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Annual report 2016
GROWTH THROUGH
CASH FLOW
INVESTMENT SUMMARY
Centamin plc 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 a production
rate of at least 500,000 ounces
per annum.
The major capital investment
phase at Sukari was completed
in 2014, allowing the
generation of free cash flow
and the opportunity for future
growth and shareholder returns.
INSIDE THIS REPORT
STRATEGIC REPORT
Financial highlights
Operational highlights
Centamin at a glance
Chairman’s statement
Chief executive
officer’s report
Business model
02
03
04
10
14
18
Strategic focus
22
1 Cash generation
2 Shareholder returns 24
3 Growth
26
4 Social responsibility 28
Risk management
Corporate social
responsibility
Operational review
Financial review
30
36
50
58
01
DIRECTORS’ REPORT
Introduction
Board of directors
Senior management
Corporate governance
Nomination report
Remuneration report
64
72
74
76
78
82
Audit and risk report
106
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
Directors’ responsibilities 114
Independent
auditor’s report
115
Consolidated statement of
comprehensive income 120
Consolidated statement
of financial position
121
Consolidated statement
of changes in equity
122
Company legal form
and structure
Consolidated statement
of cash flows
123
Notes to the consolidated
financial statements
124
Glossary
Advisers
155
158
Forward‑looking
statements
160
IBC
SHARE PERFORMANCE
Centamin
FTSE Gold Mines Index
Strategic focus areas
We have established four areas of strategic focus:
$
180
160
140
120
100
80
60
40
20
0
Cash
generation
Shareholder
returns
2011
2012
2013
2014
2015
2016
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 $100 was invested on 31 December 2011.
Find out more on pages 22 and 23
Find out more on pages 24 and 25
Visit us online
centamin.com
Growth
Social
responsibility
Find out more on pages 26 and 27
Find out more on pages 28 and 29
Centamin plc Annual report 2016STRATEGIC REPORT 02
Centamin plc
Annual report 2016
STRATEGIC REPORT
03
FINANCIAL HIGHLIGHTS
OPERATIONAL HIGHLIGHTS
The Sukari Gold Mine remains highly cash generative
and this is reflected in the group’s financial results for
the year ended 31 December 2016.
These highlights demonstrate that we have delivered on
our strategic priorities by generating substantial operating
free cash flow and providing returns to shareholders which
stand out against our peers.
REVENUE
(US$’000)
CASH COST OF PRODUCTION
(US$ per ounce)(1,2)
ALL‑IN SUSTAINING COST
(US$ per ounce)(1,2)
2016 QUARTERLY PRODUCTION
(ounces)
2016 QUARTERLY ORE PROCESSED
(’000 tonnes)
SUKARI PROCESSING
687,387
713
508,396
513
885
694
140,306
148,674
136,787
125,269
2,876
279
2,928
248
2,806
244
2,948
222
2015
2016
2015
2016
2015
2016
Q1
Q2
Q3
Q4
2,597
2,680
2,562
2,726
Q1
Q2
Q3
Q4
Open pit
Underground
2016 TOTAL(4)
$687m
2015: $508m
2016 TOTAL
$513/oz
2015: $713/oz
2016 TOTAL
$694/oz
2015: $885/oz
2016 TOTAL
551,036oz
2015: 439,072oz
2016 ANNUAL ORE PROCESSED
11.56Mtpa
2015: 10.57Mtpa
• 2016 plant throughput 11.56Mt
• Annualised rate in excess of
11Mtpa base case forecast
• Average head grade 1.65g/t
• Metallurgical recovery 89.4%
PROFIT FOR THE YEAR
Before tax
(US$’000)(1)
After EMRA profit
share (US$’000)
EARNINGS PER SHARE
Before profit share
(US cents per share)(1)
After profit share
(US cents per share)(1)
266,829
23.05
214,755
18.61
CASH BALANCES
Cash and cash
equivalents at the year
end (US$’000)
Cash and liquid
assets at the
year end (US$’000)(3)
399,873
428,010
199,616
230,743
58,407
51,570
4.51
4.51
LOST TIME INJURY FREQUENCY RATE
(per 200,000 working hours)
MEDICAL TREATMENT INJURY
(per 200,000 working hours)
SAFETY IS OUR PRIORITY
1.25
0.69
1.37
1.28
0.36
0.39
0.27
0.12
0.60
0.46
0.39
• Downward trend in LTIFR rate,
as operations have scaled up
• Targeting a zero‑harm
safety record
• Improvements in MTIFR during
2016 which remained at low
levels over the course of
the year
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2011
2012
2013
2014
2015 2016
2012
2013
2014
2015 2016
2016 TOTAL(4)
2016 TOTAL(4)
$267m
2015: $58m
$215m
2015: $52m
2016 EPS BEFORE
PROFIT SHARE
23.0c
2015: 4.5c
2016 EPS AFTER
PROFIT SHARE
18.6c
2015: 4.5c
2016 TOTAL(4)
2016 TOTAL(4)
$400m
2015: $200m
$428m
2015: $231m
2016 (“LTIFR”)
0.27
2015: 0.12
2016 (“MTIFR”)
0.46
2015: 0.60
(1) Excludes fuel subsidy (i.e. based on the full international fuel price), please refer to note 12 to the financial statements for further details.
(2) Cash cost of production and all‑in sustaining costs are non‑GAAP financial performance measures with no standard meaning under GAAP.
Please see the financial review for details of non‑GAAP measures.
(3) Includes cash and cash equivalents, bullion on hand, gold sales receivables and available‑for‑sale financial assets. Please see the financial review
for details of non‑GAAP measures.
(4) 2016 totals have been rounded to the nearest US$million.
Centamin plc Annual report 2016STRATEGIC REPORT 04
05
CENTAMIN AT A GLANCE
Production
Centamin remained focused on its drive for productivity and
efficiency at the Sukari Gold Mine and ongoing optimisation
of the processing and mining operations offers scope for
further increases in productivity and production growth.
During the year both the processing and underground
mining operations at Sukari achieved levels of productivity
that were above our base case annualised forecasts.
SUKARI
GOLD MINE
SUKARI
PROCESS
OPEN PIT
ORE
UNDERGROUND
ORE
PRIMARY CRUSHING
MILL FEED
STOCKPILE 1
PLANT 1
BALL MILL 1
ROM
ROM
GYRATORY
CRUSHER
10xMtpa
GYRATORY
CRUSHER
5xMtpa
SECONDARY CONE
CRUSHERS
SAG MILL 1
BALL MILL 2
FLOTATION CIRCUIT 1
PLANT 2
MILL FEED
STOCKPILE 2
SAG MILL 2
FLOTATION CIRCUIT 2
BALL MILL 3
Conc.
Tails
Conc.
Tails
Carbon columns
DUMP LEACH
Solution
Solution
Tails
Solution
Tails
ELUTION & ELECTROWINNING
“OXIDE” CIL CIRCUIT
CONCENTRATE CIRCUIT
FINE-GRINDING
(VERTIMILL & SMDS)
TAILINGS STORAGE FACILITY
Process plant
Open pit
Underground
The Sukari plant processed 11.6 million tonnes (“Mt”) of
ore in 2016, a 9% increase on the prior year (2015: 10.6Mt).
The total annual processed tonnes were 5% above our base
case forecast plant throughput of 11.0 million tonnes per
annum (“Mtpa”) and metallurgical recoveries of 89.4% were
an increase on 88.8% in 2015. This performance reflected
the ongoing improvements in productivity as the various
areas of the operation were further optimised.
The open pit delivered 62.2Mt of total material movement
in 2016, an increase of 8% on the prior year (2015: 57.8Mt).
This increase was related to improved mining productivity
and equipment utilisation. The average mined grade of
0.93g/t was below the reserve average of 1.03g/t.
Ore production from the underground mine was 1.02Mt,
a decrease of 12% on the prior year (2015: 1.16Mt),
at an average head grade of 9.0g/t, a 40% increase
on 2015 (6.5g/t).
A total of 7,880m of development was completed, of
which 6,051m was mineralised (4,003m in the Amun area,
and 2,048m in the Ptah area) and associated with stoping
blocks to be mined over the coming years.
THE LOCATION OF THE SUKARI GOLD MINE
ORE PROCESSED AND FEED GRADE
Million tonnes
Grade (g/t)
OPEN PIT MINING
Million tonnes
Alexandria
Cairo
Egypt
Sukari
14
12
10
8
6
4
2
0
2011
2012
2013
2014
2015
2016
Ore
processed
Feed grade
2.4
2.0
1.6
1.2
0.8
0.4
0.0
14
12
10
8
6
4
2
0
Open pit
ore mined
Open pit
plant feed
grade
1.2
1.0
0.8
0.6
0.3
0.2
0.0
2011
2012
2013
2014
2015
2016
Grade (g/t)
1.4
UNDERGROUND ORE MINED AND AVERAGE GRADE
Million tonnes
Grade (g/t)
1.2
1.0
0.8
0.6
0.4
0.2
0
2011
2012
2013
2014
2015
2016
Development
ore
Stoping
ore
Mined
grade
12.0
10.0
8.0
6.0
4.0
2.0
0.0
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT 06
07
CENTAMIN AT A GLANCE continued
Sukari – production upside potential
With continued optimisation at Sukari there is potential for
further production growth beyond our current forecasts.
Sukari – reserve
We expect further growth of the Sukari reserve over the coming
years as underground development and exploration continues,
and the numerous regional prospects are evaluated.
PRODUCTION
UPSIDE THROUGH
OPTIMISATION
DEVELOPMENT
DRIVE IN THE
UNDERGROUND
MINE AT
SUKARI
Processing
Plant throughput: current forecast processing rates of
11.75Mtpa, with potential to exceed a throughput of
12Mtpa with ongoing process optimisation.
Plant recovery: current forecast metallurgical recoveries of
89.75%, with potential to sustain circa 90% with ongoing
process optimisation.
Open pit
Fleet capacity: the mining fleet has total capacity above
current forecast rates of 66.5Mtpa and therefore offers the
potential to further improve scheduling of open pit ore.
Underground
Infrastructure capacity: current forecast ore mining rates
of 1.0Mtpa, with potential to reach circa 1.5Mtpa from the
existing Amun/Ptah declines as development progresses.
Cleopatra decline: new decline within the north‑eastern
region of Sukari Hill, aimed at developing infrastructure
with the capacity to support mining rates of up to 1Mtpa.
Ultimate production rates will depend on results from the
ongoing exploration drilling programme.
PRODUCTION AND COSTS
Ounces produced
Cash operating cost
AISC
1,000
z
o
/
$
S
U
900
800
700
600
500
400
2010 2011 2012 2013 2014 2015 2016
600
500
400
300
200
100
0
u
A
z
o
0
0
0
’
Tonnes
(‘000t)
Grade
(g/t Au)
Gold
(Moz)
• Targeting high‑grade underground reserve growth to
drive further production increases at Sukari.
Sukari mineral reserve
Proven and probable
– open pit
– underground
250,000
2,720
Total mineral reserves
252,720
Previous reserves
230,000
Sukari 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
Reserves and resources calculated as at 30 June 2015 in accordance with
NI 43‑101, using a gold price of US$1,300 per ounce. Mineral resources are
reported inclusive of those resources converted to proven and probable
mineral reserves. The estimated ore remaining in the reserve, net of depletion
to the end of 31 December 2016, is 215Mt @ 1.08g/t totalling 7.47Moz.
• Resource and reserve update planned during 2017.
Life of mine ore remaining in reserve:(1)
215Mt @ 1.08g/t = 7.47Moz
(1) Basis of the 2015 reserve statement, net of depletion to end
of December 2016.
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT
08
09
CENTAMIN AT A GLANCE continued
Exploration
focused growth
CLEOPATRA
DECLINE
Underground development and exploration
drilling commenced in 2016 within the
north‑eastern Cleopatra zone of Sukari Hill.
Sukari exploration
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 2017 from the Amun and Ptah declines.
During the second half of 2016 we began development of a
new exploration decline within the north‑eastern Cleopatra
zone of Sukari Hill. The initial project is aimed at developing
infrastructure with the capacity to support mining rates of up
to one million tonnes per annum from this area, which would
be in addition to the current underground ore production
from the Amun and Ptah declines. Ultimate production
rates will depend on future results from the development
and exploration drilling programme.
