may take some time.
116
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2015
117
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
3. Summary of significant accounting policies continued
Going concern continued
With respect to the legal action, on 20 March 2013 the Supreme
Administrative Court upheld the Company’s application to
suspend the decision until the merits of the Company’s appeal are
considered and ruled on, thus providing assurance that normal
operations would be able to continue during this process. Sukari
has operated as usual throughout the period.
In the unlikely event that the group is unsuccessful in either or both
of its legal actions, and that the operating activities are restricted to
a reduced area, it is the directors’ belief that the group will be able
to continue as going concern.
Having assessed the principal risks and the other matters discussed
in connection with the long term viability statement (refer to the
risk management report included within the annual report), the
directors considered it appropriate to adopt the going concern
basis of accounting in preparing the financial statements.
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.
The following significant policies have been adopted in the
preparation and presentation of these financial statements:
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.
Financial instruments
Financial assets and financial liabilities are recognised in the group’s
balance sheet when the group becomes a party to the contractual
provisions of the instrument.
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.
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.
Financial liabilities
Financial assets
Loans and receivables
Financial liabilities are classified as either financial liabilities at fair
value through profit or loss (“FVTPL”) or other financial liabilities.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial
liability is either held for trading or it is designated as at FVTPL.
A financial liability is classified as held for trading if:
•
it has been incurred principally for the purpose of repurchasing it
in the near term; or
• on initial recognition it is part of a portfolio of identified financial
instruments that the group manages together and has a recent
actual pattern of short‑term profit taking; or
•
it is a derivative that is not designated and effective as a
hedging instrument.
A financial liability other than a financial liability held for trading may
be designated as at FVTPL upon initial recognition if:
• such designation eliminates or significantly reduces a
measurement or recognition inconsistency that would otherwise
arise; or
• the financial liability forms part of a group of financial assets
or financial liabilities or both, which is managed and its
performance is evaluated on a fair value basis, in accordance
with the group’s documented risk management or investment
strategy, and information about the grouping is provided
internally on that basis; or
•
it forms part of a contract containing one or more embedded
derivatives, and IAS 39 ‘Financial instruments: recognition and
measurement’ permits the entire combined contract (asset or
liability) to be designated as at FVTPL.
Financial liabilities at FVTPL are stated at fair value, with any gains
or losses arising on re‑measurement recognised in profit or loss.
The net gain or loss recognised in profit or loss incorporates any
interest paid on the financial liability and is included in the ‘other
gains and losses’ line item in the income statement.
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. The effective interest method is a method of
calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate
is the rate that exactly discounts estimated future cash payments
through the expected life of the financial liability, or, where
appropriate, a shorter period.
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 are recognised and derecognised on trade date
where the purchase or sale of a financial asset is under a contract
whose terms require delivery of the financial asset within the
timeframe established by the market concerned, and are initially
measured at fair value, net of transaction costs except for those
financial assets classified as at fair value through the profit or loss
which are initially measured at fair value.
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.
Subsequent to initial recognition, investments in subsidiaries are
measured at cost in the Company financial statements. Other
financial assets are loans and receivables. The classification
depends on the nature and purpose of the financial assets
and is determined at the time of initial recognition.
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.
Available‑for‑sale financial assets (“AFS”)
Listed shares and listed redeemable notes held by the group
that are traded in an active market are classified as being AFS
and are stated at fair value. The group also has investments in
unlisted shares that are not traded in an active market but that are
classified as AFS financial assets and stated at fair value (because
the directors consider that fair value can be reliably measured). Fair
value is determined in the manner described in note 26. Gains and
losses arising from changes in fair value are recognised in other
comprehensive income and accumulated profits with the exception
of impairment losses, interest calculated using the effective interest
method and foreign exchange gains and losses on monetary assets,
which are recognised directly in profit or loss. Where the investment
is disposed of or is determined to be impaired, the cumulative gain
or loss previously recognised in the investments revaluation reserve
is reclassified to profit or loss.
Dividends on AFS equity instruments are recognised in profit or loss
when the group’s right to receive the dividends is established.
The fair value of AFS monetary assets denominated in a foreign
currency is determined in that foreign currency and translated at
the spot rate at the balance sheet date. The foreign exchange
gains and losses that are recognised in profit or loss are determined
based on the amortised cost of the monetary asset. Other foreign
exchange gains and losses are recognised in other comprehensive
income.
Impairment of financial assets
Financial assets, other than those at FVTPL, 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 available‑for‑sale 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 available‑for‑sale equity instruments, any subsequent
increase in fair value after an impairment loss is recognised in other
comprehensive income.
Derecognition of financial assets
The group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the risks
and rewards of ownership of the asset to another entity. 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.
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FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2015
3. Summary of significant accounting policies continued
Accounting policies continued
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 as 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.
Exploration, evaluation and development expenditure
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:
a) the rights to tenure of the area of interest are current; and
b) at least one of the following conditions is also met:
i)
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
ii) 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, 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.
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
United States dollars, which is the functional currency of the
group and the presentation currency for the consolidated financial
statements except for the UK subsidiaries which are denominated
in Great British pounds and the Australian subsidiaries which are
denominated in Australian dollars.
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.
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FINANCIAL STATEMENTS
Depreciation is provided on PPE. 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.
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
Office equipment
Mining equipment
Buildings
2 – 20 years
3 – 7 years
2 – 13 years
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 income.
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.
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
tonnes 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 units 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.
Inventories
Inventories are valued at the lower of cost and net realisable
value. Costs including an appropriate portion of fixed and variable
overhead expenses are assigned to inventory on hand by the
method appropriate to each particular class of inventory, with
the majority being valued on a weighted average cost basis.
Net realisable value represents the estimated selling price less
all estimated costs of completion and costs necessary to make
the sale.
Ore stockpiles, gold in circuit and finished goods are valued
applying absorption costing.
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
Concession Agreement (see note 21).
Leased assets
Leased assets are classified as finance leases when the terms of
the lease transfer substantially all the risks and rewards incidental
to ownership of the leased asset to the lessee. All other leases are
classified as operating leases.
Operating lease payments are recognised as an expense on
a straight‑line basis over the lease term, except where other
systematic basis is more representative of the time pattern in which
economic benefits from the leased asset are consumed. Contingent
rentals arising under operating leases are recognised as an expense
in the period in which they are incurred.
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.
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FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2015
3. Summary of significant accounting policies continued
Accounting policies continued
Stripping activity assets
The group defers stripping costs incurred (removal of mine waste
materials which provide improved access to further quantities of
material that will be mined in future periods). This waste removal
activity is known as “stripping”. There can be two benefits accruing
to the entity from the stripping activity:
• usable ore that can be used to produce inventory; and
•
improved access to further quantities of material that will be
mined in future periods.
The costs of stripping activity to be accounted for in accordance
with the principles of IAS 2 ‘Inventories’ to the extent that the
benefit from the stripping activity is realised in the form of inventory
produced. The costs of stripping activity which provides a benefit in
the form of improved access to ore is recognised as a non‑current
“stripping activity asset” where the following criteria are met:
a) it is probable that the future economic benefit (improved access
to the ore body) associated with the stripping activity will flow to
the entity;
b) the entity can identify the component of the ore body for which
access has been improved; and
c) the costs relating to the stripping activity associated with that
component can be measured reliably.
When the costs of the stripping activity asset and the inventory
produced are not separately identifiable, production stripping costs
are allocated between the inventory produced and the stripping
activity asset by using an allocation basis that is based on a relevant
production measure. A stripping activity asset is accounted for
as an addition to, or as an enhancement of, an existing asset and
classified as tangible or intangible according to the nature of the
existing asset of which it forms part. A stripping activity asset is
initially measured at cost and subsequently carried at cost or its
revalued amount less depreciation or amortisation and impairment
losses. A stripping activity asset is depreciated or amortised on
a systematic basis, over the expected useful life of the identified
component of the ore body that becomes more accessible as
a result of the stripping activity. The stripping activity asset is
depreciated using a units of production method based on the
total ounces to be produced over the life of the component of the
ore body.
Deferred stripping costs are included in “stripping assets”, within
tangible assets. These form part of the total investment in the
relevant cash‑generating unit, which is reviewed for impairment if
events or a change in circumstances indicate that the carrying value
may not be recoverable. Amortisation of deferred stripping costs is
included in operating costs.
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 there are 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.
Revenue
Revenue is measured at the fair value of the consideration received
or receivable for goods and services in the normal course of
business, net of discounts, VAT and other sales related taxes.
Sale of goods
Revenue from the sale of mineral production is recognised when
the group has passed the significant risks and rewards of ownership
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.
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.
Production 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 the
Sukari Gold Mine. 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.
Other income
Interest income
Interest 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. Interest 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.
Business combinations
Acquisitions of businesses as defined by IFRS 3 are accounted
for using the acquisition method. The consideration for each
acquisition is measured at the aggregate of the fair values (at the
date of exchange) of assets given, liabilities incurred or assumed,
and equity instruments issued by the group in exchange for control
of the acquiree. Acquisition related costs are recognised in profit
or loss as incurred.
Where applicable, the consideration for the acquisition includes
any asset or liability resulting from a contingent consideration
arrangement, measured at its acquisition date fair value.
Subsequent changes in such fair values are adjusted against the
cost of acquisition where they qualify as measurement period
adjustments (see below). All other subsequent changes in the fair
value of contingent consideration classified as an asset or liability
are accounted for in accordance with IFRS 3 either in profit or
loss or as a change to other comprehensive income. Changes in
the fair value of contingent consideration classified as equity are
not remeasured, and its subsequent settlement is accounted for
within equity.
Where a business combination is achieved in stages, the group’s
previously‑held interests in the acquired entity are remeasured to
fair value at the acquisition date (i.e. the date the group attains
control) and the resulting gain or loss, if any, is recognised in profit
or loss. Amounts arising from interests in the acquiree prior to the
acquisition date that have previously been recognised in other
comprehensive income are reclassified to profit or loss, where such
treatment would be appropriate if that interest were disposed of.