Within the wider 160km2 Sukari exploitation lease,
a number of additional prospect areas have been
identified by reconnaissance field work, including
geophysical/geochemical surveys and first‑pass drilling.
These prospects offer the potential for satellite deposits
to feed the existing processing plant with both high‑grade
and low‑grade (bulk tonnage) ore. Exploration at these
prospects is ongoing.
Centamin remains in a strong position to continue investing
in its long term growth throughout the cycle. Beyond Sukari we
remain focused on our extensive licence holdings in West Africa.
Côte d’Ivoire
Burkina Faso
Côte d’Ivoire
Burkina Faso
Centamin has been progressing exploration work
significantly in Côte d’Ivoire during 2016, conducting
both regional reconnaissance and first‑pass ground
work, combined with detailed prospect scale drilling.
We have circa 2,334km2 licence area in Côte d’Ivoire
and circa 2,489km2 under application. A new discovery
has been made at the Doropo Project in north‑east
Côte d’Ivoire, covering five prospects within a 5km radius,
with a maiden resource estimate of 0.3Moz indicated
at a grade of 1.6g/t and 1.0Moz inferred at a grade of
1.3g/t. The resource, using a 0.5g/t cut‑off, is summarised
in the table below and further detail can be found in the
operational review. Exploration during 2017 will be aimed
at increasing and upgrading this resource, in addition to
identifying and drilling new prospects.
During 2016, the exploration programme involved
systematic drill‑testing of numerous targets along the
160km strike length of greenstone belt contained within
our extensive 2,200km2 licence holding. This led to the
prioritisation of two key prospect areas, Wadaradoo and
Napelapera. Further drilling is planned during 2017,
focusing on both infill and extension drilling of the
multiple resource development targets within these areas.
• The table shows a summary of the February 2013
resource estimate using a cut‑off of 0.5g/t Au.
• The Konkera February 2013 resource estimate was
prepared using JORC (2014) guidelines and meets
the criteria of the NI 43‑101.
INDICATED
INFERRED
INDICATED
INFERRED
Tonnes
5,750,472
Au g/t
1.62
Au koz
Tonnes
300 25,290,406
Au g/t
1.26
Au koz
1,032
Mt
34.2
Au g/t
Au Moz
1.7
1.92
Mt
25
Au g/t
Au Moz
1.7
1.33
METRES DRILLED BY CENTAMIN
(POST‑ACQUISITION) IN CÔTE D’IVOIRE
METRES DRILLED BY CENTAMIN
(POST‑ACQUISITION) IN BURKINA FASO
Diamond
Reverse circulation
Air core
Auger
2,550
82,904
40,446
Diamond
Reverse circulation
Air core
136,439
Auger
18,331
335,503
156,030
114,952
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT 10
11
CHAIRMAN’S STATEMENT
We remain focused on delivering peer‑leading returns,
through our value‑driven growth strategy and a
commitment to return excess cash to our shareholders.
Ore stockpile and
conveyor belt at Sukari
Josef El‑Raghy
Chairman
During 2016 Centamin’s flagship
Sukari Gold Mine continued to deliver
substantial free cash flows, driven
by a seventh successive year of
production growth and by substantial
reductions in operating costs. This
performance has allowed Centamin
to maintain its strategic focus on
generating shareholder returns and
value‑accretive growth.
A significant milestone was achieved
during the year, as the capital
investment in the Sukari operation by
Centamin’s wholly owned subsidiary
Pharaoh Gold Mines (“PGM”) was
recovered from cash flows to the extent
that profit share commenced with
the Egyptian government during the
third quarter.
Centamin ended the year with
US$428 million in cash, bullion on
hand, gold sales receivables and
available‑for‑sale financial assets.
The increase of US$197 million during
the twelve‑month period highlights
the continued potential of the business
to self‑fund its next stages of growth
from cash flows, whilst at the same time
sustaining industry‑leading dividend
returns to shareholders.
The board of directors approved an
interim 2016 payment of 2.00 US cents
per share (versus a 2015 interim
payment of 0.97 US cents per share).
I am now pleased to announce that,
with the strong performance of our
flagship asset and solid cash flows
carrying through into the second half, a
final dividend for 2016 of 13.5 US cents
per share has been proposed for
approval at the forthcoming AGM on
21 March 2017. This represents a full
year pay‑out of US$178 million, which
is equivalent to approximately 70%
of our net free cash flow in 2016 and
follows the update to our dividend
policy which was announced on
9 January 2017, as follows:
The Company’s dividend policy sets
a minimum payout level relative
to cash flow while considering the
financial condition of, and outlook
for, the Company. When determining
the amount to be paid the board will
take into consideration the underlying
profitability of the Company and
significant known or expected funding
commitments. Specifically, the board
will aim to approve an annual dividend
of at least 30% of the Company’s net
cash flow after sustaining capital costs
and following the payment of profit
share due to the government of Egypt.
This dividend policy and the proposed
full year payment for 2016 reflects our
commitment to maintain strong fiscal
discipline in managing our existing
portfolio of assets, and to return
to shareholders any cash reserves
above those required to sustain our
value driven growth strategy. We also
remain committed to our policy of
being 100% exposed to the gold price
through an unhedged position and
with a zero‑debt balance sheet.
During the year both the processing
and underground mining operations at
Sukari achieved levels of productivity
that were above our base case
annualised forecasts. As a result,
full‑year production of 551,036 ounces
was above the revised guidance range
of 520,000 to 540,000 ounces.
The cash cost of production improved
significantly to US$513 per ounce
from US$713 per ounce in 2015,
below our revised forecast of between
US$530 and US$550 per ounce, due
to the above‑forecast gold production
and an 8% reduction in mine
production costs. The main positive
impact on costs was from reductions
in the price set by the government for
fuel, which remained below originally
forecast levels throughout the year in
line with lower international oil prices.
In addition, during the fourth quarter
local costs in Egypt were reduced in
US dollar terms following a devaluation
of the Egyptian pound. In line with
the reduction in operating costs, the
AISC of US$694 per ounce marked an
improvement on US$885 per ounce
in 2015, and was below our revised
forecast of between US$720 and
US$750 per ounce.
We expect the strong levels of
productivity to be maintained in 2017,
with forecast production of 540,000
ounces at a cash cost of production
of US$580 per ounce and an all‑in
sustaining cost of US$790 per ounce.
Ongoing optimisation of the Sukari
operation, in particular within the
processing and underground mining
functions, continues to offer scope
for further production growth and
reductions in cash costs and AISC.
2016 revenues of US$687.4 million
were up 35% year‑on‑year, with an 8%
increase in realised gold prices and a
25% increase in gold sales. EBITDA
increased by 145% to US$372.9 million,
with an increase of gross operating
margin resulting from the higher
revenue and decreased mine
production costs, discussed above.
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT 12
13
CHAIRMAN’S STATEMENT continued
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.
Also in line with this increased margin,
profit before tax of US$266.8 million
was up 357% on 2015 and earnings
per share (before profit share) for
2016 was 23.05 US cents, compared
with 4.51 US cents in 2015. Profit for
the year following deduction of profit
share was US$214.8 million, equating
to 18.61 US cents basic earnings per
share (compared with 4.51 US cents
in 2015).
The underground operation at Sukari
is an important value‑driver for our
business and we expect further growth
of the reserve over the coming years
as development and exploration
continues. In August, we commenced
development of a new exploration
decline within the north‑eastern
Cleopatra zone of Sukari Hill. Whilst the
infrastructure is being developed with
the capacity to support mining rates of
up to 1 million tonnes per annum from
this area, ultimate production rates
will depend on future results from the
drilling programme and development.
Centamin remains in a strong position
to continue investing in its long term
growth throughout the cycle. Beyond
Sukari we remain focused on our
extensive licence holdings in West
Africa. Momentum continues to build in
Côte d’Ivoire, with further prospective
licence holdings added to our portfolio
and a new discovery at the Doropo
project in the north‑east of the country,
where drilling to date has led to a
maiden resource estimate of 0.3Moz
indicated and 1.0Moz inferred. Further
work in 2017 will aim to upgrade and
expand on this positive start towards
project development. In Burkina Faso,
we continue to evaluate data from
the extensive drilling programmes
carried out to date and further work
is being planned for the year ahead.
I look forward to updating you further
in due course with our progress
towards 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 that 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 21 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 stayed until the Supreme
Constitutional Court has ruled on the
validity of Law no. 32.
Samples from Sukari
underground mine
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 2016 as Centamin
continued on its path 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 2017, and would
welcome you to join us at our AGM,
which this year will be held in Jersey
on 21 March 2017.
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
1 February 2017
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT 14
15
CHIEF EXECUTIVE OFFICER’S REPORT
Whilst the gold market conditions improved, Centamin
remained focused on its drive for productivity and
efficiency, and undertook a growth strategy aimed
at enhancing shareholder returns.
Underground operators
in the Cleopatra decline
A seventh successive year of
growth in 2016 saw production of
551,036 ounces increase by 26%
over 2015 and exceed the top end
of our revised annual guidance range
of between 520,000 and 540,000
ounces. Fourth quarter production
was 136,787 ounces, an 8% reduction
on the previous quarter, mainly due a
lower average head grade of open pit
ore of 0.85g/t (versus 1.14g/t in the
third quarter), in line with the mining
plan as a low‑grade cutback in the east
wall of the pit was developed.
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 2016 of 0.27 per
200,000 man hours. Centamin remains
committed to further improving health
and safety during 2017 towards our
‘zero‑harm’ target.
The open pit total material movement
in 2016 was 62.2Mt, an increase of
8% on the prior year due to improved
mining productivity and equipment
utilisation, at an average mined grade
of 0.93g/t. During the third quarter
of 2016, open pit mining rates had
achieved our annualised base case rate
of approximately 65Mt of total material
movement (ore plus waste) and mined
grades had progressed towards the
reserve average. During Q1 2017
the open pit is scheduled to develop
a low‑grade east wall cutback and
planned gold production will be lower
than in Q4 2016. Grades are forecast
to return towards the reserve average
from Q2 2017 and the operation
remains on a secure footing to deliver
the scheduled material movements for
the remaining mine life.
The underground mine delivered
1.02Mt of ore (a 12% decrease on
2015) at a grade of 9.04g/t (up 40% on
2015), achieving a sustained annualised
rate in excess of our base case forecast
of 1Mt per annum of ore at a grade of
at least 6g/t.
Andrew Pardey
Chief executive officer
The process plant also continued to
operate at levels above our base case
forecast rate of 11Mtpa, with 11.6Mt of
ore processed in 2016 (a 9% increase
on 2015). The average metallurgical
recovery was 89.4%, an increase of
0.6% on 2015. Work continues to
develop the potential to improve and
sustain recoveries at the 90% level with
increasing throughput rates.
Sukari’s cost performance during 2016
provides a strong indication for the
potential of the operation to generate
significant free cash flow over the
coming years. There was a year‑on‑year
decrease in operating costs per tonne
in both the open pit mining and
processing areas, principally driven
by reductions in the local diesel price
during the first half of 2016, driven by
international fuel price movements.
During the fourth quarter, a devaluation
of the Egyptian pound versus
US dollar also had a positive impact
on local costs.
As a result of these factors,
the cash cost of production of
US$513 was below guidance of
between US$530 and $550 per
ounce. The AISC of US$694 was
similarly below guidance of between
US$720 and $750 per ounce,
despite an increase in sustaining
capital expenditure of US$27 million
(a 74% increase on 2015), mainly
due to a planned increase in fleet
maintenance costs.
Centamin had previously elected
to make advance payments against
future profit share from 2013 onwards,
to demonstrate goodwill towards
the Egyptian government. The total
value of these payments, amounting
to US$28.75 million, was recovered
against entitlement to profit share
by the Egyptian Mineral Resources
Authority (“EMRA”).
To the end of 2016, further
distributions of profit share amounting
to a total of US$18.5 million had
subsequently been made to EMRA.
Both EMRA and PGM will benefit from
advance distributions of profit share
on a proportionate basis in accordance
with the terms of the Concession
Agreement and considering ongoing
cash flows, historic costs that are
still to be recovered and any future
capital expenditure.
Free cash flow generation from Sukari
of approximately US$200 million
has further strengthened Centamin’s
financial position during 2016,
a trend we expect to continue as
we forecast 2017 production of
540,000 ounces at a cash cost of
production of US$580 per ounce and
an all‑in sustaining cost of US$790
per ounce. This guidance is based on
a plant throughput of 11.75Mt and
approximately 1Mt of underground
ore mined at a grade of 7.26g/t.
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT 16
17
CHIEF EXECUTIVE OFFICER’S REPORT continued
The objective of our producing asset, as always,
is to generate substantial free cash flow.
Exploration drill rig
in Côte d’Ivoire
Ongoing optimisation of the
processing and mining operations
continues to offer scope for
further increases in productivity
and production growth. At the
underground mine, we see potential
for further increases in mined tonnages
whilst retaining a priority on stable
grade delivery. The additional
shareholder value that can be gained
through improving the delivery of
high‑grade underground ore has the
potential to be significant and requires
no material capital expenditure.
At the process plant, further planned
upgrades to the secondary crushing
circuit with an estimated capital cost of
circa US$6 million offer the potential for
throughput rates to exceed 12Mtpa.
In parallel with these productivity
improvements, there remains scope
for lower unit costs as the expanded
operation continues to be optimised
and further efficiency gains are realised.
We expect further growth of the
Sukari reserve over the coming
years as underground development
and exploration continues, and the
numerous regional prospects are
evaluated. An updated resource and
reserve estimate for Sukari is expected
in 2017.
The objective of our producing asset,
as always, is to generate substantial
free cash flow even under challenging
gold price assumptions. In line with
our updated dividend policy, and
supported by the board’s proposal
for a final 2016 dividend of 13.5 US
cents per share (equating to a full‑year
dividend of 15.5 US cents per share),
we intend to return at least 30% of
this cash flow to our shareholders.
The remaining cash flows are allocated
towards our medium and long term
objective of organic growth, which
is aimed at realising incremental
shareholder value and returns.
We remain committed to our
disciplined approach to capital
allocation, as well as the potential
for exploration to deliver significant
shareholder value over the long
term. Results from our programmes
in Burkina Faso and Côte d’Ivoire
continue to build momentum and
warrant further investment, and we
again exit the year with a robust
financial and operating base on
which to continue delivering our
growth strategy.
Exploration at Sukari continues to
prioritise extensions of the high‑grade
underground resource and reserve,
as the development and drilling
extends along strike and at depth.
We expect to continue to deliver
positive news in line with our strong
results to date and a further resource
and reserve update is planned
during 2017.
During August, we began
development of a new exploration
decline within the north‑eastern
Cleopatra zone of Sukari Hill. The total
project expenditure is expected to be
US$11.5 million, of which US$3 million
has been spent to date. A portal has
been established and approximately
900 metres of development was
completed to the end of the year. Initial
exploration drilling has commenced
to target multiple zones of high‑grade
mineralisation, as interpreted from
existing data. The initial project is
aimed at developing infrastructure
with the capacity to support mining
rates of up to 1Mtpa from this area.
Ultimate production rates will depend
on future results from the programme
and further development, and would
be in addition to the current 1Mtpa
underground ore production from the
Amun and Ptah declines.
In Côte d’Ivoire, exploration drilling
over targets defined by geochemical
and geophysical surveys has led to a
new discovery at the Doropo project
in the north‑east of the country,
adjacent to our licence holding across
the border in Burkina Faso. A maiden
resource of 0.3Moz at 1.6g/t indicated
and 1.0moz at 1.3g/t inferred has
been estimated from drilling results
over five prospects within a 5km radius
area. Preliminary metallurgical test
work has returned positive results,
indicating mineralisation is amenable
to conventional leaching. Mineralisation
at these prospects remains open
along strike and at depth and drilling
in 2017 will focus on expanding and
upgrading this initial resource in these
areas. Regional exploration will also
continue to test existing and new
prospects for laterally extensive and
near‑surface mineralisation. We have
continued to expanded our portfolio
of highly prospective licence holdings
in Côte d’Ivoire and, with licence
applications pending, we expect to
increase this further during 2017.
In Burkina Faso, exploration during
2016 continued to test the potential
for lateral and depth extensions
of the more advanced targets,
with priority on the Wadaradoo
and Napelapera prospect areas.
We continue to evaluate the results
from these programmes, and the
resulting interpretation will guide
further drilling to be carried out in
2017. There remains potential to add
significant shareholder value from
this district‑scale licence holding as
we continue to make progress towards
developing our next stage of growth
in West Africa.
We expect a total exploration
expenditure of circa US$25 million
in 2017, split between Côte d’Ivoire
and 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.
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 social responsibility report.
Our workforce 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.
We welcome Ross Jerrard who was
appointed as our new chief financial
officer (“CFO”). Ross joined Centamin
from Deloitte Australia. 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. I am pleased to report that
during his first year as CFO, Ross has
overseen continued improvements in
the Company’s financial control and
reporting functions.
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 and Côte d’Ivoire
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 2017.
Andrew Pardey
Chief executive officer
1 February 2017
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT 18
19
BUSINESS MODEL
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 24
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SOCIAL RESPO N S I B I
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Environmental pro t e c t i o n
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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
HSES policies, induction
training, monitoring.
GOVERNMENTS
COMMUNITIES
Profit sharing and royalties, investment,
new industries, job creation, engagement,
resource allocation.
Infrastructure, conservation, healthcare,
engagement, concessions.
SUPPLIERS
Local economy, local suppliers,
government suppliers, contracts, imports.
REFINERS
Exports, commodities.
SHAREHOLDERS
Governance, strategy,
engagement, dividends.
GOLD PRODUCTION
Development of economically viable
projects leading to profitable production
of gold.
2016 PRODUCTION
(ounces)
2016 ORE PROCESSED
(million tonnes per annum)
2016 TOTAL
551,036oz
2015: 439,072oz
2016 TOTAL
11.56Mtpa
2015: 10.57Mtpa
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT
20
21
BUSINESS MODEL continued
Our KPIs and targets for 2017 are set out below:
STRATEGIC FOCUS AREAS
PRINCIPAL RISKS
OBJECTIVES
KPIs REPORTED IN 2016
KPIs SET FOR 2017
1
Cash
generation
2
Shareholder
returns
3
Growth
4
Social
responsibility
Priority 1
Single project dependency
Joint venture
Gold price and currency exposure
Jurisdictional tax exposure
Political risk – Egypt
Political risk – West Africa
Reserve and resource estimates
Exploration development
Production estimates
Litigation
Priority 2
Single project dependency
Joint venture
Gold price and currency exposure
Jurisdictional tax exposure
Political risk – Egypt
Political risk – West Africa
Reserve and resource estimates
Exploration development
Production estimates
Litigation
Priority 3
Single project dependency
Joint venture
Gold price and currency exposure
Jurisdictional tax exposure
Political risk – Egypt
Political risk – West Africa
Reserve and resource estimates
Exploration development
Production estimates
Litigation
Priority 4
Single project dependency
Joint venture
Gold price and currency exposure
Jurisdictional tax exposure
Political risk – Egypt
Political risk – West Africa
Reserve and resource estimates
Exploration development
Production estimates
Litigation
Represent the areas of risk closely related to the strategic focus area.
• Competitive costs.
• Stable production with
opportunities for further
increases through optimisation.
• Cash cost of production of US$513 per ounce, a
28% reduction on US$713 in 2015 and below revised
guidance of between US$530 and US$550 per ounce.
• All‑in sustaining cost of US$694 per ounce, a 22%
reduction on US$885 in 2015 and below revised
guidance of between US$720 and US$750 per ounce.
• 551,036 ounces produced, a 26% increase on
439,072 ounces in 2015 and above revised guidance
of between 520,000 and 540,000 ounces.
• Targeted US$580 cash cost of production per ounce.
• Targeted US$790 per ounce all‑in sustaining cost.
• Targeted production of 540,000 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 2016 of 15.5 US cents per share,
• Annual dividend of at least 30% net cash flow
an increase on 2.94 US cents per share in 2015 and
equating to approximately 70% of net cash flow
after sustaining capital and profit share and before
exploration expenditure outside of Sukari.
after sustaining capital and profit share and before
exploration expenditure outside of Sukari.
• 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.
• Maintaining a safe environment
to work, with opportunities
for our employees to train
and develop skills.
• Process plant throughput of 11.6Mt, a 9% increase
on 2015 and above our base case forecast rate.
• Resource/reserve replacement and expansion at
Sukari, with a focus on the high‑grade underground.
• Exploration programme over licence areas in
• Drilling on priority targets in Burkina Faso and
Burkina Faso.
• Exploration programme over licence areas in
Côte d’Ivoire.
Côte d’Ivoire, providing the foundation for further
resource development.
• LTIFR of 0.27 per 200,000 man hours, above our
• Zero‑harm safety record throughout the
zero‑harm target.
group’s operations.
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT STRATEGIC FOCUS
1
Cash
generation
Maximising productivity
and maintaining one of the
industry’s lowest cost profiles
• No major expansion capital at Sukari
• Further production growth potential,
driven by ongoing process
optimisation and exploration
• No debt or hedging
obligations
23
HOW WE
GENERATE FREE
CASH FLOW
AND DELIVER
SHAREHOLDER
RETURNS
PROJECT DELIVERY
• Track record: investment
and construction phase at
Sukari complete.
• Production: 2017 guidance
of 540,000oz.
FOCUS ON COST CONTROL
• Capex: Sukari staged construction
delivered on budget.
• Low cash cost of production:
target of US$580/oz in 2017.
• Low all‑in sustaining cost:
target of US$790/oz in 2017.
OPTIMISING PRODUCTION
• Upside: further potential for
production growth and cost
reduction through process
optimisation.
• Reserve growth: further
exploration potential to extend
the mine life and/or increase
production.
• Capex: no requirement for further
significant capital expansion.
STABLE FINANCES AND
SHAREHOLDER RETURNS
• Cash: maintaining appropriate
cash reserves.
• Dividend: competitive
dividend policy.
• Debt free: no interest payments
or hedging obligations.
• Long life: Sukari has a mine life
of approximately 20 years on
current reserves.
NEXT STAGE OF GROWTH
• Cash flow: post‑dividend cash
flows are used to fund growth.
• New project generation:
Exploration projects in Côte
d’Ivoire and Burkina Faso.
• Acquisitions: financial flexibility to
acquire value‑accretive projects.
A record year of free cash flow from
our flagship Sukari Gold Mine.
During 2016, the Sukari operation delivered against its potential to generate
substantial free cash flows, as the expanded operation met, and subsequently
exceeded, its base case target levels of productivity. With the potential for
ongoing process optimisation and exploration to drive further production growth
over the coming years, Sukari enters 2017 on a strong and stable footing for its
remaining circa 20‑year life of mine. Centamin has no debt or hedging and has
US$428.0 million of cash and liquid assets at the year end 2016. The Company is
therefore financially robust, is well positioned to benefit from a further recovery
in the gold price, and has the financial flexibility to grow both organically and
through strategic acquisitions.
KPIs reported during the year:
• cash cost of production of US$513 per ounce;
• all‑in sustaining cost of US$694 per ounce; and
• revenue of US$687.4 million was an increase of 35% on 2015, driven by
increased production and a higher average gold price of US$1,256 per ounce
(US$1,159 per ounce in 2015).
Our KPIs reported for 2016 are set out below:
Cash
Q4 2016 Q4 2015
Cash cost of production US$ per ounce
536
667
2016
513
2015
713
All‑in sustaining
cost of sales
US$ per ounce
720
842
694
885
Revenue
US$’000
158,307 130,196 687,387 508,396
KPIs set for 2017:
• targeted production of 540,000 ounces;
• targeted US$580 cash cost of production per ounce; and
• targeted US$790 all‑in sustaining cost per ounce.
Underground grade control rig
Centamin plc Annual report 2016STRATEGIC REPORT
STRATEGIC FOCUS
2
Shareholder
returns
Dividend payments
are prioritised
• Dividend policy to pay at least
30% of free cash flow(1)
• 2016 full year dividend 15.5 US cents
per share (2.94 US cents for 2015)
• We remain committed to
maintaining fiscal discipline
and returning excess cash
to shareholders
25
CENTAMIN IS
COMMITTED TO ITS
SHAREHOLDER
RETURN
POLICY
Interim dividend of
2 US cents per share
Final dividend of
13.5 US cents per share
Total dividend for 2016
15.5 US cents per share
Centamin’s board of directors is pleased
to propose a final dividend for 2016 of
13.5 US cents per share, which will be
paid on 31 March 2017 to shareholders
on the register at the record date
following approval at the AGM
on 21 March 2017.