The acquiree’s identifiable assets, liabilities and contingent liabilities
that meet the conditions for recognition under IFRS 3 (2008) are
recognised at their fair value at the acquisition date, except that:
• deferred tax assets or liabilities and liabilities or assets related to
employee benefit arrangements are recognised and measured
in accordance with IAS 12 ‘Income taxes’ and IAS 19 ‘Employee
benefits’ respectively;
•
liabilities or equity instruments related to the replacement by
the group of an acquiree’s share‑based payment awards are
measured in accordance with IFRS 2 ‘Share‑based payment’;
and
• assets (or disposal groups) that are classified as held for sale in
accordance with IFRS 5 ‘Non‑current assets held for sale’.
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FINANCIAL STATEMENTS
Assets held for sale and discontinued operations are measured
in accordance with that standard. If the initial accounting for a
business combination is incomplete by the end of the reporting
period in which the combination occurs, the group reports
provisional amounts for the items for which the accounting is
incomplete. Those provisional amounts are adjusted during the
measurement period (see below), or additional assets or liabilities
are recognised, to reflect new information obtained about facts and
circumstances that existed as of the acquisition date that, if known,
would have affected the amounts recognised as of that date.
The measurement period is the period from the date of acquisition
to the date the group obtains complete information about facts and
circumstances that existed as of the acquisition date, and is subject
to a maximum of one year.
Investments in associates
An associate is an entity over which the group has significant
influence and that is neither a subsidiary nor a joint arrangement.
Significant influence is the power to participate in the financial and
operating policy decisions of the investee but is not control or joint
control over those policies.
The results, assets and liabilities of associates are incorporated in
these financial statements using the equity method of accounting,
except when the investment is classified as held for sale, in which
case it is accounted for in accordance with IFRS 5 ‘Non‑current
assets held for sale and discontinued operations’.
Under the equity method, investments in associates are carried
in the consolidated balance sheet at cost as adjusted for
post‑acquisition changes in the group’s share of the net assets
of the associate, less any impairment in the value of individual
investments. Losses of an associate in excess of the group’s interest
in that associate (which includes any long‑term interests that, in
substance, form part of the group’s net investment in the associate)
are recognised only to the extent that the group has incurred
legal or constructive obligations or made payments on behalf of
the associate.
Any excess of the cost of acquisition over the group’s share of the
net fair value of the identifiable assets, liabilities and contingent
liabilities of the associate recognised at the date of acquisition is
recognised as goodwill. The goodwill is included within the carrying
amount of the investment and is assessed for impairment as part of
that investment.
Any excess of the group’s share of the net fair value of the
identifiable assets, liabilities and contingent liabilities over the cost
of acquisition, after reassessment, is recognised immediately in
profit or loss.
Where a group entity transacts with an associate of the group,
profits and losses are eliminated to the extent of the group’s
interest in the relevant associate.
The group determines at each reporting date whether there is any
objective evidence that the investment in the associate is impaired.
If this is the case, the group calculates the amount of impairment
as the difference between the recoverable amount of the associate
and its carrying value and recognises the amount adjacent to share
of profit and loss of associates in the income statement.
Dilution gains and losses arising in investments in associates are
recognised in the income statement.
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Centamin plc Annual report 2015
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2015
123
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FINANCIAL STATEMENTS
3. Summary of significant accounting policies continued
Accounting policies continued
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. 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.
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 in note 27. 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.
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
purchases 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.
Taxation
Restoration and rehabilitation
Litigation
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.
Deferred tax liabilities are recognised for taxable temporary
differences associated with investments in subsidiaries and
associates, and interests in joint ventures, except where the group
is able to control the reversal of the temporary difference and it
is probable that the temporary difference will not reverse in the
foreseeable future. Deferred tax assets arising from deductible
temporary differences associated with such investments and
interests are only recognised to the extent that it is probable that
there will be sufficient taxable profits against which to utilise the
benefits of the temporary differences and they are expected to
reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of
each reporting period and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all
or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that
are expected to apply in the period in which the liability is settled
or the asset realised, based on tax rates (and tax laws) that have
been enacted or substantively enacted by the end of the reporting
period. The measurement of deferred tax liabilities and assets
reflects the tax consequences that would follow from the manner
in which the group expects, at the end of the reporting period, to
recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same
taxation authority and the group intends to settle its current tax
assets and liabilities on a net basis.
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.
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 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.
4. Critical accounting judgments
Critical judgments in applying the entity’s accounting policies
The following are the critical judgments that management has
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 associated disclosures with the Company’s audit and risk
committee.
Impairment of assets (other than exploration and evaluation and
financial assets)
IFRS requires management to test for impairment if events or
changes in circumstances indicate that the carrying amount of
a finite lived asset may not be recoverable. Management has
concluded that there is no indication that an impairment exists,
nor have any indicators arisen after the reporting period and are
therefore not required to perform a full impairment review under
IAS 36.
In making its assessment as to the possibility of whether
impairments losses having arisen, management considered the
following indications:
•
internal sources of information;
• external sources of information;
•
litigation;
• the key assumptions applied in the 31 December 2015
impairment review;
•
forecast gold prices;
• discount rate;
• production volumes;
• reserves and resources report; and
• costs and recovery rates.
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 20
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 the financial settlement.
The group is currently a party to two legal actions both of which
could affect its ability to operate the mine at Sukari in the manner
in which it is currently operated and adversely affect its profitability.
The details of this litigation, which relate to the loss of the Egyptian
national subsidy for diesel fuel oil and the ability of the group to
operate outside the area of 3km2 determined by the Administrative
Court of first instance to be the area of the Sukari exploitation lease,
are given in note 20 to the financial statements and in the most
recently filed Annual Information Form (“AIF”) which is available
on SEDAR at www.sedar.com. Although it is possible to quantify
the effects of the loss the national fuel subsidy, it is not currently
possible to quantify with sufficient precision the effect of restricting
operations to an area of 3km2.
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 remain confident that a
satisfactory outcome will ultimately be achieved. In the meantime,
however, the group is continuing to pay international prices for
diesel fuel oil. With respect to the Administrative Court ruling,
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 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.
Recovery of capitalised exploration evaluation and
development expenditure
The group’s accounting policy for exploration and evaluation
expenditure results in exploration and evaluation expenditure being
capitalised for those projects where such expenditure is considered
likely to be recoverable through future extraction activity or sale
or where the exploration activities have not reached a stage which
permits a reasonable assessment of the existence of reserves.
This policy requires management to make certain estimates and
assumptions as to future events and circumstances, in particular
whether the group will proceed with development based on
existence of reserves or whether an economically viable extraction
operation can be established. Such estimates and assumptions
may change from period to period as new information becomes
available. If, subsequent to the exploration and evaluation
expenditure being capitalised, a judgment is made that recovery
of the expenditure is unlikely or the project is to be abandoned,
the relevant capitalised amount will be written off to the
income statement.
124
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2015
125
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
4. Critical accounting judgments continued
Recovery of capitalised exploration evaluation and
development expenditure continued
As described in note 13 to the financial statements, in
February 2015, the Company gave formal notice to Alecto Minerals
plc (”Alecto”) terminating the joint venture agreement entered into
between the Company and Alecto in September 2013 with regards
to the development of Alecto’s licences in Ethiopia.
Centamin’s rights in the Wayuboda and Aysid Metekel licences
have reverted back to Alecto, such that Alecto will hold 100%
of the licences and will assume responsibility for the ongoing
commitments in respect of the licences on termination of the
joint venture and have thus written off all expenditure incurred to
date, including the acquisition costs in relation to those licences,
amounting to US$2.7 million of which US$2.3 million was written
off in 2014.
Exploration activities were ceased in Ethiopia in late 2015 with
closure of all remaining projects and the subsequent wind up of the
Sheba Exploration entities is in progress. The decision was taken
after a review of the potential of the Una Deriem prospect after
completing the testing the eastern soil anomaly, which runs parallel
to the main soil anomaly and mineralised zone. The cessation
of activity in Ethiopia resulted in impairment of exploration and
evaluation assets of US$5.9 million in 2015.
Going concern
Under guidelines set out by the UK Financial Reporting Council
(“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.
Based on a detailed cash flow forecast prepared by management,
in which it included any reasonably possible change in the key
assumptions on which cash flow forecast is based, the directors
have a reasonable expectation that the group will have adequate
resources to continue in operational existence for the foreseeable
future. Key assumptions underpinning this forecast include:
•
•
litigation as discussed in note 20 to the financial statements;
forecast gold price;
• production volumes; and
• costs and recovery rates.
These financial statements for the year ended 31 December
2015 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 the
financial statements.
Accounting treatment of Sukari Gold Mines (“SGM”)
SGM is consolidated within the Centamin group of companies,
reflecting the substance and economic reality of the Concession
Agreement (see note 21 to the financial statements).
Key sources of estimation uncertainty
5. Revenue
The following are the key assumptions concerning the future,
and other key sources of estimation uncertainty at the reporting
date, that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next
financial year:
Provision for restoration and rehabilitation costs
The group is required to decommission, rehabilitate and restore
mines and processing sites at the end of their producing lives to
a condition acceptable to the relevant authorities. The provision
has been calculated taking into account the estimated future
obligations including 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.
Ore reserve estimates
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, that
there has been insufficient exploration to define a mineral resource
and that it is uncertain if further exploration will result in the target
being delineated as a mineral resource.
Depreciation of capitalised underground mine development costs
Depreciation of capitalised underground mine development costs
at the Sukari mine is based on reserve estimates. Management
and directors believe that these estimates are both realistic and
conservative, based on current information.
An analysis of the group’s revenue for the year, from continuing operations, is as follows:
Gold sales
Silver sales
506,963
1,433
31 December 31 December
2014
2015
US$’000
US$’000
471,776
805
All gold and silver sales during the year were made to a single customer in North America.