In reflection of the free cash flow generation from Sukari, the 2016 full‑year
dividend of 15.5 US cents per share represents a significant increase on the 2015
payment of 2.94 US cents per share. This is in line with the Company’s recently
revised dividend policy, to pay an amount of at least 30% of the Company’s net
cash flow after sustaining capital costs and following the payment of profit share
due to the government of Egypt. Centamin is committed to its shareholder return
policy and, to the extent that future cash reserves exceed that required to maintain
a stable balance sheet and also provide capacity for potential future growth,
the Company is committed to make further returns to shareholders.
What we do for Egypt – stakeholder returns:
• direct payments to the government including:
• an entitlement of US$51 million profit share to 31 December 2016; and
• royalty payments of US$103 million to 31 December 2016.
• approximately US$3 billion investment to date (including capital and
operational expenditure); and
• an average of circa 1,300 Egyptian employees (70 expatriates) and over
270 Egyptian companies supplying Sukari.
KPIs reported during the year:
• total dividend 15.5 US cents per share for 2016 (totalling approximately
US$178 million); and
• total payout above the dividend policy 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.
Dividend policy and KPIs set for 2017:
• annual dividend of at least 30% of the Company’s free cash flow(1).
Geologists in underground operation
Centamin plc Annual report 2016STRATEGIC REPORT STRATEGIC FOCUS
3
Growth
Focus on exploration to
drive production growth and
enhance shareholder value
• Targeting high‑grade underground
reserve growth to drive further
production increases at Sukari
• New discovery in Côte d’Ivoire
• Exploration in Burkina Faso
on key prospect areas
27
EXPLORATION
FOCUSED
GROWTH
2017 guidance of
540,000 ounces
at a cash cost of production of
US$580 per ounce and an all‑in
sustaining cost of US$790 per ounce
Maiden resource at the
Doropo Project in
Côte d’Ivoire of
0.3Moz at 1.6g/t
indicated and
1.0Moz at 1.3g/t
inferred.
Centamin is focused on its drive for
productivity and efficiency at the Sukari
Gold Mine, and undertakes a growth
strategy aimed at enhancing shareholder
returns over the long term.
Our strategy for growth is summarised in the table below.
NEAR TERM (1‑2 YEARS)
• Further production growth at Sukari, driven by productivity improvements
and resource/reserve expansion, with a focus on underground high‑grades.
• Resource expansion and project evaluation in Burkina Faso and
Côte d’Ivoire.
• Continue to evaluate selective M&A opportunities with the potential to
develop low‑cost projects.
MEDIUM TERM (3‑5 YEARS)
• Achieve optimal production at Sukari through continued expansion and
exploitation of the underground high‑grade reserves.
• Development and first production in Burkina Faso and Côte d’Ivoire,
assuming positive project evaluation.
LONG TERM (5+ YEARS)
• 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.
KPIs reported during the year:
• Sukari production of 551,036 ounces an increase of 26% on 2015; and
• new discovery and maiden resource at the Doropo project in north‑east
Côte d’Ivoire.
KPIs set for 2017:
• annualised production of 540,000 ounces;
• resource/reserve replacement and expansion at Sukari, with a focus on
underground high grade; and
• resource expansion through systematic drilling programmes in West Africa.
SAG Mill at Sukari
Centamin plc Annual report 2016STRATEGIC REPORT
STRATEGIC FOCUS
4
Social responsibility
The environment,
workplace health and
focus on employee safety
• Improvements in MTIFR
and low levels of LTIFR
• Striving for a zero‑harm workplace
• Progressive training for employees
29
COMMITMENT TO
IMPROVING HEALTH
AND SAFETY
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 workplace.
Key themes in the
social
responsibility
report are as follows:
• committed to minimising
health and safety risks; and
• development of
highly skilled workforce.
Sukari
• Improvements in MTIFR during 2016 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.
Burkina Faso
2016
frequency
2015
frequency
2014
frequency
rate(1)
rate(1)
rate(1)
2013
frequency
rate(1)
—
0.27
0.46
0.04
0.12
0.6
—
0.39
0.39
—
0.36
1.28
The project lies in Batie, Noymbeil, in the south of Burkina Faso. Batie is a town
with a population of about 30,000 and has several cities and villages affiliated
to it. The town is considered the least developed in Burkina Faso.
Marsa Alam town
Safety performance
FIFR
LTIFR
MTIFR
(1) Based on 200,000 working hours.
Côte d’Ivoire
2016
frequency
2015
frequency
rate(1)
rate(1)
—
—
0.37
0.2
0.62
0.21
The Doropo project lies in the north‑east of Côte d’Ivoire, across the border from
Batie West in Burkina Faso.
Safety performance
FIFR
LTIFR
MTIFR
(1) Based on 200,000 working hours.
2016
frequency
rate(1)
—
—
2.45
Centamin plc Annual report 2016STRATEGIC REPORT
30
31
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.
The principal risks described in the
report can have a serious impact on
our ability to deliver on our strategic
aims. The management of risks
through identification, monitoring
and mitigation allows the group to
improve its decision making process,
deliver on its objectives and improve
its performance as a mining company.
The report below covers the board’s
assessment of its risk appetite to
key strategic decisions, our viability
statement and details of our
principal risks.
Risk appetite
Centamin accepts that 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. The
group therefore can only manage,
rather than eliminate risk completely.
In considering risk appetite, the board
considered the level of acceptable risk
(tolerance), the attitude and culture
towards risk and the ways in which
the board can influence risk appetite
throughout the business.
In considering risk appetite, the board
was clear that Centamin had zero
tolerance to breaches in health and
safety and environmental protection.
The board was clear about their
objectives and strategy which could
be managed and mitigated to an
acceptable level.
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. In summary
the principal risks, objectives and risk
appetite are summarised below:
PRINCIPAL RISK
STRATEGY
MITIGATION/RISK APPETITE
Loss of revenue due to
single project dependency
Maintain redundancies within the operating
cycle and develop a well‑balanced
project pipeline.
Risk appetite is at an acceptable level, with appropriate levels
of mitigation in place to reduce the likelihood of significant
loss of revenue due to single project dependency.
Sukari Gold Mine joint venture
risk and relationship with EMRA
Maintaining good relations with EMRA
(our joint venture partner in Egypt).
Risk appetite is at an acceptable level, with appropriate levels
of mitigation in place.
Gold price and
currency exposure
The Company does not currently hedge against
the price of gold or exposure to currencies.
The strategy is aligned with the risk appetite
of the Company.
Jurisdictional taxation
exposure
Political risk – Sukari
To minimise the complexity of the corporate
structure ensuring tax neutrality within the
holding group entities.
Simplification of the structure is ongoing, however, the
mitigation in place is at an acceptable level and therefore
operating within the parameters of our current risk appetite.
Maintain a detailed understanding of the
political environment in which we operate
as well as constructive relationships with
government.
The Company operates within acceptable limits and the
operation has continued to be unaffected despite a number
of major political events occurring in Egypt. The Company
supports Egypt’s development of a modern mining code.
Political risk – West Africa
Maintain a detailed understanding of the
politcal environment and key relationships
where we operate.
The Company operates within acceptable limits.
Exploration and
development
To ensure a progressive pipeline of greenfield
and advance stage exploration projects to serve
the next stage of growth for the Company.
The Company operates its exploration programmes within
acceptable risk appetite parameters.
Reserve and resource
estimate or failure to achieve
production estimates
Litigation
To achieve reliable and consistent production,
whilst optimising the potential of the operation.
The Company operates within acceptable risk
appetite parameters.
To minimise exposure to litigation and reduce
the impact of actions.
The Company is operating within its risk appetite parameters
and the mitigation in place is at an acceptable level.
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 the
budget and forecast carried out in
December 2016 which reviewed the
longer term viability of the Company.
The review assessed 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 20. 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 review includes
the Company’s strategic objectives,
business model and its prospects
over the coming five years to
December 2021.
The review, which included the
presentation and approval of the
budget, received board approval
and formed the basis of an investor
presentation which was released
on 1 February 2017. 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.
Integral to the long term viability
of the Company is the Company’s
resource and reserves (“R&R”) and
details of Sukari’s R&R can be found
on the Company’s website. The R&R
statements are supported by technical
reports (including the published
TSX compliant NI 43‑101) which are
developed in consultation with external
experts and combine geological,
metallurgical and economic data.
The budget process, which pulls
heavily on the R&R data, include key
assumptions related directly to our
significant risks, our strategy and risk
appetite and are summarised below:
• gold price assumptions:
management time and focus
is applied to ensure a low cost
operation, which helps Sukari remain
profitable, even in a relatively
low gold price environment.
The strategic decision to remain
un‑hedged means the Company
benefits fully in a strong gold price
environment. In a weaker gold price
environment, the commitment
to cost control helps ensure
business continuity;
• commodity assumptions: based
on forecast prices, fuel represents
approximately 20% of our
operational costs and is therefore a
significant commodity assumption
in both the budget process and
development of the R&R. This can
therefore materially affect the cost
base of the business; and
• production assumptions: Sukari is
a 24‑hour‑a‑day, seven‑days‑a‑week
operation with an estimated plant
throughput capacity is 11.75Mtpa
(12Mtpa from 2018). The process
plant recovery rates are estimated
to average at 89.7% in 2017.
Maintaining and improving
productivity is fundamental to our
business and long term strategy.
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 and carried
out the review in December 2016
based on this time horizon.
In preparing budgetary information
and forecasts, the group considers
the principal risks and wider corporate
and operational risks. Of the principal
risks identified on pages 32 to 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.
The 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 information.
The management team also considers
strategic, operational and compliance
risks throughout the year and produces
the following reports and documents
for the 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.
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT 32
33
RISK MANAGEMENT continued
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.
TREND
NATURE OF RISK
MITIGATION
RISK CATEGORY
STRATEGIC RISK
Single project dependency
Neutral
The Sukari Gold Mine currently constitutes Centamin’s main mineral resource and
sole mineral reserve and near term production and revenue. The resource in Burkina
Faso is not currently of a sufficient size to convert into a reserve.
Until further production growth beyond Sukari is identified the potential impact
remains high and safeguarding the project is paramount to the Company.
Sukari Gold Mine: the project at Sukari has two distinct ore
sources (open pit and underground), 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 process 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, outside
the single project at Sukari, include the continued focus on longer
term growth and expansion through exploration and acquisition
targets both inside and outside of Egypt.
Maintaining relations: a key milestone was achieved this
year, with the commencement of profit sharing with EMRA.
Managing timing and quantum of payment of regular profit share
payments, as well as applying and interpreting certain provisions
of the Concession Agreement, is important in ensuring a good
relationship with EMRA. Future expenditure and recovery of
qualifying capital expenditure will also need to be managed, to be
appropriately cost recovered by the Company.
COMPANY OBJECTIVE/STRATEGY
To develop a well‑balanced project pipeline,
with potential to add incremental shareholder
value by increasing production across the group.
The regional exploration of the licence portfolio
in Burkina Faso and Côte d’Ivoire continues.
OWNER
Executive:
CEO
Maintaining good relations with EMRA is a key
objective of the Company which is achieved
through co‑operation, regular meetings and
correspondence with EMRA, as well as making
sure that the terms and conditions of the
Concession Agreement governing the mine
are fully complied with.
Executive:
Chairman
CEO
CFO
Operational:
GM
The group is 100% exposed to the gold price, however, the cash
costs of the Sukari gold project remain low compared with the
industry norm.
The Company does not currently hedge against
the price of gold or exposure to currencies.
Natural hedges against currency fluctuations
are utilised wherever possible to offset foreign
currency liabilities.
Executive:
CEO
CFO
Tax exposure: the group engages tax advisers to provide local
advice at an operational level as well as corporate and structuring
advice at a corporate level.
To minimise the complexity of the corporate
structure ensuring tax neutrality within the
holding group entities.
Executive:
CEO
CFO
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. This law received full
parliamentary approval as required by Egyptian law.
Maintain a detailed understanding of the political
environment in which we operate as well as a
constructive relationships with government.
The Company undertakes to abide by the spirit
and letter of the Concession Agreement as well
as local laws and regulations.