6. Profit before tax
Profit for the year has been arrived at after crediting/(charging) the following gains/(losses) and expenses:
508,396
472,581
Cost of sales
Mine production costs
Movement in inventory
31 December 2015
31 December 2014
Before
exceptional
items
US$’000
Exceptional
items
US$’000
Before
exceptional
items
US$’000
Exceptional
items
US$’000
Total
US$’000
Total
US$’000
(271,019)
(43,808)
(314,827)
(214,370)
(61,564)
(275,934)
(4,545)
(2,931)
(7,476)
2,839
(970)
—
1,869
(84,232)
Depreciation and amortisation
(93,939)
—
(93,939)
(84,232)
(369,503)
(46,739)
(416,242)
(295,763)
(62,534)
(358,297)
31 December 31 December
2014
2015
US$’000
US$’000
Finance income
Interest received
Other operating costs
Corporate compliance
Office related depreciation
Auditing fees
Corporate consultants
Communications and IT
Employee entitlements
Salary and wages
Travel and accommodation
Office rents and lease payment
Other administration expenses
Impairment reversal
Insurances
Rates and taxes
Entertainment
Employee equity settled share‑based payments
Fixed royalty – attributable to the Egyptian government
Foreign exchange gain/(loss), net
Provision for restoration and rehabilitation – unwinding of discount
Loss on disposal of property, plant and equipment
269
410
(1,408)
(1,339)
(111)
(573)
(751)
(206)
(119)
(6,637)
(1,031)
(185)
(634)
526
(120)
(523)
(181)
(2,350)
(15,198)
2,141
(362)
—
(90)
(566)
(381)
(248)
(116)
(5,150)
(897)
(147)
(117)
—
(111)
—
(40)
(2,491)
(14,144)
(2,900)
(538)
(1,093)
(27,722)
(30,368)
126
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2015
127
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
6. Profit before tax continued
Impairment of assets
Impairment of available‑for sale financial assets(1)
Impairment of exploration and evaluation assets(2)
(1) Refer to note 14 for further details.
(2) Refer to note 13 for further details.
Exceptional items
31 December 31 December
2014
2015
US$’000
US$’000
(436)
(2,328)
(2,764)
526
(6,294)
(5,768)
7. Tax
Tax recognised in profit is summarised as follows:
Tax expense
Current tax
Current tax expense in respect of the current year
Deferred tax
Total tax expense
31 December 31 December
2014
2015
US$’000
US$’000
—
—
—
(6,837)
(6,837)
—
The directors consider that items of income or expense which are material by virtue of their unusual, irregular or non‑recurring nature
should be disclosed separately if the consolidated financial statements are to fairly present the financial position and underlying business
performance. In order to allow a better understanding of the financial information presented within the consolidated financial statements,
and specifically the group’s underlying business performance, the effect of exceptional items are shown below.
31 December 31 December
2014
2015
US$’000
US$’000
Included in cost of sales
Mine production costs
Movement in inventory
(43,808)
(61,564)
(2,931)
(970)
(46,739)
(62,534)
In January 2012 the Company received a letter from Chevron to the effect that Chevron would not be able to continue supplying Diesel
Fuel Oil (“DFO”) to the mine at Sukari at local subsidised prices. It is understood that the reason that this letter was issued was that
Chevron had received a letter instructing it to do so from the Egyptian General Petroleum Corporation (“EGPC”). It is understood that
EGPC itself took the decision to issue this instruction because it had received legal advice from the Legal Advice Department of the
Council of State (an internal government advisory department) that the companies operating in the gold mining sector in Egypt were not
entitled to such subsidies. In addition, during 2012, the Company received a demand from Chevron for the repayment of fuel subsidies
received in the period from late 2009 through to January 2012, amounting to some US$51 million (EGP403 million).
The group has taken detailed legal advice on this matter (and, in particular, on the opinion given by Legal Advice Department of the
Council of State) and in consequence in June 2012 lodged an appeal against EGPC’s decision in the Administrative Courts. Again, the
group believes that its grounds for appeal are strong and that there is every prospect of success. However, as a practical matter, and in
order to ensure the continuation of supply, the group has since January 2012 advanced funds to its fuel supplier, Chevron, based on the
international price for diesel.
As at the date of the financial statements, no final decision had been taken by the courts regarding this matter.
Furthermore, the group remains of the view that an instant move to international fuel prices is not a reasonable outcome and will look to
recover funds advanced thus far should the court proceeding be concluded in its favour. 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$208.2 million to 31 December 2015, as an exceptional item, of which US$42.5 million was provided for during 2015 as follows:
a) a US$43.8 million increase in mine production costs (2014: US$62.5 million increase);
b) a US$1.3 million decrease in stores inventories (2014: US$0.2 million increase);
c) a US$2.9 million decrease in mining stockpiles, gold in circuit and finished goods (2014: US$1.0 million decrease).
This has resulted in a net charge of US$46.7 million in the profit and loss.
The group operates in several countries and, accordingly, it is subject to, the various tax regimes in the countries in which it operates. From
time to time the group is subject to a review of its related tax filings and in connection with such reviews, disputes can arise with the taxing
authorities over the interpretation or application of certain rules to the group’s business conducted within the country involved. If the group
is unable to resolve any of these matters favourably, there may be an adverse impact on the group’s financial performance, cash flows or
results of operations. In the event that management’s estimate of the future resolution of these matters changes, the group will recognise
the effects of the changes in its consolidated financial statements in the period that such changes occur.
In Australia, Centamin Egypt Limited and Pharaoh Gold Mines NL have elected to form a tax‑consolidated group and therefore are treated
as a single entity for Australian income tax purposes. Pharaoh Gold Mines NL benefits from the “Branch Profits Exemption” whereby
foreign branch income will generally not be subject to Australian income tax.
Australian tax rules govern the taxation of financial arrangements (“TOFA”) and the realisation of foreign exchange gains/losses.
The TOFA rules provide that a foreign exchange gain or loss will arise in relation to foreign currency bank accounts to the extent funds
have been withdrawn from these accounts during the period. This foreign exchange gain or loss is calculated by comparing the A$ spot
rate at the date of deposit to the A$ spot rate at the date of withdrawal on a first‑in‑first‑out (“FIFO”) basis (i.e. the first amounts deposited
are the first amounts to be withdrawn).
The group made foreign exchange gains for Australian income tax purposes during the year which were assessable when they were
realised (i.e. when US$ cash balances were withdrawn from Australian bank accounts). Australian income tax rules (contained within
subdivision 960‑D of the Income Tax Assessment Act 1997) require that where an amount is not in the taxpayer’s ‘applicable functional
currency’, the amount is to be converted into the ‘applicable functional currency’ i.e. Australian dollars. Accordingly, the withdrawal of
US$ bank deposits gave rise to foreign exchange gains for Australian income tax purposes, which were assessable when realised.
In Egypt, Centamin has entered into a concession agreement that provides that the income generated by Sukari Gold Mining Company’s
activities is granted a long‑term tax exemption from all taxes imposed in Egypt.
The tax expense for the year can be reconciled to the profit per the consolidated statement of comprehensive income as follows:
Profit before income tax
Tax expense calculated at 0% (2014: 0%)(1) of profit before tax
Tax effect of amounts which are not deductible/taxable in calculating taxable income:
Effect of tax different tax rates of subsidiaries operating in other jurisdictions
Tax expense for the year
58,407
—
(6,837)
(6,837)
(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 (2014: 0%).
There has been no change in the underlying corporate tax rates when compared to the previous financial period.
Current tax liabilities
Current tax payable
Tax consolidation
Relevance of tax consolidation to the consolidated entity
(6,837)
—
Companies within the group’s wholly owned Australian resident entities formed a tax‑consolidated group with effect from 1 July 2003.
The head entity within the tax‑consolidated group is Centamin Egypt Limited. The members of the tax‑consolidated group are
Pharaoh Gold Mines NL, Viking Resources NL and North African Resources NL.
31 December 31 December
2014
2015
US$’000
US$’000
81,562
—
—
—
US$’000
—
—
31 December 31 December
2014
2015
US$’000
128
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2015
7. Tax continued
Tax consolidation continued
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 has
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 into 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.
8. Segment reporting
The group is engaged in the business of exploration and mining of precious metals only, which represents a single operating segment. The
board is the group’s chief operating decision maker within the meaning of IFRS 8.
Non‑current assets other than financial instruments by country:
10. Inventories
Mining stockpiles and ore in circuit
Stores
11. Prepayments
Current
Prepayments
Fuel prepayments
Movement in fuel prepayments(1)
Balance at the beginning of the year
Fuel prepayment recognised
Less: provision charged to:(2)
Mine production costs (see note 6)
Property, plant and equipment (see note 6)
Inventories (see note 6)
Balance at the end of the year
(1) Refer to note 6, exceptional items, for further details.
(2) The cumulative fuel prepayment recognised and provision charged as at 31 December 2015 is as follows:
Fuel prepayment recognised (US$’000)
Provision charged to:
Mine production costs (US$’000)
Property, plant and equipment (US$’000)
Inventories (US$’000)
208,204
(195,156)
(11,852)
(1,196)
31 December 31 December
2014
2015
US$’000
US$’000
970,376
1,023,495
336
76,209
5,316
2
115
3,835
48,893
977
2
156
1,052,354
1,077,358
31 December 31 December
2014
2015
US$’000
US$’000
24
621
645
Non‑current
EMRA(3)
60
—
60
31 December 31 December
2014
2015
US$’000
US$’000
24,057
916
24,973
20,472
3,312
23,784
(3) With a view to demonstrating goodwill toward the Egyptian government, PGM made advance payments to EMRA which will be netted off against future
profit share that becomes payable to EMRA.
129
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
31 December 31 December
2014
2015
US$’000
28,291
106,484
134,775
1,161
—
1,161
US$’000
35,768
104,860
140,628
US$’000
1,710
—
1,710
31 December 31 December
2014
2015
US$’000
—
—
42,472
68,737
(43,808)
(61,564)
—
1,336
—
(6,953)
(220)
—
31 December 31 December
2014
2015
US$’000
US$’000
23,750
23,750
28,750
28,750
Egypt
Ethiopia
Burkina Faso
Côte d’Ivoire
Australia
Jersey
9. Trade and other receivables
Non-current
Deposits
Value added taxation refund
Current
Gold sales debtors
Other receivables
Trade and other receivables are classified as loans and receivables and are therefore measured at amortised cost.
The average age of the receivables is 14 days (2014: 21 days). 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 sales debtor is all receivable from Johnson Matthey of Canada. The amount due has been received in full subsequent
to year end.
Other receivables represent GST and VAT amounts owing from the various jurisdictions that the group operates in inventory returns to
vendors where refunds are expected to occur.
The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.
130
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2015
12. Property, plant and equipment
13. Exploration and evaluation asset
131
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
Office
equipment
US$’000
Buildings
US$’000
Plant and
equipment
US$’000
Mine
Mining development
properties
US$’000
equipment
US$’000
Capital
work in
progress
US$’000
Total
US$’000
Cost
Balance at 31 December 2014
Additions
Increase in rehabilitation asset
Disposals
Transfers
5,401
103
—
—
31
1,186
565,836
221,178
232,921
116,772
1,143,294
8
—
—
—
147
—
—
3,779
—
(202)
—
3,762
—
28,781
—
—
16,871
16,561
79,621
(113,084)
32,818
3,762
(202)
—
Balance at 31 December 2015
5,535
1,194
582,854
241,316
316,304
32,469
1,179,672
Accumulated depreciation
Balance at 31 December 2014
(4,280)
Depreciation and amortisation
Disposals
(587)
—
(234)
(59)
—
(67,980)
(30,524)
—
(72,339)
(28,663)
176
(69,497)
(34,218)
—
Balance at 31 December 2015
(4,867)
(293)
(98,504)
(100,826)
(103,715)
—
—
—
—
(214,330)
(94,051)
176
(308,205)
Cost
Balance at 31 December 2013
4,625
171
284,903
178,374
182,974
426,461
1,077,508
Additions
Decrease in rehabilitation asset
Acquisition of subsidiary
Disposals
Transfers
17
—
1,080
(571)
250
—
—
1,131
(160)
44
8
—
814
(724)
—
—
1,224
(391)
6,979
(5,161)
—
—
62,111
69,115
—
3
(574)
(5,161)
4,252
(2,420)
—
280,835
41,971
48,129
(371,229)
Balance at 31 December 2014
5,401
1,186
565,836
221,178
232,921
116,772
1,143,294
Accumulated depreciation
Balance at 31 December 2013
(3,077)
Acquisition of subsidiary
Depreciation and amortisation
Disposals
(765)
(730)
292
(80)
(146)
(8)
—
(42,983)
(46,867)
(34,774)
(649)
(1,224)
—
(24,456)
(24,373)
(34,723)
108
125
—
Balance at 31 December 2014
(4,280)
(234)
(67,980)
(72,339)
(69,497)
—
—
—
—
—
(127,781)
(2,784)
(84,290)
525
(214,330)
Net book value
As at 31 December 2014
As at 31 December 2015
1,121
668
952
901
497,855
148,839
163,424
116,772
928,964
484,350
140,490
212,589
32,469
871,467
In 2013 as a result of the significant decline in the gold price, the group carried out a review of the recoverable amount of the property,
plant and equipment. The review did not lead to a recognition of an impairment loss. The discount rate used in measuring value in use was
12% per annum and the assumed average gold price was US$1,342 per ounce. No impairment review was performed in 2014 or 2015 as
no indicators of impairment were identified.
Balance at the beginning of the period
Expenditure for the period
Acquisition of Ampella Mining Limited
Impairment of exploration and evaluation asset
Balance at the end of the period
31 December 31 December
2014
2015
US$’000
123,999
34,372
—
US$’000
59,849
28,841
37,637
(6,294)
(2,328)
152,077
123,999
The exploration and evaluation asset relates to the drilling, geological exploration and sampling of potential ore reserves.
In February 2015, the Company gave formal notice to Alecto Minerals plc (”Alecto”) terminating the joint venture agreement entered
into between the Company and Centamin in September 2013 with regards to the development of Alecto’s licences in Ethiopia.
Centamin’s rights in the Wayuboda and Aysid Metekel licences have reverted back to Alecto, such that Alecto will hold 100% of the
licences and will assume responsibility for the ongoing commitments in respect of the licences on termination of the joint venture and have
thus written off all expenditure incurred to date, including the acquisition costs in relation to those licences, amounting to US$2.7 million
of which US$2.3 million was written off in 2014.
Exploration activities were ceased in Ethiopia in late 2015 with closure of all remaining projects and the subsequent wind up of the Sheba
Exploration entities is in progress. The decision was taken after a review of the potential of the Una Deriem prospect after completing the
testing the eastern soil anomaly, which runs parallel to the main soil anomaly and mineralised zone. The cessation of activity in Ethiopia
resulted in impairment of exploration and evaluation assets of US$5.9 million in 2015. Exploration in Burkina Faso and Côte d’Ivoire
continues to progress.
14. Available-for-sale financial assets
Balance at the beginning of the period
Acquisitions
Disposals
Gain/(loss) on foreign exchange movement
Loss on fair value of investment – other comprehensive income
Impairment reversal/(loss)
Balance at the end of the period
31 December 31 December
2014
2015
US$’000
409
—
—
(560)
(212)
526
163
US$’000
989
379
(91)
(352)
(80)
(436)
409
The available‑for‑sale financial asset at period end relates to a 6.66% (2014: 11.34%) equity interest in Nyota Minerals Limited (“Nyota”),
a listed public company. During 2014, management made the decision to sell its interest in Nyota and the financial asset is classed as a
current asset.
15. Trade and other payables
Trade payables
Other creditors and accruals
31 December 31 December
2014
2015
US$’000
25,461
18,508
43,969
US$’000
17,067
16,975
34,042
Trade payables principally comprise the amounts outstanding for trade purchases and ongoing costs. The average credit period taken for
trade purchases is 22 days (2014: 16 days). Trade payables are interest free for periods ranging from 30 to 180 days. Thereafter interest
is charged at commercial rates. The group has financial risk management policies in place to ensure that all payables are paid within the
credit timeframe.
The directors consider that the carrying amount of trade payables approximate their fair value.
132
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2015
133
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
16. Provisions
Current
Employee benefits(1)
Non-current
Restoration and rehabilitation(2)
Movement in restoration and rehabilitation provision
Balance at beginning of the year
Additional provision recognised/(provision derecognised)
Interest expense – unwinding of discount
Balance at end of the year
31 December 31 December
2014
2015
US$’000
US$’000
307
307
3,015
3,015
7,638
(5,161)
538
3,015
576
576
7,139
7,139
3,015
3,762
362
7,139
(1) Employee benefits relate to annual, sick and long service leave entitlements.
(2) The provision for restoration and rehabilitation represents the present value of the directors’ best estimate of the future outflow of economic benefits
that will be required to remove the facilities and restore the affected areas at the group’s sites discounted by 8.17% (2014: 12.00%). This restoration and
rehabilitation estimate, which is reviewed on annual basis, has been made on the basis of benchmark assessments of restoration works required following
mine closure and after taking into account the projected area to be disturbed over the life of the mine, being 20 years. The annual review undertaken as
at 31 December 2015 has resulted in the US$3.8 million increase in the provision.
17. Issued capital
Fully paid ordinary shares
Balance at beginning of the period
Issue of shares
Own shares acquired during the period
Transfer to share option reserve
Balance at end of the period
31 December 2015
31 December 2014
Number
US$’000
Number
US$’000
1,152,107,984
661,573 1,101,397,381
—
—
—
38
—
3,979
50,710,603
—
—
612,463
48,218
(1,743)
2,635
1,152,107,984
665,590 1,152,107,984
661,573
The authorised share capital is an unlimited number of no par value shares.
At 31 December 2015 the Company held 5,659,709 ordinary shares in treasury(1) (2014: 9,821,383 ordinary shares). These shares are held
by the trustee pursuant to the deferred bonus share plan.
Fully paid ordinary shares carry one vote per share and carry the right to dividends. See note 27 for more details of the share options.
(1) Refers to shares held by the trustee pursuant to the deferred bonus share plan.
18. Reserves
Share option reserve
Share option reserve
Balance at beginning of the period
Share‑based payments expense
Transfer to accumulated profits
Transfer to issued capital
Balance at the end of the period
31 December 31 December
2014
31 December 31 December
2014
2015
US$’000
2015
US$’000
2,469
2,469
4,098
2,456
(106)
(3,979)
2,469
US$’000
4,098
4,098
US$’000
5,761
2,493
(1,521)
(2,635)
4,098
The share option reserve arises on the grant of share options to employees under the employee share option plan. Amounts are transferred
out of the reserve and into issued capital when the options and warrants are exercised/vested. Amounts are transferred out of the reserve
into accumulated profits when the options and warrants are forfeited.
19. Commitments for expenditure
(a) Capital expenditure commitments
Plant and equipment(1)
No longer than one year
Longer than one year and not longer than five years
Longer than five years
31 December 31 December
2014
2015
US$’000
—
—
—
—
US$’000
—
—
—
—
US$’000
63
195
258
31 December 31 December
2014
2015
US$’000
(1) As a result of the completion of Stage 4, the group had no commitments for capital expenditure as at 31 December 2015.
(b) Operating lease commitments
The future aggregate minimum lease payments under non‑cancellable operating leases are as follows:
Office premises
No longer than one year
Longer than one year and not longer than five years
Operating lease commitments are limited to office premises in Jersey.