Executive:
Chairman
CEO
General
Counsel
INTERNAL STRATEGIC RISK
Neutral
Sukari Gold Mine joint venture risk
and relationship with EMRA
EXTERNAL STRATEGIC RISK
Neutral
Gold price and currency exposure
INTERNAL STRATEGIC RISK
Neutral
Jurisdictional taxation exposure
EXTERNAL STRATEGIC RISK
Neutral
Political risk – Sukari
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.
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.
The extent of the Company’s financial performance is due in part to the price of
gold, which the Company has no influence over. Revenues from gold sales are
in US dollars and Centamin has exposure to costs in other currencies including
Egyptian pounds, Australian dollars and sterling.
Centamin manages its exposure to gold price by keeping operating costs as low
as possible.
The group’s corporate structure includes operational activity in Egypt and West
Africa held through holding companies in Australia and the United Kingdom.
Exposure to changing cross jurisdictional tax legislation could have an adverse effect
of the Company’s ability to repatriate revenues.
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,
repatriation of income and capital. Changes may also impact the ability to import
key supplies and export gold.
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.
Law no. 32 has been confirmed by Parliament, although it remains subject to a
challenge in the Supreme Court.
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT 34
35
RISK MANAGEMENT continued
Principal risks continued
RISK CATEGORY
TREND
NATURE OF RISK
MITIGATION
COMPANY OBJECTIVE/STRATEGY
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
Neutral
Exploration development
INTERNAL OPERATIONAL RISK
Improved
Failure to achieve
production estimates
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.
Time and costs of exploration activity are recognised as exploration and evaluation
assets (“E&E assets”) on the balance sheet. E&E assets continue to be carried on
the balance sheet where there is ongoing planned activity and the right of tenure
is current.
There can be no guarantee that an exploration project progresses to an economic
resource and therefore there remains a risk that E&E assets are partially or fully
impaired during a financial period where either a decision is made to discontinue
a project or no further activity is scheduled.
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.
EXTERNAL OPERATIONAL RISK
Neutral
Litigation
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.
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.
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.
Maintain relationships with all key stakeholders,
including regional governments, land owners
and local chiefs. The Company meets its
environmental and operational commitments
set out in the permits/grants and local laws/
regulations.
Management has implemented processes to continuously monitor
and evaluate the current life of the Sukari Gold Mine, mine
plans and production targets. The most recent technical update
was completed in Form 43‑101 dated 23 October 2015 and is
available at www.sedar.com.
To achieve reliable and consistent production,
whilst optimising the potential of the operation.
The Company provides timely and accurate
information to the market on production levels
and forecasts.
The exploration for precious metal may not be successful
and are highly speculative in nature. Before undertaking any
exploration projects a full risk assessment in undertaken covering
country risk, industry risks as well as a detailed technical review
of the underlying geological data available. Management
implements systematic drilling programmes across its exploration
projects, with costs aggregated appropriately to licence areas
and prospects.
To ensure a progressive pipeline of greenfield
and advance stage exploration projects to serve
the next stage of growth for the Company.
Ensure systematic exploration programmes are
carried out with costs attributed to licence areas
and prospects so that they can be assessed
for impairment.
OWNER
Executive:
CEO
General
Counsel
Operational:
GM
Executive:
CEO
Operational:
GM
Executive:
CEO
CFO
Operational:
GM
To achieve reliable and consistent production,
whilst optimising the potential of the operation.
The Company provides timely and accurate
information to the market on production levels
and forecasts.
Executive:
CEO
Operational:
GM
To minimise exposure to litigation and reduce
the impact of actions by complying with all
relevant laws and regulations and to defend
and/or bring any actions necessary to protect
the Company’s assets, rights and reputation.
Executive:
Chairman
CEO
General
Counsel
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, 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) taken appropriate
legal advice and continues actively to pursue its legal rights with
respect to its existing cases (its legal advisers believe that Centamin
will ultimately be successful in both of these cases); and b) actively
monitors activity in both court and local media for signs of any
legislative or similar 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; the Egyptian government’s support of Centamin’s
investment; Law no. 32 of 2014 that should protect Centamin
against litigation by third parties; and the fact that Egypt and
Australia (PGM’s place of incorporation) have in place a bilateral
investment treaty.
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT 36
37
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
(“HSES”) committee, 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 of 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; and
• review of environmental,
health, safety and emergency
planning issues.
The committee assisted in progressing
the segregation and removal 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.
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.
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.
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 this CSR
report as part of its commitment to
environmental issues.
The report below covers the key HSES
issues for Sukari and concludes with
information relating to the exploration
activity in West Africa.
Trevor Schultz
Chairman of HSES committee
1 February 2017
The Company is committed to
continuously training the employees
through comprehensive safety training
and coaching programmes, including:
• a tailored safety induction for new
employees, contractors and visitors;
• incident investigation and hazard
identification and job hazard analysis
and risk assessments;
• safety‑specific training modules
addressing work permits and
procedures involved, first aid,
fire extinguishing, 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
HSES department. Mandatory training
is rolled out for all departments,
encompassing area‑specific training,
field training and coaching.
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 2016, we undertook 27 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.
CASE STUDY: BEING ALERT AND READY
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 twelve months 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. The team implements a
programme for routine inspection of
emergency equipment and supplies and
conducts random emergency drills to
test the emergency response elements
and check their effectiveness.
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 519 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
pack upon their arrival at site and given
full access to onsite health services.
HSES
The HSES committee members at the
date of this report are Trevor Schultz
(chairman), Mark Bankes and Edward
Haslam, all of whom are independent
directors of the Company. Kevin
Tomlinson previously served on the
committee prior to his resignation in
May 2016.
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 workplace.
We have designed and implemented
systems, procedures and measures to
manage occupational health and safety
risks. These systems are implemented
in full conformity with local legislation,
licence and permit conditions, as well
as taking account of international best
practice standards.
In 2016, we were able to reduce the
MTIFR further and we continue to strive
for an injury‑free environment and
maintained low LTIF rates.
Safety conscious culture
We believe that safety is the
responsibility of all employees and
thus pursue the development of a
safety conscious culture in our sites
where safety is fully embedded across
all operations and activities. 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.
CASE STUDY: INTERACTIVE
COMMUNICATION MECHANISMS
Continuous communication is
maintained with employees regarding
HSES through several channels. The tool
box talks are an effective and easy
method of safety communication.
The talk provides an environment for
interactive discussion and promotes
a safety conscious culture. This timely
communication addresses numerous
safety aspects and supplements formal
training. Other forms of communication
include safety meetings, daily pre‑shift
meetings as well as safety alerts.
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT 38
39
CORPORATE SOCIAL RESPONSIBILITY continued
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.
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.
CASE STUDY: EMPLOYEE
WELLBEING AT SUKARI
Apart from all control measures adopted
in operations, Sukari has a well‑equipped
clinic providing health and emergency
related services 24 hours a day and
seven days a week. A doctor and
qualified nurse manage the clinic and
provide professional services in normal
and emergency conditions. A medical
evacuation scheme MEDIVAC is in place
supported by first aid facilities, as well
as an ambulance for transportation to
the nearest hospital. The clinic also
provides guidance to employees for
fatigue management. The clinic assesses
and provides advice to help improve
fitness levels. In addition, Sukari has a
comprehensive health insurance scheme
that covers almost all regions in Egypt.
The scheme extends to members of the
employee family.
Our safety performance in 2016 saw a considerable improvement in our medical treated injury (“MTI”) frequency rate.
Fatality injury (“FIFR”)
Lost time injury (“LTIFR”)
Medical treatment injury (“MTIFR”)
(1) Per 200,000 working hours.
2016
frequency
rate(1)
2015
frequency
rate(1)
2014
frequency
rate(1)
2013
frequency
rate(1)
—
0.27
0.46
0.04
0.12
0.6
—
0.39
0.39
—
0.36
1.28
Emergency response training
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 2016, 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.
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. In 2016, the
programme yielded very satisfactory
results and a higher level of hygiene
was achieved and maintained.
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 1,341 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.
Modern mining requires a highly
skilled workforce. Egypt does not
have a developed mining industry,
therefore technical skills must be
developed onsite. Centamin provides
employees with the highest level of
training on the latest technologies
and international standards of best
practice. By co‑ordinating with the
Egyptian Universities we are able to
enhance the level of education in
mining‑related fields.
The table below sets out the number of people employed by the group
(excluding contractors) by country, during the years stated:
Egypt
Australia
Jersey
Burkina Faso
Côte d’Ivoire
Ethopia
Total
31 December
2016
31 December
2015
31 December
2014
31 December
2013
31 December
2012
31 December
2011
1,341
1,316
1,296
1,340
1,120
1,106
1
9
95
44
—
1
10
102
30
3
1
10
64
11
31
1
9
—
—
37
1
7
—
—
45
2
2
—
—
47
31 December
2010
985
2
—
—
—
—
1,490
1,462
1,413
1,387
1,174
1,157
988
The table above excludes contractors onsite. The number of contractors onsite at Sukari, Egypt during the year averaged
519 individuals.
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41
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 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 HSES
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 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
are designed for database, software
and surveying with distant learning
and support opportunities.
We value regular communication and
feedback from employees which help
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.
The environment
Our HSES policy outlines our
commitment to environmental
responsibility. One of Centamin’s core
values is to minimise the environmental
impact and risk of an 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 achieved in 2016.
An environmental and social impact
assessment 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 Gold Mine
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.
Children’s playground
in Marsa Alam
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
are a core components of our training
programme and our continuous
education system. The systems in place
ensure safe transportation, storage,
labelling and handling of chemicals.
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.
Water management and
groundwater protection
Water is a crucial input for our
processes and therefore it is essential
to secure and maintain a sustainable
water supply 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.
In 2016, we used a total of
8,742,685m3 with a reduction of 10%
compared to 2015 (9,743,584m3).
About 99.5% of the water consumed at
Sukari is sea water, which has no impact
on fresh water resources.
Desalinated water used in the camps
and offices is tested for 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.
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 includes spill prevention
and response measures.
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CORPORATE SOCIAL RESPONSIBILITY continued
Water management and
groundwater protection continued
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 2016, the monitoring of these
bores showed no contamination.
Calculation of the direct greenhouse
gases (“GHG”) emissions is based
on the Intergovernmental Panel
on Climate Change Guidelines for
National Greenhouse Gas Inventories.
In 2016, the Sukari Gold Mine
consumed 397,568(1) tonnes of CO2
to produce 551,036 ounces of gold.
The emissions intensity for 2016 was
0.72 tonnes of CO2 equivalent per
ounce of gold produced. The figures
show an increase in the efficiency of
energy utilisation in 2016 compared
to 2015, which in turn reduced the
emissions intensity for 2016.
A review of alternative fuel sources to
supply the processing plant is ongoing,
but to date there have been no
viable alternatives. Sukari has started
to use solar energy in its new
camp expansions.
Emissions, effluents and wastes
Systems and procedures are in place
for the 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.
CASE STUDY: RECOVERING
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 offsite 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.
Energy
Marsa Alam, the region in which
the Sukari Gold 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.
Consequently, the project at
Sukari powers the entire processing
plant through its own onsite
diesel power station.
In 2016, Sukari consumed a total of
141,346,040 litres of diesel, an increase
of 8% from 130,687,478 litres in 2015.
About 65% of this quantity is used
in power generation and the rest is
used in operating mobile equipment
and vehicles.
FUEL CONSUMPTION
(million litres)
141.3
130.7
2015
2016
CO2 EQUIVALENT
(tonnes)
397,568
367,588
2015
2016
ANNUAL PRODUCTION
(ounces)
551,036
439,072
2015
2016
CO2 EQUIVALENT
(per ounce of gold)
0.84
0.72
2015
2016
(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.
Power station in
Marsa Alam, near Sukari
Our monitoring activities in 2016
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);
• dust concentration in different
We maintain a salvage area where
valuable waste is 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.
Land management and rehabilitation
We are committed to transferring
Sukari into 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.
work areas;
Biodiversity
• 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.
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 2016.
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.
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 cleaning
up minor spills.
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CORPORATE SOCIAL RESPONSIBILITY continued
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
2016, as in previous years, the Sukari
Gold Mine continues to enjoy full
support from the local community and
government authorities.
Community development initiatives
In 2016, 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 co‑ordination
with local authorities, community
groups and associations.