20. Contingent liabilities and contingent assets
Contingent liabilities
Fuel supply
68
119
187
In January 2012, the group received a letter from Chevron to the effect that Chevron would only be able to supply Diesel Fuel Oil (“DFO”)
to the mine at Sukari at international prices rather than at local subsidised prices. It is understood that the reason that this letter was
issued was that Chevron had received a letter instructing it to do so from the Egyptian General Petroleum Corporation (“EGPC”). It is
further understood that EGPC itself issued this instruction because it had received legal advice from the Legal Advice Department of the
Council of State (an internal government advisory department) that the companies operating in the gold mining sector in Egypt were not
entitled to such subsidies. In November 2012, the group received a further demand from Chevron for the repayment of fuel subsidies
received during the period from late 2009 through to January 2012, amounting to EGP403 million (approximately US$51 million at current
exchange rates).
The group has taken detailed legal advice on this matter (and, in particular, on the opinion given by the Legal Advice Department of the
Council of State) and in June 2012 lodged an appeal against EGPC’s decision in the Administrative Courts. Again, the group believes that
its grounds for appeal are strong and that there is a good prospect of success. However, as a practical matter, and in order to ensure the
continuation of supply whilst the matter is resolved, the group has since January 2012 advanced funds to its fuel supplier, Chevron, based
on the international price for fuel.
As at the date of this document, no decision had been taken by the courts regarding this matter. The group remains of the view that an
instant move to international fuel prices is not a reasonable outcome and will look to recover funds advanced thus far should the court
proceeding be successfully concluded. However, management recognises the practical difficulties associated with reclaiming funds
from the government and for this reason has fully provided against the prepayment of US$208.0 million, as an exceptional item. Refer
to note 6 of the accompanying financial statements for further details on the impact of this exceptional provision on the group’s results
for 2015.
No provision has been made in respect of the historic subsidies prior to January 2012 as, based on legal advice, the Company believes
that the prospects of a court finding in its favour in relation to this matter remain very strong.
134
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2015
20. Contingent liabilities and contingent assets continued
Contingent liabilities continued
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 (“EMRA”) and Centamin’s wholly owned subsidiary Pharaoh Gold Mines (“PGM”), 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.
Upon notification of the judgment the group took various steps to protect its ability to continue to operate the mine at Sukari. These
included lodging a formal appeal before the Supreme Administrative Court on 26 November 2012. In addition, in conjunction with the
formal appeal the group applied to the Supreme Administrative Court to suspend the initial decision until such time as the court was able
to consider and rule on the merits of the appeal. On 20 March 2013 the court upheld this application thus suspending the initial decision
and providing assurance that normal operations would be able to continue whilst the appeal process is underway.
EMRA has lodged its own appeal in relation to this matter which is supportive of the Company’s position in this matter.
Furthermore, in late December 2012, the Minister of Petroleum lodged a supporting appeal and shortly thereafter publicly indicated that,
in his view, the terms of the Concession Agreement were fair and that the “exploitation” lease was valid. The Minister of Petroleum also
expressed support for the investment and expertise that Centamin brings to the country. The Company believes this demonstrates the
government’s commitment to its investment at Sukari and the desire to stimulate further investment in the Egyptian mining industry.
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. In addition, the Company has been advised
that it should benefit from Law no. 32 of 2014, which came into force in April 2014 and which restricts the capacity for third parties to
challenge any contractual agreement between the Egyptian government and an investor. This law, whilst in force and ratified by the new
parliament, is currently under review by the Supreme Constitutional Court of Egypt. It therefore remains of the view that the appeal is
based on strong legal grounds and will ultimately be successful.
In the event that the appellate court fails to be persuaded of the merits of the case put forward by the group, the operations at Sukari
may be adversely effected to the extent that the group’s operation exceeds the exploitation lease area of 3km2 referred to in the original
court decision.
The Company remains confident that normal operations at Sukari will be maintained whilst the appeal process is underway. Centamin does
not currently see the need to take the matter to a court outside of Egypt as Centamin remains of the belief that the Egyptian Court will rule
in Centamin’s favour.
Contingent assets
There were no contingent assets at year end (31 December 2014: nil).
135
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
21. Subsidiaries
The parent entity of the group is Centamin plc, incorporated in Jersey, and the details of its subsidiaries are as follows:
Ownership interest
Country of
incorporation
31 December 31 December
2014
%
2015
%
Centamin Egypt Limited
Viking Resources Limited
North African Resources NL
Pharaoh Gold Mines NL
Sukari Gold Mining Co
Centamin UK Limited (voluntarily struck off)
Sheba Exploration Holdings Limited(1)
Centamin Group Services Limited
Centamin Holdings Limited
Sheba Exploration Limited
Centamin Limited
Centamin West Africa Holdings Limited
Ampella Mining Limited
Ampella Share Plan Ltd
Ampella Mining Gold Pty Ltd
West African Gold Reserve Pty Ltd
Ampella Mining Gold SARL
Ampella Mining SARL
Ampella Mining Côte d’Ivoire
Centamin Côte d’Ivoire
Ampella Mining Exploration CDI
Ampella Resources Burkina Faso
Konkera SA
(1) Previously Sheba Exploration (UK) Plc.
Australia
Australia
Australia
Australia
Egypt
United Kingdom
United Kingdom
Jersey
Jersey
United Kingdom
Bermuda
United Kingdom
Australia
Australia
Australia
Australia
Burkina Faso
Burkina Faso
Côte d’Ivoire
Côte d’Ivoire
Côte d’Ivoire
Burkina Faso
Burkina Faso
100
100
100
100
50
—
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
90
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
—
—
—
—
Through its wholly owned subsidiary, PGM, the Company entered into the Concession Agreement with EMRA and the Arab Republic of
Egypt 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 Concession Agreement 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 Project 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 Concession Agreement. 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 Concession Agreement require that PGM solely funds SGM. PGM is however entitled to recover from sales revenue
recoverable costs, as defined in the Concession Agreement. 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 has not recovered
its cost and accordingly, no EMRA entitlement has been recognised to date. It is anticipated that the first payment to EMRA will become
payable during 2017. Any payment made to EMRA pursuant to these provisions of the Concession Agreement will be recognised as a
variable charge in the income statement.
136
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2015
21. Subsidiaries continued
23. Joint arrangements
The Concession Agreement grants certain tax exemptions, including the following:
The consolidated entity has an interest in the following joint arrangement:
•
from 1 April 2010, being the date of commercial production, the Sukari Project is entitled to a 15‑year exemption from any taxes
imposed by the Egyptian government on the revenues generated from the Sukari Project. 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 has
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 the Sukari Gold Mine. 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 additional 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 the Sukari Gold Mine;
• 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 sub‑contractors 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.
22. Auditor’s remuneration
The analysis of the auditor’s remuneration is as follows:
31 December 31 December
2014
2015
US$’000
Fees payable to the Company’s auditor and its associates for the audit of the Company’s annual accounts
Additional fees relating to the prior year
Fees payable to the Company’s auditor and its associates for other services to the group
– the audit of the Company’s subsidiaries
Total audit fees
Non-audit fees:
Audit related assurance services – interim review
Other assurance services
Tax compliance services
Tax advisory services
Other expenses
Total non-audit fees
375
—
150
525
104
22
—
—
14
140
US$’000
300
—
100
400
100
125
—
—
—
225
The audit and risk committee and the external auditor have safeguards in place to avoid the possibility that the auditor’s objectivity and
independence could be compromised. These safeguards include the implementation of a policy on the use of the external auditor 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 auditor
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.
137
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
Percentage interest
31 December 31 December
2014
%
2015
%
50
50
Name of joint operation
Egyptian Pharaoh Investments(1)
(1) Dormant company.
The group has a US$1 (cash) interest in the above joint operation. The amount is included in the consolidated financial statements of the
group. There are no capital commitments arising from the group’s interests in joint operation are disclosed in note 19.
24. Earnings per share
Basic earnings per share
Diluted earnings per share
Basic earnings per share
31 December 31 December
2014
2015
Cents per share Cents per share
4.506
4.441
7.208
7.113
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:
Earnings used in the calculation of basic EPS
51,570
31 December 31 December
2014
2015
US$’000
US$’000
81,562
Weighted average number of ordinary shares for the purpose of basic EPS
1,144,499,697 1,131,521,652
Diluted earnings per share
The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows:
31 December 31 December
2014
2015
Number
Number
Earnings used in the calculation of diluted EPS
51,570
31 December 31 December
2014
2015
US$’000
US$’000
81,562
Weighted average number of ordinary shares for the purpose of basic EPS
Shares deemed to be issued for no consideration in respect of employee options
Weighted average number of ordinary shares used in the calculation of diluted EPS
1,144,499,697 1,131,521,652
16,649,502
15,098,842
1,161,149,199 1,146,620,494
No potential ordinary shares were excluded from the calculation of weighted average number of ordinary shares for the purpose of diluted
earnings per share.
31 December 31 December
2014
2015
Number
Number
138
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2015
25. Notes to the statements of cash flows
(a) Reconciliation of cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents includes cash on hand and at bank and deposits.
Cash and cash equivalents
199,616
(b) Reconciliation of profit for the year to cash flows from operating activities
31 December 31 December
2014
2015
US$’000
US$’000
125,659
Profit for the year
Add/(less) non‑cash items:
51,570
31 December 31 December
2014
2015
US$’000
US$’000
81,562
Categories of financial assets and liabilities:
Financial assets
Available‑for‑sale assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Depreciation/amortisation of property, plant and equipment
94,051
84,290
(b) Financial risk management and objectives
139
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
31 December 31 December
2014
2015
US$’000
US$’000
409
125,659
25,618
151,686
163
199,616
23,844
223,623
43,969
43,969
34,042
34,042
Stock write‑off
Increase/(decrease) in provisions
Foreign exchange rate (gain)/loss
Impairment (reversal of)/loss on available‑for‑sale financial assets
Loss on disposal of property, plant and equipment
Impairment of exploration and evaluation assets
Share‑based payments expense
Changes in working capital during the period:
(Increase)/decrease in trade and other receivables
Decrease/(increase) in inventories
Decrease/(increase) in prepayments
Decrease/(increase) in trade and other payables
Cash flows generated from operating activities
(c) Non‑cash financing and investing activities
During the year there have been no non‑cash financing and investing activities. In 2014 there was the Ampella asset acquisition as
disclosed in note 13.