Infrastructure initiatives:
• provision of additional generators
Enhancing education:
• training of 85 geology and
and related transformers to
add 3.2MW to the Marsa Alam
power station;
• continuing to supply electricity to a
neighbouring Bedouin settlement
of circa 200 people; and
• establishment of a children’s
playground in Marsa Alam.
CASE STUDY: STRENGTHENING POWER
GENERATION IN MARSA ALAM
Marsa Alam is not connected to the
national grid for electricity but is supplied
by power through a diesel power plant
of capacity 5MW that is about 30 years
old. The power plant is not adequate
to the city needs or its future plans and
development. Sukari supplied the power
plant with additional generators to
provide needed electricity.
• Two generators with a combined
capacity of 3.2MW were provided to
the Marsa Alam power plant.
• A further generator house was
supplied and constructed.
• Training has been provided to the
power station staff to operate and
maintain the generators.
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; and
• donation of equipment and furniture
to local authorities in Marsa Alam.
engineering students at Sukari
in the summer vacation; and
• organising field visits to Sukari for
circa 1,040 students and officials.
Social welfare contributions:
• provision of food waste to
neighbouring Bedouins for
grazing purposes;
• financing surgery for Bedouins in
the Marsa Alam hospital;
• financing daily iftars during
Ramadan for unprivileged
individuals in Marsa Alam; and
• distributing food at key
community events.
Advanced exploration
Burkina Faso
The project lies in Batie, Noumbiel
Province, in the south‑west region of
Burkina Faso. Batie is a town with a
population of about 30,000 and has
56 villages affiliated to it.
Education is one of the most important
focus areas for the region where there
is a need to create a more productive,
higher skilled next generation of
Burkinabes and help to build capacity
beyond the lifespan of our activities in
the region. The School Bike Project,
for example, rewards academic
performance and helps to empower
communities and improve access to
education for students who walk up
to 10km each day to attend school.
Multiple water wells have been built
in communities across the licence
area to combat problems associated
with poor water quality. This has an
immediate impact on every part of
village life and each well can serve up
to 1,000 people’s basic daily needs.
Part of our investment in this initiative
goes into training village residents to
maintain and repair the pumps and
routinely check installations.
Integration of Company policies
The Company’s health, safety and
environmental policies and standards
have been 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;
• contractor management; and
• code of conduct – anti‑bribery policy
and gift register.
Safety performance
The safety performance of Batie project
is monitored and evaluated and is, in
general, satisfactory.
CASE STUDY: SUPPLY OF STUDENTS’ BIKES
The local transportation in Batie and
around the village is limited. Students in
particular depend on cycling or walking
to school. Centamin decided to provide
bicycles to students to facilitate their
daily commute and encourage and
motivate them to study. The project
was designed in co‑operation with the
education director of the Noumbiel
province. 50 bicycles were given to the
students with excellent achievements in
their school year. Each student received
a bicycle and a school bag together with
school accessories. A ceremony was held
for the occasion and executive officials
from Batie and Noumbiel attended.
The project received high recognition
in the media as an initiative to support
education and excellence. This project
was very well received by the community
and Centamin received requests to
repeat it in the following years.
Our employees
In Burkina Faso, 95 people
(90 nationals and five expatriate staff)
were employed in 2016 and 95%
of those employed are Burkinabe.
The remaining 5% are experienced
expatriate mining exploration
professionals.
The current staff is composed of
geologists (18 employees in total
with the expatriate staff), field
technicians, field technician assistants
and the surveyor (30 employees) and
administration staff, as well as other
support staff (47 employees). 9% of
our Burkina workforce are women who
work in Ouagadougou as well as at the
camp in Batie.
2016
2015
frequency frequency
rate(1)
rate(1)
FIFR
LTIFR
MTIFR
0
0
0.37
0.2
0.62
0.21
(1) Based on 200,000 working hours.
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 89 per 1,000 people
in 2016 compared to the 180 per 1,000
country frequency rate in Burkina Faso
as a whole.
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 and 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.
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CORPORATE SOCIAL RESPONSIBILITY continued
Social involvement:
• sponsorship of a community
development plan for the Batie
mine project areas, which will be
developed by wide consultation
with all stakeholders;
• sponsorship of, and participation in,
community events and celebrations;
and
• support for vulnerable students
in education.
Enhancing livelihood:
• establishing two water bores in Batie
and Danhal tenements; and
• supplying 50 bicycles for students
with excellent achievements.
Medical facilities in Burkina Faso
The medical facilities at our site in Batie
are managed by an emergency medical
assistance contract with ISOS which
provide medical services assistance,
including first aid to the staff working
onsite. The site facilities are routinely
visited by the Gaoua’s Labour Office
and the Occupational Safety and
Health Committee.
Côte d’Ivoire
Centamin now has seven permits in
Côte d’Ivoire across the border from
Batie West in Burkina Faso, covering
approximately 2,334km2. Eight permits
remain under application, some of
which are expected to be granted
during 2017.
The project area is located in the
north‑eastern region of the country
characterised by extreme poverty and
lack of basic infrastructure.
Integration of Company policies
The Company’s health, safety and
environmental policies and standards
have been integrated into the Côte
d’Ivoire operations where relevant.
These include:
• provision of health services at camp;
• training and induction requirements;
• incident investigation and reporting
requirements;
• defensive driving training;
• code of conduct, anti‑bribery policy
and gift register;
• internal communication
mechanisms;
• vehicle safety requirements; and
• contractor management.
Community and society
Centamin values underpin the
Company sustainability programme.
We are committed to contribute to
the improvement of living conditions
of communities around our operations
by building partnership with all
stakeholders. We are committed
to working with the highest level of
respect for the communities and the
environments in which we operate.
We will always endeavour to build
open, transparent and honest
relationship with stakeholders.
Our long term goal is to move our
communities away from the idea
of gifts and donations, and direct
their attitudes, perceptions and
behaviours towards interdependency,
ownership and accountability.
Therefore, the centrepiece of our
actions will be creating shared vision
and building capacity.
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; and
• conflict management.
Community development initiatives
Community development in 2016
tackled several objectives including
enhancing:
• education;
• health services;
• social involvement;
• livelihood; and
• preparation of a community
development plan with and for the
communities covering the project
areas, which will guide the Company
community investment activities
from 2018 onwards.
Enhancing education:
• initiating work to establish a primary
school in Danhal.
Enhancing health services:
• supporting Batie medical centre
through providing antivenins,
running water, power access,
analysis equipment, and financing
hygiene services; and
• supporting Gauoa medical center
through providing haematology
equipment and beds and furniture.
Community development initiatives
The improvement of basic social
infrastructures (health, education)
and the provision of basic services
are planned to be conducted by the
Company alone or in partnership with
other organisations pursuing similar
goals in areas around its operations.
To maximise our impact, we will build
partnership with stakeholders such as
donors (developed world development
agencies), governments and NGOs so
the expertise and resources of each
partner are used complementarily with
the objective to get more sustainable
and wider impact, which guarantees
the achievement of partners’ goals
faster and at lower cost.
CASE STUDY: PUBLIC‑PRIVATE
PARTNERSHIPS
Through partnership with the German
Society for International Cooperation
(“GIZ”), we are putting together a
Public‑Private Partnership (“PPP”) called
the Rural Development and Populations’
Income Improvement in Bouna, Doropo,
Tehini, Nassian and Kong. This PPP is
designed to deliver the following:
• training of more than 4,000 market
gardeners and producers of acajou
and karité nuts;
• provision of improved seeds and
equipment to farmers;
• processing equipment for karité nuts;
• construction of water boreholes for
crop irrigation;
• provision of improved rural stoves;
• micro‑finance programme for mainly
women farmers and traders; and
• public awareness programme for
biodiversity protection in the Tai
and Comoe Park areas.
Enhancing education:
• provision of school benches;
• construction of latrines for the high
Enhancing livelihood:
• repairing of rural tracks damaged
by the rains;
school of Doropo village;
• construction of classrooms;
• internship for one accountant
student at the Abidjan Office
department; and
• provision of water borehole with
solar pump at Danoa;
• support programme to production,
processing and marketing of
agricultural products;
• internship for four geology students
• diversification of income and food
in the exploration department.
Environment:
• building of garbage dump site
for the village of Danoa; and
security improvement; and
• promotion of sustainable
production methods which
preserve biodiversity.
• biodiversity protection programme
Our employees
The Company’s activities provide
direct and indirect employment,
training and work experience for many
Ivorian employees. Our workforce has
witnessed considerable growth since
we increased exploration work in end
2014, both in terms of the number of
employees and the range of skills and
expertise of our workforce.
In the Ivory Coast, we employ 44
people of whom 96% are Ivorians.
The remaining 4% are experienced
expatriate mining professionals. 24%
of our Ivorian workforce are women
and they work primarily in the office at
Abidjan as well as the camps in Doropo
and Danoa.
Medical facilities in Côte d’Ivoire
Our medical requirements are
managed by an emergency medical
assistance contract with Medicis.
for Tai and Comoe National
Park areas.
Enhancing health services:
• provision of medical assistance
to health centres around our
operations by the doctor of
Medicis, the Company contractor.
Social involvement:
The Company is committed to be a
good corporate citizen of Doropo and
the villages around our operations.
We will support initiatives intended
to improve the livelihood of the
communities. Focus areas include:
• acting as a key player on the
community development committee
of Doropo and Bouna;
• sponsorship of a community
development plan for the
Company’s operation areas,
which will be developed by wide
consultation with all stakeholders;
and
• sponsorship of, and participation in,
community events and celebrations.
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT 48
49
CORPORATE SOCIAL RESPONSIBILITY continued
The Company is also subject to
equivalent Canadian legislation –
the Extractive Sector Transparency
Measures Act (“ESTMA”) which
came into force on 1 June 2015.
Canada’s requirements are aligned
with those in the EU Directive and
this report is deemed equivalent for
Canadian purposes.
Payments in this report have been
disclosed in US dollars, which is
the Company’s reporting currency.
Where actual payments have been
made in a local currency they have
been converted using the prevailing
exchange rate at the time of
the payment.
Payments to governments
The Reports on Payments to
Governments Regulations (the
“Regulations”) came into force
on 1 December 2014. Whilst the
Regulations are part of UK law,
they apply to the Company by virtue
of its listing on the London Stock
Exchange (pursuant to Disclosure
and Transparency Rule 4.3A).
The Regulations require companies
active in the extractive industries
to report any payments they have
made to their host governments in
the form of taxes, bonuses, royalties,
fees and support for infrastructure
payments. The Regulations implement
Chapter 10 of the EU Accounting
Directive. The Regulations are part of
an EU‑wide effort to curb corruption
and promote transparency in the
energy and extractives sector. Their
stated objectives are to provide
citizens of resource‑rich countries with
the information they need to hold
their governments to account; and to
provide greater insight (for investors
and all other stakeholders) into how
the sector operates and the range of
economic contributions that can result.
The Regulations require disclosure
of the following:
a) production entitlements;
b) taxes levied on the income,
production or profits of companies,
excluding taxes levied on
consumption such as value added
taxes, personal income taxes or
sales taxes;
c) royalties;
d) dividends, other than dividends
paid to a government as an ordinary
shareholder unless they are paid
in lieu of a production entitlement
or royalty;
e) signature, discovery and
production bonuses;
f) licence fees, rental fees, entry fees
and other considerations for licences
and/or concessions; and
g) payments for infrastructure
improvements.
Where a payment or series of related
payments do not exceed GBP86,000
they do not need to be disclosed but,
in the interests of transparency, the
Company has included these costs.