26. 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 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 17 and 18. 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 the Sukari Gold Mine in Egypt, and the
exploration projects in Burkina Faso and Côte d’Ivoire.
—
11,231
(3,471)
(526)
—
6,294
2,350
1,188
5,853
549
11
(5,234)
4,455
436
1,093
2,328
2,493
454
(5,359)
(4,832)
16,722
(44,885)
185,811
116,812
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 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 pound, Australian dollar and Egyptian pound are as follows:
Great British pound
Australian dollar
Egyptian pound
31 December 31 December 31 December 31 December 31 December 31 December
2014
2015
US$’000
2014
US$’000
2015
US$’000
2014
US$’000
2015
US$’000
Financial assets
Cash and cash equivalents
Available‑for‑sale assets
Financial liabilities
Trade and other payables
Net exposure
332
146
478
390
390
88
127
390
517
1,476
1,476
(959)
2,800
17
2,817
10,905
10,905
(8,088)
5,919
19
5,938
1,161
1,161
4,777
1,411
—
1,411
9,402
9,402
(7,991)
US$’000
1,246
—
1,246
7,311
7,311
(6,065)
140
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2015
26. Financial instruments continued
(c) Market risk continued
The following table summarises the sensitivity of financial instruments held at the reporting date to movements in the exchange rate of the
Great British and Egyptian pounds and Australian dollar to the United States dollar, with all other variables held constant. The sensitivities
are based on reasonably possible changes over a financial period, using the observed range of actual historical rates.
Impact on profit
Impact on equity
31 December 31 December 31 December 31 December
2014
2015
US$’000
2014
US$’000
2015
US$’000
US$’000
(35)
35
(2)
2
—
—
US$/GB£ increase by 10%
US$/GB£ decrease by 10%
US$/A$ increase by 10%
US$/A$ decrease by 10%
US$/E£ increase by 10%
US$/E£ decrease by 10%
(35)
35
737
(737)
726
(726)
123
(123)
(483)
483
463
(463)
(13)
13
(1)
1
—
—
The group’s sensitivity to foreign currency has decreased at the end of the current period mainly due to the decrease in foreign currency
cash holdings in Australian dollars and a corresponding increase in US dollar cash holdings.
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 prices. The group has not entered into
forward gold hedging contracts.
(e) Interest rate 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 balance date were as follows:
Weighted
average
effective
interest rate
%
Less than
one month
US$’000
One to
twelve
months
US$’000
More than
twelve
months
US$’000
Total
US$’000
31 December 2015
Financial assets
Variable interest rate instruments
Non‑interest bearing
Financial liabilities
Variable interest rate instruments
Non‑interest bearing
31 December 2014
Financial assets
Variable interest rate instruments
Non‑interest bearing
Financial liabilities
Variable interest rate instruments
Non‑interest bearing
0.22
—
—
—
0.23
—
—
—
53,471
24,059
77,530
—
43,969
43,969
26,863
26,053
52,916
—
34,042
34,042
146,093
—
146,093
—
—
—
98,770
—
98,770
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
199,564
24,059
223,623
—
43,969
43,969
125,633
26,053
151,686
—
34,042
34,042
141
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
(f) Liquidity risk
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 or liquidity risk management rests with the board of directors, who 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 above reflect a
balanced view of cash inflows and outflows and shows 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 liquidity position including cash flow forecasts to determine the forecast liquidity position
and maintain appropriate liquidity levels.
31 December 2015
Financial assets
Variable interest rate instruments
Non‑interest bearing
Financial liabilities
Variable interest rate instruments
Non‑interest bearing
31 December 2014
Financial assets
Variable interest rate instruments
Non‑interest bearing
Financial liabilities
Variable interest rate instruments
Non‑interest bearing
(g) Credit risk
Less than
one month
US$’000
One to
twelve
months
US$’000
More than
twelve
months
US$’000
Total
US$’000
53,471
25,531
79,002
—
43,969
43,969
26,863
25,325
52,188
—
34,042
34,042
146,093
—
146,093
—
—
—
98,770
—
98,770
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
199,564
25,531
225,095
—
43,969
43,969
125,633
49,075
174,708
—
34,042
34,042
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 credit‑worthy 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, but the group has good credit checks on customers and none of the trade receivables
from the customer has been past due. Also, the cash balances held in Australian dollars which are held with a financial institution 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.
142
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2015
26. Financial instruments continued
(h) 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.
(i) 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).
Available‑for‑sale financial assets
Available‑for‑sale financial assets
2015
Level 1
Level 2
Level 3
163
—
—
2014
Level 1
Level 2
Level 3
409
—
—
Total
163
Total
409
There were no financial assets or liabilities subsequently measured at fair value on Level 3 fair value measurement bases.
27. Share-based payments
Restricted share plan
The Company’s new restricted share plan, as approved by shareholders at the AGM in 2015, allows the Company the right to grant awards
(as defined below) to employees of the group. Awards may take the form of either conditional share awards, where shares are transferred
conditionally upon the satisfaction of performance conditions; or share options, which may take the form of nil cost options or have a
nominal exercise price, the exercise of which is again subject to satisfaction of applicable performance conditions.
To date the Company has granted 5,145,000 conditional awards to employees of the group.
A detailed summary of the scheme rules is set out in the 2015 AGM proxy materials which are available at www.centamin.com.
In summary, 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. For the purpose of the performance conditions, the award will be divided into up to three tranches to be
assessed against separate performance conditions measured over a three year period. Although the precise performance conditions may
vary between awards, the performance conditions adopted at the date of the plan which apply to the first grant are as follows:
• 20% of the award shall be assessed by reference to a target total shareholder return (“TSR”).
• 50% of the award shall be assessed by reference to absolute growth in earnings per share (“EPS”).
• 30% of the award shall be assessed by reference to compound growth in gold production.
The above measures are assessed by reference to current market practice and the remuneration committee will have regard to market
practice when establishing the precise performance conditions for future awards.
Where the performance conditions have been met, in the case of conditional awards, 50% of the total shares under the award will be
issued or transferred to the award holders on or as soon as possible following the specified vesting date, with the remaining 50% being
issued or transferred on the second anniversary of the vesting date.
Restricted share plan (“RSP”) awards granted during the period:
Grant date
Number of instruments
TSR: fair value at grant date £(1)
TSR: fair value at grant date US$(1)
EPS: fair value at grant date £(1)
EPS: fair value at grant date US$(1)
Gold production: fair value at grant date £(1)
Gold production: fair value at grant date US$(1)
Vesting period (years)
Expected volatility (%)
Expected dividend yield (%)
143
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
RSP 2015
4 June 2015
5,145,000
0.5150
0.7894
0.6520
0.9994
0.6520
0.9994
3
0 – 72.33
1.97
(1) The vesting of 20% the awards granted under this plan are dependent on a TSR performance condition. As relative TSR is defined as a market condition
under IFRS 2 ‘Share‑based payment’, this requires that the valuation model used takes into account the anticipated performance outcome. We have
therefore applied a Monte‑Carlo simulation model. The simulation model takes into account the probability of performance based on the expected
volatility of Centamin and the peer group companies and the expected correlation of returns between the companies in the comparator group.
The remaining 80% of the awards are subject to EPS and gold production performance conditions. As these are classified as non‑market
conditions under IFRS 2 they do not need to be taken into account when determining the fair value. These grants have been valued using
a Black‑Scholes model.
The fair value calculated was then converted at the closing £:US$ foreign exchange rate on that day.
The awards due to be granted in April 2016 will vest following the passing of three years. Vesting will be subject to the satisfaction of the
performance conditions (and the two year holding period for 50% of the award) which will be divided into four tranches, as set out on
pages 96 and 97 of the directors’ remuneration report.
The above 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.
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 ELFSP and to the majority of the
beneficiaries of the options granted under the 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.
Historic plans
The historic plans, namely the executive directors loan funded share plan (“EDLFSP”) and employee loan funded share plan
(“ELFSP”) 2011 Employee Option Scheme (“EOS”) are no longer in use and all shares awarded have either being forfeited, lapsed or
transferred to other schemes. The residual accrual in relation to these schemes has been expensed to the consolidated statement of
comprehensive income.
144
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2015
28. 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 and the Company is set out below:
Short‑term employee benefits
Long‑term employee benefits
Post‑employment benefits
Share‑based payments
Total
29. Related party transactions
(a) Equity interests in related parties
Equity interests in subsidiaries
31 December 31 December
2014
US$
2015
US$
6,184,750
7,567,732
—
22,025
1,642
59,285
1,810,805
2,106,223
8,017,580
9,734,882
Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 21.
Equity interests in associates and jointly controlled arrangements
Details of interests in joint ventures are disclosed in note 23.
(b) Key management personnel compensation
Details of key management personnel compensation are disclosed above in note 28.
(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 period ended 31 December 2015 are as follows:
31 December 2015
Balance at
1 January
2015
Granted as
remuneration
(“DBSP”)
Received
on exercise
of options
Balance at
Net other 31 December
2015
change(1)
Balance
held
nominally
J El‑Raghy
T Schultz
G Haslam
M Arnesen
M Bankes
K Tomlinson
P Louw
A Pardey
R Osman
H Brown
D Le Masurier
L Gregory
Y El‑Raghy
T Smith
L Sobey
A Davidson
71,445,086
30,000
102,056
15,000
150,000
24,400
2,137,500
2,185,000
800,000
550,000
300,000
300,000
637,414
—
390,000
450,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
500,000
900.000
300,000
100,000
200,000
150,000
200,000
400,000
—
—
—
71,445,086
30,000
102,056
34,000
49,000
—
—
150,000
24,400
(112,000)
2,525,500
(116,200)
2,968,800
(116,666)
983,334
—
—
(20,000)
(56,781)
(25,000)
650,000
500,000
430,000
780,633
375,000
—
—
(390,000)
200,000
(30,000)
620,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1) “Net other change” relates to the on market acquisition or disposal of fully paid ordinary shares, including the forfeiture of shares awarded under the LFSP
and DBSP and the replacement of awards under the ELFSP with shares awarded under the DBSP.