Summary table showing payments to governments made during the year ended 31 December 2016 in US$
Type
Côte d’Ivoire
Burkina Faso
Australia
Egypt
Notes
Profit share
Corporate taxes
Royalties
Exploration licence fees
Mining and other licence fees
(i)
(ii)
18,503,333
621,956
17,314,743
—
231,536
Infrastructure improvements
(iii)
1,095,868
—
—
—
22,468
776,153
—
—
7,599,793
—
—
—
—
Total
18,503,333
8,221,749
17,314,743
—
—
—
70,353
92,821
—
—
1,007,689
1,095,868
Payments split by payee during the year ended 31 December 2016 in US$
Country
Notes
Payee
Royalties
Profit share
Taxes
Licence or
permit fees
Other
Total
Egypt:
Sukari Gold Mine
Arab Republic
of Egypt
—
18,503,333
EMRA 17,314,743
Egyptian
Tax Authority
Other payees
Burkina Faso:
Konkera project
(v)
Ministry
of Mines
Burkina Faso:
Exploration projects
Burkina Faso
Tax Office
Ministry
of Mines
Burkina Faso
Tax Office
Côte d’Ivoire:
Exploration projects
(v)
Ministry
of Mines
Australia:
Corporate
Côte d’Ivoire
Tax Office
Australian
Tax Office
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
621,956
—
—
—
—
—
—
18,503,333
17,314,743
621,956
—
231,536
1,095,868
1,327,404
—
—
—
—
—
—
776,153
—
22,468
—
70,353
—
—
—
—
—
—
—
—
776,153
—
22,468
—
70,353
—
—
7,599,793
(v) In accordance with the definition of ‘project’ in the Regulations, the Company treats its exploration licence holding areas in Côte d’Ivoire and Burkina Faso
as one project each for the purposes of the Regulations. This is because the licence areas are operationally and geographically linked.
17,314,743 18,503,333
8,221,749
1,100,510
1,095,868 46,236,203
—
7,599,793
(iv) 36,767,436
798,621
7,599,793
70,353
46,236,203
(i) With a view to demonstrating goodwill towards the Egyptian government, Centamin (through its subsidiary PGM), made advance payments to the Egyptian
Mineral Resources Authority (EMRA) totalling US$28,750,000 between 2013 and 2016. These payments have since been netted off against profit share with
EMRA. The balance represents the cash amount paid to EMRA during the period.
(ii) In accordance with the Regulations, this figure excludes taxes levied on consumption such as VAT, personal income or sales taxes. The Australian tax
payment relates to foreign exchange gains realised that were assessable for tax.
(iii) This is the value of generators donated to the Marsa Alam power station.
(iv) Other types of payments that are required to be disclosed in accordance with the Regulations include production entitlements; signature, discovery and
production bonuses; and dividends. The Company and its subsidiaries did not make any such payments to governments during the year.
Local market in Côte d’Ivoire
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT
50
51
OPERATIONAL REVIEW
In this section we feature our operational performance
and exploration review for 2016.
Health and safety – Sukari
The Lost Time Injury Frequency
Rate (“LTIFR”) for 2016 was 0.27 per
200,000 man hours (2015: 0.12 per
200,000 man hours), with a total of
5,187,635 man hours worked during
2016 (2015: 5,032,828). Continued
development of the onsite health and
safety culture has resulted in improved
reporting of incidents.
Centamin remains committed to further
improving health and safety during
2017 towards our zero‑harm target.
Open pit
The open pit delivered total material
movement of 62.2Mt, an increase of
8% on the prior year (2015: 57.8Mt).
This increase was related to improved
mining productivity and equipment
utilisation. The strip ratio was 4.68,
a reduction on 5.60 in 2015 as ore
mining focused on the Stage 3A
and 3B areas and the next stages of the
northern and eastern walls of the open
pit which progressed in line with the
mine plan.
Ore production from the open pit
was 10.95Mt at 0.93g/t, with an
average head grade to the plant
of 0.95g/t. The ROM ore stockpile
balance decreased by 128kt to 577kt
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 2016.
In 2017 mining activities will be
conducted in Stage 3 and Stage 4
along with pioneering activities in
Stage 5. Ore will be supplied from
Stage 3B whilst developing the
elevated benches from Stage 4.
Expected ore mined is 10.7Mt at an
average grade of 1.06g/t. The strip
ratio is planned to be 5.23 during
2017. During Q1 2017 the open pit
is scheduled to develop a low‑grade
east wall cutback and planned gold
production will be lower than Q4 2016.
Underground mine
The underground mine produced
1.02Mt of ore, a 12% decrease on
2015 (1.16Mt). Ore from stoping
accounted for 55% (0.56Mt) of the
total, with the balance of ore (0.45Mt)
from development. The average
mined head grade was 9.0g/t, above
our forecast. The average grade from
stoping was 9.1g/t (an increase of 32%
on 2015) and the average grade from
development was 9.0g/t (an increase
of 49% on 2015).
During the first quarter, higher tonnage
and lower‑grade stockwork stopes on
the western contact and in the central
zone were completed. Thereafter,
stoping was carried out predominately
from the eastern side of the deposit,
where higher‑grade mineralisation
typically occurs in laminated quartz
veins, with sulphide stockworks trailing
out westward into the porphyry mass.
This, together with local geotechnical
variations, requires a narrower and
more selective mining method, thus
reducing the available tonnes per
vertical metre. This has resulted
in a higher average grade for the
year, coupled with a slight reduction
in productivity.
Underground development advanced
7,880 metres, including progression of
the Amun, Horus and Ptah declines.
This development comprised
4,557 metres in Amun and 3,323
metres in Ptah.
The exhaust circuit for the Ptah decline
was progressed, ensuring sufficient
ventilation as the decline extends
deeper into the ore body.
A total of 9,691 metres of grade control
drilling were completed, aimed at
short term mine planning and resource
development. A further 25,670 metres
of underground diamond drilling
continued to test for reserve extensions
below the current Amun and Ptah
zones. A new exploration decline also
commenced within the north‑eastern
Cleopatra zone of Sukari Hill. Further
details and underground drilling results
are discussed in the exploration section
of this report.
Processing
The Sukari plant processed 11.56Mt of
ore in 2016, a 9% increase on 2015 and
5% above our base case of 11.0Mtpa,
as forecast at the beginning of the
year. Productivity continued to increase
throughout the year, with 2.95Mt
processed during the fourth quarter,
reflecting the ongoing ramp up of the
expanded circuit.
Metallurgical recovery averaged 89.4%,
a 0.6% increase on 2015. Work is
continuing to optimise the operational
controls and improve circuit stability
to ensure recoveries are maintained at
approximately 90% at the increased
rate of throughput.
The dump leach operation produced
9,872oz during the year.
The 2017 production guidance is
based on a forecast production rate
of 11.75Mt, with an annual average
gold recovery of 89.75%. Grades
are expected to show a rising trend
throughout the year, starting the
first quarter at 1.33g/t and rising to
1.78g/t in the final quarter of the year,
averaging 1.57g/t. An expansion of the
secondary crusher system is planned
during 2017, with an expected capital
cost of US$6 million. This is expected
in due course to increase the grinding
capacity of Plant 1, and thus lead
to further overall plant throughput
increases to above 12Mtpa.
Sukari Gold Mine production summary
Open pit mining
Ore mined(1) (‘000t)
Ore grade mined (g/t Au)
Ore grade milled (g/t Au)
Total material mined (‘000t)
Strip ratio (waste/ore)
Underground mining
Ore mined from development (‘000t)
Ore mined from stoping (‘000t)
Ore grade mined (g/t Au)
Ore processed (‘000t)
Head grade (g/t)
Gold recovery (%)
Gold produced – dump leach (oz)
Gold produced – total(2) (oz)
Cash cost of production(3,4) (US$/oz)
Open pit mining
Underground mining
Processing
General and administrative
Gold sold (oz)
All‑in sustaining cost (US$/oz)(4)
Average realised sales price (US$/oz)
Year ended
31 December
2016
10,949
0.93
0.95
62,238
4.68
454
565
9.04
11,559
1.65
89.4
9,872
Year ended
31 December
2015
8,746
0.75
0.78
57,766
5.6
560
598
6.47
10,575
1.40
88.8
15,642
Q4 2016
2,183
0.85
0.85
15,810
6.24
103
125
10.43
2,948
1.62
89.9
2,550
Q4 2015
2,229
0.77
0.75
13,754
5.17
151
149
7.05
2,758
1.47
88.5
3,417
551,036
136,787
439,072
117,644
513
179
43
253
38
536
198
46
254
38
713
243
46
367
56
667
232
42
338
54
546,630
130,959
437,571
117,351
694
1,256
720
1,207
885
1,159
842
1,103
(1) Ore mined includes 117kt @ 0.21g/t delivered to the dump leach in Q4 2016 (54kt @ 0.54g/t in Q4 2015).
(2) Gold produced is gold poured and does not include gold‑in‑circuit at period end.
(3) Cash cost of production exclude royalties, exploration and corporate administration expenditure. Cash costs of production reflect a provision against
prepayments to reflect the removal of fuel subsidies which occurred in January 2012 (refer to note 12 of the financial statements for further details).
(4) Cash cost of production and all‑in sustaining costs are non‑GAAP financial performance measures with no standard meaning under GAAP.
Please see the financial review for details of non‑GAAP measures.
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT
52
53
OPERATIONAL REVIEW continued
Cleopatra
Hole number
CRSD001
INCLUDING
CRSD002
Interval
(m)
6.7
0.7
4.5
0.5
Au
(g/t)
3.1
6.2
5.9
20.1
Cleopatra exploration decline
The existing underground operations
at Sukari have demonstrated that the
western contact zone between the
main porphyry and the surrounding
metasedimentary rock units is highly
prospective for high‑grade gold
mineralisation. This contact has limited
drilling in the north‑western portion
of Sukari Hill, where the porphyry is
approximately 300 metres wide and
access for surface drill rigs is limited.
High grades have been observed
along the north‑eastern flank of Sukari
Hill, where an interpreted en‑echelon
set of three mineralised zones are
located, namely Cleopatra, Julius and
Antoine zones. Cleopatra outcrops
as two distinct quartz veins on the
north‑eastern flank of Sukari Hill,
whereas Julius and Antoine do not
outcrop. The zones are interpreted as
commencing on the eastern porphyry
contact, dipping broadly to the west.
This project is designed to commence
development along strike within the
upper Cleopatra zone and set up four
drill sites in the centre of the porphyry.
The drives will provide a large quantity
of geological data in addition to that
gained from the drilling.
The initial project will be developed in
two phases. Phase 1 has a projected
cost of US$5 million, with 1,370 metres
of development and 96,422 tonnes
of mined material to be completed
over a five‑month period. Phase 1
commenced during the third quarter,
with the portal established and
893 metres of development completed
to year end 2016. This development
produced 21,078 tonnes of low‑grade
mineralised material. The first drill
cuddy has been established and
exploration drilling commenced during
December 2016. The initial target is
a westerly‑dipping dilation of stock
work porphyry which is located on the
eastern contact.
Phase 2 has a projected cost of
US$6.5 million, with 1,057 metres of
development and 54,409 tonnes of
mined material to be completed over
a five‑month period. Grade control
diamond drilling has commenced for
three proposed strike drives.
The initial project is aimed at
developing infrastructure with the
capacity to support mining rates of
up to 1Mtpa from this area. Ultimate
production rates will depend on
future results from the development,
exploration drilling and further
development. It will be in addition
to the current underground ore
production from the Amun and
Ptah declines.
Exploration
Sukari
Drilling from underground remains
a focus of the Sukari exploration
programme as new development
provides improved access to test for
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 2017,
from across the existing and planned
areas of development.
Selected underground drilling results
received during the year (including
from the fourth quarter), include
the following:
Amun
Hole number
UGRSD0064
UGRSD0082
UGRSD0201
UGRSD0229
UGRSD0237
Ptah
Hole number
UGRSD0155
UGRSD0585
UGRSD0589_W1
UGRSD0708_W1
UGRSD0714_W1
UGRSD0596
UGRSD0710
UGRSD0713
UGRSD0716
UGRSD0614
UGRSD0615
UGRSD0609
UGRSD0618
UGRSD0720
Interval
(m)
Au
(g/t)
1.1
2.6
9.5
18.4
4.0
30.6
108.2
78.4
12.6
56.5
Interval
(m)
Au
(g/t)
6.3
2.3
3.0
2.0
0.4
1.8
3.0
2.8
2.2
3.0
0.7
2.3
3.0
1.4
1.0
1.0
13.6
110.7
40.0
160.8
22.8
73.4
147.6
65.1
88.3
87.8
2745.0
43.0
47.5
313.5
61.5
28.1
Cleopatra exploration
decline at Sukari
Côte d’Ivoire
Centamin has seven permits covering
circa 2,334km2. Six of these are part
of the Doropo Project across the
border from Batie West in Burkina
Faso and the other is in the west of
the country. Eight permits are currently
under application and, once these
are awarded, exploration will focus
Mineral resource for Côte d’Ivoire
on regional surface geochemistry
and mapping aimed at identifying
anomalies for first‑pass drilling.