Since 31 December 2015 to the date of this report there have been no transactions notified to the Company under DTR 3.1.2.R.
145
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
The details of the movement in key management personnel equity holdings of fully paid ordinary shares in Centamin plc during the
financial period ended 31 December 2014 are as follows:
31 December 2014
J El‑Raghy
T Schultz
G Haslam
M Arnesen
M Bankes
K Tomlinson
P Louw
A Pardey
R Osman
H Brown
D Le Masurier
L Gregory
Y El‑Raghy
T Smith
L Sobey
A Davidson
Balance at
1 January
2014
Granted as
remuneration
(“DBSP”)
Received
on exercise
of options
Balance at
Net other 31 December
2014
change(1)
Balance
held
nominally
71,445,086
1,030,000
102,056
15,000
120,000
—
—
—
—
—
—
—
1,737,500
400,000
1,785,000
400,000
600,000
200,000
475,000
75,000
—
—
300,000
300,000
510,000
170,000
—
300,000
300,000
100,000
—
450,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
71,445,086
(1,000,000)
30,000
—
—
30,000
24,400
—
—
—
—
—
—
102,056
15,000
150,000
24,400
2,137,500
2,185,000
800,000
550,000
300,000
300,000
(42,586)
637,414
—
300,000
(10,000)
390,000
—
450,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1) “Net other change” relates to the on market acquisition or disposal of fully paid ordinary shares, including the forfeiture of shares awarded under the LFSP
and DBSP and the replacement of awards under the ELFSP with shares awarded under the DBSP.
(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 transaction for the year ended 31 December 2015 is summarised below:
Josef El‑Raghy is a director and shareholder of El‑Raghy Kriewaldt Pty Ltd (“El‑Raghy Kriewaldt”). El‑Raghy Kriewaldt provides office
premises to the Company. All dealings with El‑Raghy Kriewaldt are in the ordinary course of business and on normal terms and conditions.
Rent and office outgoings paid to El‑Raghy Kriewaldt during the period were A$62,595 or US$46,820 (31 December 2014: A$57,898 or
US$51,920).
(f) Transactions with the government of Egypt
Royalty costs attributable to the government of Egypt of US$15,197,860 (2014: US$14,143,710) were incurred in 2015.
With a view to demonstrating goodwill toward the Egyptian government during the year PGM has made advance payments to EMRA of
US$5,000,000 (2014: US$4,800,000) which will be netted off against any future profit share that becomes payable to EMRA..
(g) Transactions with other related parties
Other related parties include the parent entity, subsidiaries, and other related parties.
During the financial period, 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 period 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 period 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 consolidated
financial statements of the group.
146
Centamin plc Annual report 2015
FINANCIAL STATEMENTS
Centamin plc Annual report 2015
SHAREHOLDER INFORMATION
147
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2015
COMPANY LEGAL FORM AND STRUCTURE
30. Dividends per share
The dividends paid in 2015 were US$33,786,831 and are reflected in the consolidated statement of the changes in equity for the period
(2014: US$9,923,308).
A final dividend in respect of the year ended 31 December 2015 of 1.97 US cents per share, totalling US$22,696,527 has been approved
by the board of directors and is subject to shareholder approval at the annual general meeting on 11 May 2016. These financial statements
do not reflect this dividend payable.
31. Subsequent events
As referred to in note 30 subsequent to the year end, the board of directors announced the approval of a final dividend for 2015 of
1.97 US cents per share. Subject to shareholder approval at the annual general meeting on 11 May 2016, the final dividend will be
paid on 27 May 2016 to shareholders on the register as of 22 April 2016.
There were no other significant events occurring after the reporting date requiring disclosure in the financial statements.
Centamin plc, number 109180 (the “Company”) is a mineral exploration, development and mining company dual listed on the London
Stock Exchange (LSE: CEY) and the Toronto Stock Exchange (TSX: CEE).
The Company is incorporated in the island of Jersey with company number 109180. The Company conducts limited activity in its own
right, with certain of the subsidiary entities carrying out exploration, development and mining activity. Details of all subsidiaries are listed
in note 21 to the financial statements.
The Company’s principal asset, the Sukari Gold Mine, is operated by the Sukari Gold Mining Company, a joint stock company established
under the laws of Egypt, which is owned 50% by Pharaoh Gold Mines NL, a wholly owned subsidiary of the Company, and 50% held by
the Egyptian Mineral Resource Authority.
Articles of Association
The Articles of Association govern many aspects of the management of the Company. The Articles may only be amended by a special
resolution at a general meeting of the shareholders. The Articles of Association were adopted on 15 December 2011 and, together with
the Memorandum of Association, are available for inspection at the Company’s registered office during normal office opening hours.
The liability of each member arising from the members respective holding of a share in the Company is limited to the amount (if any)
unpaid on it. The Company has unrestricted corporate capacity.
Directors
Directors may be appointed by ordinary resolution. The board may appoint a director but such a director may hold office only until the
dissolution of the next annual general meeting after his appointment unless he is reappointed during that meeting. Each appointed
director shall retire from office at each annual general meeting and may, if willing to act, be reappointed.
All directors must notify the Company of any shares held, acquired or disposed of in the Company. A register of director shareholdings is
held at the registered office which is open to inspection by the members. The directors are also required to disclose shares held by their
connected parties. Details of the interests of directors and their connected persons in the Company’s shares are outlined in the directors’
remuneration report.
Directors’ indemnity insurance
In accordance with Company’s Articles of Association and to the extent permitted by law, the Company may indemnify its directors out of
its own funds to cover liabilities incurred as a result of their office.
The Company has entered into indemnity agreements with each director to indemnify each director to the extent permitted by applicable
law and excluding any matters involving fraud, dishonesty, wilful default or bad faith on the part of a director.
During the year, the Company paid a premium in respect of a contract insuring the directors and officers of the Company and any related
body corporate against a liability incurred as a director or officer to the extent permitted by law. This provides insurance cover for any
claim brought against directors or officers for wrongful acts in connection with their positions. The insurance provided does not extend to
claims arising from fraud or dishonesty and it does not provide cover for civil or criminal fines or penalties imposed by law.
Capital structure
The capital structure of the Company is detailed in the schedule below, which reflects the total issued shares in the Company at
31 December 2015 and those held by trustees pursuant to the Company’s share plans.
Issued capital (including shares issued and held under the DBSP)
Total shares in issue under the DBSP
As at
31 December
2015
1,152,107,984
5,659,709
The issued capital of the Company at the date of this report is 1,152,107,984 ordinary shares.
The Company may from time to time pass an ordinary resolution (by a simple majority) authorising the board to allot relevant securities up
to the amount specified in the resolution. The authority shall expire on the day specified in the resolution, not being more than five years
after the date on which the resolution is passed. Details of the share capital and reserves are set out in note 17 to the financial statements.
148
Centamin plc Annual report 2015
SHAREHOLDER INFORMATION
COMPANY LEGAL FORM AND STRUCTURE continued
GLOSSARY
Centamin plc Annual report 2015
SHAREHOLDER INFORMATION
149
Substantial shareholders
Based on shareholder disclosure and register analysis(1), the following shareholders had holdings of more than 3% (being the applicable
threshold adopted by Centamin in its Articles of Association, as though it were a UK issuer under the Disclosure and Transparency Rules
of the UK Financial Conduct Authority) in the issued share capital of Centamin:
Name
Van Eck Global
BlackRock Investment Mgt
Mr Josef El‑Raghy(2)
T Rowe Price
Aberforth Partners
Dimensional Fund Advisors
(1) Information at 14 December 2015.
(2) Includes the El‑Raghy family.
The substantial shareholders do not have any different voting rights to other shareholders.
To the extent known to the Company:
Shareholding
% holding
141,235,159
119,656,807
71,445,086
44,349,855
37,835,554
37,335,485
12.26
10.39
6.2
3.85
3.28
3.24
AFS
Available‑for‑sale financial assets
AIF
Annual Information Form
Alecto
Alecto Minerals plc
AML
Ampella Mining Limited
AN
Ammonium nitrate
ARE
Arab Republic of Egypt
ASIC
Australian Securities Investments Commission
a) no person other than the substantial shareholders detailed above has an interest of 3% or more in the Company’s capital;
assay
b) the Company is not aware of any persons who, directly or indirectly, jointly or severally, exercise or could exercise control over the
Qualitative analysis of ore to determine its components
Company; and
c) there are no arrangements, the operation of which may at a subsequent date result in a change of control of the Company.
Listing rules
UK listed companies must report in accordance with LR 9.8.4 R. In compliance with LR 9.8.4 (12) Computershare Nominees (Channel
Islands) Limited waived its entitlement to dividends in respect of the unvested shares held by it pursuant to the Company’s deferred
bonus share plan. In accordance with LR 9.8.4 (13) Computershare Nominees (Channel Islands) Limited has agreed to waive future
dividends in respect to unvested shares under the deferred bonus share plan. There are no other disclosures to report under LR 9.8.4 R.
Dividend policy
Centamin announced its dividend policy on 16 May 2014 which is based on the financial condition of, and outlook for, the Company
and its cash flow and financing needs. When determining the amount to be paid the board will take into consideration the underlying
profitability of the Company. Specifically, the board aims to approve an annual dividend within the range of 15‑30% of the Company’s
net cash flow after sustaining capital costs and following the payment of profit share due to the government of Egypt. The following
dividends have been declared in respect to the financial year ended 31 December 2014:
Interim dividend
An interim dividend of 0.97 US cents per share (US$0.0097) on Centamin plc ordinary shares (totalling approximately US$11 million)
was declared on 12 August 2015. The interim dividend for the half year period ending 30 June 2015 was paid on 9 October 2015 to
shareholders on the register on the record date of 4 September 2015.
Final dividend
A final dividend of 1.97 US cents per share (US$0.0197) on Centamin plc ordinary shares (totalling approximately US$22.7 million
was declared on 21 March 2016. The final dividend for the financial year ended 31 December 2015 will be paid on 27 May 2016 to
shareholders on the register on the record date of 22 April 2016. The ex‑dividend date is 21 April 2016 for LSE listed shareholders and
20 April 2016 for TSX listed shareholders.
AGM
All shareholders are encouraged to attend our AGM on 11 May 2016, which will be held in Jersey. This will be an excellent opportunity to
meet board members and our senior management team.
Financial calendar
7 April 2016
11 May 2016
11 May 2016
27 May 2016
7 July 2016
10 August 2016
6 October 2016
Q1 2016 preliminary production results
Results for the quarter ended 31 March 2016
Annual general meeting in Jersey
Dividend payment date
Q2 2016 preliminary production results
Results for the quarter ended 30 June 2016
Q3 2016 preliminary production results
9 November 2016
Results for the quarter ended 30 September 2016
Au
Chemical symbol for the element gold
Board
The board of directors of the group
CA
Concession Agreement
cash and cash equivalents, bullion on hand, gold sales receivable and available-for-sale financial assets
Cash and cash equivalents, bullion on hand, gold sales receivables and available‑for‑sale financial assets is a non‑GAAP financial measure
any other companies may calculate these measures differently. Bullion on hand is valued at the year‑end spot price
DBSP
Deferred bonus share plan
DFO
Diesel fuel oil
directors
The directors of the board of Centamin plc
dump leach
A process used for the recovery of metal ore from typically weathered low‑grade ore. Blasted material is laid on a slightly sloping,
impervious pad and uniformly leached by the percolation of the leach liquor trickling through the beds by gravity to ponds. The metals are
recovered by conventional methods from the solution
EDLFSP
Executive director loan funded share plan
ELFSP
Employee loan funded share plan
EMRA
Egyptian Mineral Resource Authority
EOS
Employee option scheme
EGPC
The Egyptian general Petroleum Corporation
150
Centamin plc Annual report 2015
SHAREHOLDER INFORMATION
GLOSSARY continued
EMRA
Egyptian Resource Mineral Authority
FA
Fatality
feasibility study
Extensive technical and financial study to assess the commercial viability of a project
flotation
Mineral processing technique used to separate mineral particles in a slurry, by causing them to selectively adhere to a froth and float
to the surface
FRC
Financial Reporting Council
FVTPL
Financial liabilities at fair value
grade
Relative quantity or the percentage of ore mineral or metal content in an ore body
g/t
Gram per metric tonne
GST
Goods and services tax
indicated resource
As defined in the JORC Code, is that part of a mineral resource which has been sampled by drill holes, underground openings or other
sampling procedures at locations that are too widely spaced to ensure continuity but close enough to give a reasonable indication of
continuity and where geoscientific data is known with a reasonable degree of reliability. An indicated mineral resource will be based on
more data and therefore will be more reliable than an inferred resource estimate
inferred resource
As defined in the JORC Code, is that part of a mineral resource for which the tonnage and grade and mineral content can be estimated
with a low level of confidence. It is inferred from the geological evidence and has assumed but not verified geological and/or grade
continuity. It is based on information gathered through the appropriate techniques from locations such as outcrops, trenches, pits,
workings and drill holes which may be limited or of uncertain quality and reliability
IFRS
International Financial Reporting Standards
JORC
Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and the Minerals
Council of Australia
LFSP
Loan funded share plan
LTI
Lost time due to injury
LTIFR
Lost time injury frequency rate
mill
Equipment used to grind crushed rocks to the desired size for mineral extraction
mineralisation
Process of formation and concentration of elements and their chemical compounds within a mass or body of rock
Moz
Million ounces
Centamin plc Annual report 2015
SHAREHOLDER INFORMATION
151
Mt
Million tonnes
MTIFR
Medical treatment injury frequency
Mtpa
Million tonnes per annum
net production surplus or profit share
Revenue less payment of the 3% royalty to Arab Republic of Egypt (“ARE”) and recoverable costs
NCI
Non‑controlling interest
Nyota
Nyota Minerals plc
open pit
Large scale hard rock surface mine
ore
Mineral deposit that can be extracted and marketed profitably
ore body
Mining term to define a solid mass of mineralised rock that can be mined profitably under current or immediately foreseeable economic
conditions
ore reserve
The economically mineable part of a measured or indicated mineral resource. It includes diluting materials and allowances for losses which
may occur when the material is mined. Appropriate assessments, which may include feasibility studies, have been carried out, and include
consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and
governmental factors. These assessments demonstrate at the time of reporting that extraction could be reasonably justified. Ore reserves
are sub‑divided in order of increasing confidence into Probable and Proven
ounce or oz
Troy ounce (= 31.1035 grams)
PGM
Pharaoh Gold Mines NL
PPE
Property, plant and equipment
probable
Measured and/or indicated mineral resources which are not yet proven, but where technical economic studies show that extraction is
justifiable at the time of the determination and under specific economic conditions
RSP
Restricted share plan
SGM
Sukari Gold Mining Co.
TOFA
Taxation of financial arrangements
VAT
Value added tax
152
Centamin plc Annual report 2015
SHAREHOLDER INFORMATION
ADVISERS
Registrar services
Jersey, Channel Islands
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Hilgrove Street
St Helier
Jersey JE1 1ES
Canada
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Toronto ON M5J 2Y1
Public relations
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Telephone: +44 (0)20 7466 5000
Auditor
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
Telephone: +44 (0)20 7583 5000
FORWARD-LOOKING STATEMENTS
This report contains certain forward‑looking statements.
These statements are made by the directors in good faith
based on the information available to them up to the time of
their approval of this report and such statements should be
treated with caution due to the inherent uncertainties, including
both economic and business risk factors, underlying any such
forward looking information.
Cautionary note regarding forward looking statements
This document contains “forward‑looking information” which may
include, but is not limited to, statements with respect to the future
financial or operating performance of Centamin plc (‘Centamin’ or ‘the
Company’), its subsidiaries (together ‘the Group’), affiliated companies,
its projects, the future price of gold, the estimation of mineral reserves
and mineral resources, the realisation of mineral reserve and resource
estimates, the timing and amount of estimated future production,
revenues, margins, costs of production, estimates of initial capital,
sustaining capital, operating and exploration expenditures, costs and
timing of the development of new deposits, costs and timing of future
exploration, requirements for additional capital, foreign exchange
risks, governmental regulation of mining operations and exploration
operations, timing and receipt of approvals, consents and permits
under applicable mineral legislation, environmental risks, title disputes
or claims, limitations of insurance coverage and regulatory matters.
Often, but not always, forward‑looking statements can be identified by
the use of words such as “plans”, “expects”, “is expected”, “budget”,
“scheduled”, “estimates”, “forecasts”, “intends”, “targets”, “aims”,
“anticipates” or “believes” or variations (including negative variations)
of such words and phrases, or may be identified by statements to the
effect that certain actions, events or results “may”, “could”, “would”,
“should”, “might” or “will” be taken, occur or be achieved.
Centamin plc Annual report 2015
SHAREHOLDER INFORMATION
153
Forward‑looking statements involve known and unknown risks,
uncertainties and a variety of material factors, many of which are beyond
the Company’s control which may cause the actual results, performance
or achievements of Centamin, its subsidiaries and affiliated companies
to be materially different from any future results, performance or
achievements expressed or implied by the forward‑looking statements.
Readers are cautioned that forward‑looking statements may not be
appropriate for other purposes than outlined in this document. Such
factors include, among others, future price of gold; general business,
economic, competitive, political and social uncertainties; the actual
results of current exploration and development activities; conclusions
of economic evaluations and studies; fluctuations in the value of
the U.S. dollar relative to the local currencies in the jurisdictions of
the Company’s key projects; changes in project parameters as plans
continue to be refined; possible variations of ore grade or projected
recovery rates; accidents, labour disputes or slow‑downs and other
risks of the mining industry; climatic conditions; political instability,
insurrection or war, civil unrest or armed assault; labour force availability
and turnover; delays in obtaining financing or governmental approvals
or in the completion of exploration and development activities; as
well as those factors referred to in the section entitled “Principal risks
affecting the Centamin Group” section of the Management Discussion
& Analysis. The reader is also cautioned that the foregoing list of factors
is not exhausted of the factors that may affect the Company’s forward‑
looking statements.
Although the Company has attempted to identify important factors
that could cause actual actions, events or results to differ materially
from those described in forward‑looking statements, there may be
other factors that cause actions, events or results to differ from those
anticipated, estimated or intended. Forward‑looking statements
contained herein are made as of the date of this document and, except
as required by applicable law, the Company disclaims any obligation
to update any forward‑looking statements, whether as a result of new
information, future events or results or otherwise. There can be no
assurance that forward‑looking statements will prove to be accurate,
as actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not place
undue reliance on forward‑looking statements.
Please refer to the technical report entitled “Mineral Resource and
Reserve Estimate for the Sukari Gold Project, Egypt” effective on
30 June 2015 and issued on 23 October 2015 and filed on SEDAR
at www.sedar.com, for further discussion of the extent to which the
estimate of mineral resources/reserves may be materially affected by any
known environmental, permitting, legal, title, taxation, socio‑political,
or other relevant issues as well as details of the qualified persons and
quality control.
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CENTAMIN.COM
Registered office
2 Mulcaster Street
St Helier
Jersey JE2 3NJ
T: +44 (0)1534 828 700
Egypt
361 EI‑Horreya Road
Sedi Gaber
Alexandria
Egypt
F: +44 (0)1534 731 946
T: +20 (0)3541 1259
E: info@centamin.com
F: +20 (0)3522 6350
E: pgm@centamin.com
Australia
57 Kishorn Road
Mount Pleasant
Western Australia 6153
T: +61 (0)8 9316 2640
F: +61 (0)8 9316 2650
E: centamin@centamin.com.au