Drilling within the Doropo Project
area gained momentum during 2016,
with the fleet increasing from one to
three rigs by the last quarter. The initial
areas of focus is a 5km radius area,
containing five prospects: Souwa,
Nokpa, Kekeda, Han and Chegue.
Systematic drill‑testing of these
prospects, together with infill drilling
towards the end of the year, has led to
a new discovery and a maiden resource
of 0.3Moz at 1.6g/t indicated and
1.0Moz at 1.3g/t inferred. This resource
is summarised in the table below.
Souwa
Nokpa
Chegue
Kekeda
Han
Total
Souwa
Nokpa
Chegue
Kekeda
Han
Total
0.5g/t cut off
Indicated
Au (g/t)
Au (koz)
Mt
3.41
2.34
—
—
—
1.71
1.49
—
—
—
187
112
—
—
—
300
5.75
1.62
0.8g/t cut off
Indicated
Au (g/t)
Au (koz)
2.19
1.97
—
—
—
2.1
167
95
—
—
—
262
Mt
2.37
1.5
—
—
—
3.87
Inferred
Au (g/t)
Au (koz)
1.4
1.3
0.9
1.1
1.1
540
146
35
141
170
1.26
1,032
Inferred
Au (g/t)
Au (koz)
1.9
1.7
1.2
1.6
1.6
1.74
409
126
19
103
134
791
Mt
12
3.5
1.2
4
4.8
26
Mt
6.7
2.3
0.5
2
2.6
14
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT
54
55
OPERATIONAL REVIEW continued
Côte d’Ivoire continued
Exploration during 2016, including
soil geochemistry, auger drilling
and ground IP surveys, also
provided evidence of higher‑grade
mineralisation on several other
prospects (Dilly, Hinda, Atirré and
Enioda). The Enioda prospect is
believed to be the strike extension of
the Napelepera mineralised structure,
within Centamin’s Burkina Faso
licences, as discussed below.
Work in 2017 will focus on expanding
and upgrading the initial resource, in
addition to first‑pass drilling on newly
defined prospects.
The Nokpa prospect hosts high‑grade
mineralisation from three cross
cutting structures near a dyke swarm.
It currently has a 150m diameter
footprint, a shallow plunge along
the fault plans and is open in
all directions.
Nokpa significant mineralised
RC and DD drill intersections
Hole ID
From (m)
Interval (m)
Au (g/t)
Souwa significant mineralised
RC and DD drill intersections
Hole ID
From (m)
Interval (m)
Au (g/t)
Exploration in
Côte d’Ivoire
DPRC0191
DPRC0192
DPRC0192
DPRC0193
DPRC0194
DPRC1051
DPRC1052
DPRC1053
DPRC1057
DPRC1065
DPRC1066
DPRC1069
DPRC1138
DPRC1139
DPRD1070
DPRD1140
DPRD1143
DPRD1145
41
36
68
82
122
13
22
99
112
74
124
170
118
127
159
10
10
14
11
16
7
5
5
5
24
20
12
22
14
13
153.7
149.9
210.6
17.3
12.1
15.9
At the Souwa prospect, mineralisation has been tested
over a 1,700m strike length and 200m vertical depth.
Several large high‑grade mineralised shoots are hosted
by a shallow‑dipping shear zone.
3.3
DPRC0039
10.1
DPRC0041
4.3
5.0
3.3
DPRC0042
DPRC0061
DPRC0173
11.1
DPRC0185
5.4
6.9
8.5
2.6
2.0
4.8
1.6
2.7
2.3
1.7
2.3
2.2
DPRC0487
DPRC1047
DPRC1083
DPRC1086
DPRC1088
DPRC1089
DPRC1091
DPRC1099
DPRC1100
DPRC1108
DPRC1109
DPRC1110
DPRC1114
DPRC1116
DPRC1118
DPRC1120
DPRC1121
DPRC1124
DPRC1126
DPRC1162
DPRD0503
DPRD1037
44
73
21
11
96
42
52
219
91
35
83
105
11
113
27
47
73
109
42
140
61
78
98
101
48
14
149
223
10
17
33
20
17
6
14
8
14
17
21
21
17
7
12
26
17
12
6
10
5
14
22
10
11
19
9
6
22.0
2.3
2.2
3.0
4.7
4.0
4.5
9.0
3.1
3.5
2.6
6.8
2.3
6.2
3.4
8.4
2.5
2.5
11.0
6.0
11.3
6.2
5.4
5.1
6.0
10.5
3.0
11.3
The Kekeda and Han prospects are both well‑defined shallow dipping shear zones showing a high sulphide
content associated with strong sericite‑silica alterations.
Han and Kekeda significant mineralised
RC and DD drill intersections
Prospect
From (m)
Hole ID
Interval (m)
Other prospects with significant mineralised
RC and DD drill intersections
Prospect
From (m)
Hole ID
Interval (m)
Au (g/t)
Han
Han
Han
Han
Han
Han
Han
Han
Han
Han
DPRC0198
DPRC0226
DPRC0228
DPRC0235
DPRC0433
DPRC0434
DPRC0454
DPRC0465
DPRC0566
DPRC0570
Kekeda
DPRC0018
Kekeda
DPRC0019
Kekeda
DPRC0525
Kekeda
DPRC0535
Kekeda
DPRC0540
Kekeda
DPRC0561
16
129
108
70
30
54
86
74
23
23
36
0
10
50
64
71
10
7
9
10
4
14
10
10
5
11
7
7
10
14
9
9
5.3
3.9
2.5
5.4
Atirré
DPRC0347
Chegue
DPRC0393
Chegue
DPRC0475
Chegue
DPRC0477
51.2
Chegue
DPRC0478
2.4
2.1
3.0
8.0
Dilly
Dilly
Enioda
Enioda
DPRC0264
DPRC0265
DPRC1016
136
DPRC0107
16.9
Enioda
DPRC0129
Enioda
DPRC0110
Hinda
DPRC0343
Solo
Solo
DPRC0206
DPRC0209
112
44
10
53
38
6
86
72
30
24
76
94
53
5.7
5.0
3.9
4.0
2.7
4.2
The other tested prospects also returned significant results
during the year, which will be followed up by further drilling
in 2017.
Summary details in relation to the HSES aspects of
exploring in Côte d’Ivoire are set out in the CSR report.
Au (g/t)
8.8
8.8
2.9
3.1
3.9
10.1
3.2
3.0
3.1
3.3
1.8
15.5
5.8
5.0
5
8
9
12
8
2
4
7
9
9
17
3
8
4
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT
56
57
OPERATIONAL REVIEW continued
Exploration is continuing at several 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).
Wadaradoo significant mineralised
RC and DD drill intersections, downhole
Hole ID
From (m)
Interval (m)
Au (g/t)
WDRC0564
WDRC0143
WDRC0670
WDRC0671
WDRC0763
WDRD0592
WDRD0598
WDRC0941
WDRC0970
WDRD0350
WDRC1300
WDRC0238
WDRC0971
WDRD0349
WDRD1408
WDRD0491
WDRD1230
216
114
81
130
58
353
98
3
156
147
238
41
143
198
292
270
201
6
4
9
6
15
11
2
20
5
23
8
19
9
7
12
19
2
11.0
15.7
3.0
13.3
2.3
3.0
19.2
2.9
15.1
3.4
3.9
3.1
4.4
6.5
3.4
3.3
42.1
At Napelapera, our exploration licence holdings were extended to the
Côte d’Ivoire border. Gold mineralisation at this prospect area is typically hosted
within a broad alteration halo around the main structure. Cross‑cutting structures
‘compartmentalise’ the granodiorite host rock into broad dilation zones of
higher‑grade mineralisation along the main structural trend. This trend was drilled
out to the south‑west, where higher grades are observed, with drilling covering a
strike length of over 4km. Mineralisation remains open at depth.
Burkina Faso
In Burkina Faso, the strategy during
2016 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 2017. Exploration
remains focused on developing new
zones of near‑surface and high‑grade
mineralisation, as defined by
geochemical sampling, geophysical
surveys and analysis of an in‑house
structural model.
Exploration during 2016 prioritised two
main prospect areas, Wadaradoo and
Napelapera. During 2016 there were
164,333m of RC, 6,633m of diamond,
69,370m of aircore and 27,810m of
auger drilled. Drilling activities were
scaled down during the second half
of the year to allow for analysis of the
assay results.
At Wadaradoo, drilling outlined both
structurally‑controlled mineralisation
(Wadaradoo Main and Wadaradoo
North) and broad disseminated zones
of mineralisation (Wadaradoo East and
Wadaradoo Far East).
At Wadaradoo Main, high‑grade north
plunging shoots were identified on
both the main 020° trending structure
and 320° trending splay structures.
These structures have all been drilled
on a 50m x 50m or greater spacing and
remain open at depth. At Wadaradoo
North, mineralisation is hosted by a
tightly confined, high‑grade structure
with narrow, more discontinuous zones
in the hanging wall. Drilling during
the year closed off this structure along
strike and at depth.
Napelapera significant mineralised
RC and DD drill intersections, downhole
Hole ID
From (m)
Interval (m)
Au (g/t)
NPRD449
NPRD457
NPRD459
NPRC468
NPRD455W1
NPRD471
NPRD472
NPRD480
NPRC487
NPRD511
NPRD546
120
127
107
38
118
150
170
234
50
261
181
6
3
4
10
4
6
17
10
4
19
6
2.1
5.6
3.3
1.8
51.6
8.4
3.6
1.9
17.5
2.0
3.8
Continuous updates and improvements
in our health and safety management
systems are being implemented
into our operations in Burkina Faso.
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 managed by
International Medical Company ISOS
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.
The Poni prospect on the Danhal permit consists of a narrow 600m length
mineralised structure, which is open to the north and south and at depth.
Initial drilling was conducted in early 2016. At Tiopolo, a small narrow
mineralised structure has been identified over a strike length of 450m, with
consistent mineralisation which is open along strike and at depth. Follow‑up
work is planned in these areas.
Significant mineralised RC and DD drill intersections, downhole,
from Farmstead, Poni, Tokera and Tonior prospects
Prospect
From (m)
Hole ID
Interval (m)
PONI
PONI
PONI
PONI
PONI
PONI
PONI
PONI
TIOPOLO
TIOPOLO
TIOPOLO
TIOPOLO
PNRC049
PNRC048
PNRC053
PNRC053
PNRD047
PNRD047
PNRD012
PNRD046
TIAC3259
TIRC146
TIRC173
TIRC178
24
2
16
29
49
57
80
56
7
91
19
76
2
3
3
4
2
5
8
15
2
4
3
3
Au (g/t)
5.5
2.1
1.6
4.3
1.5
4.5
3.0
1.0
2.0
1.2
3.5
3.1
Exploration at Napelapera
Exploration at Wadaradoo
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT
58
59
FINANCIAL REVIEW
Centamin has continued to return strong earnings
and cash flow generation.
Ross Jerrard
Chief financial officer
The consolidated 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 2016:
• 2016 revenues of US$687.4 million
were up 35% year‑on‑year with an
8% increase in realised gold prices
and a 25% increase in gold sales;
• cash costs decreased to US$513 per
ounce produced from US$713 in
2015, driven predominantly by the
decrease in fuel price and other cost
savings, as well as higher production
than originally forecast;
• AISC of US$694 per ounce sold was
below our forecast of US$720‑750
per ounce mainly due to the
higher gold production base and
the rescheduling of certain capital
cost items;
• EBITDA increased by 145% to
US$372.9 million, mainly due to
higher gross operating margins
as a result of the gold price and
also a decreased production cost
associated with net changes in
production inventories;
• profit before tax increased by 357%
to US$266.8 million, due to the
factors above;
• earnings per share before profit share
of 23.05 US cents were up 412% on
4.51 US cents per share in 2015; and
• operational cash flow of
US$366.3 million was 97% higher
than 2015, due to the higher gold
production base, gold prices and
much lower cost base achieved.
The board of directors approved an
interim 2016 payment of 2.00 US cents
per share (versus a 2015 interim
payment of 0.97 US cents per share).
With the strong performance of our
flagship asset and solid cash flows
carrying through into the second
half, a final dividend for 2016 of
13.5 US cents per share has been
proposed for approval at the AGM
on 21 March 2017. This represents
a full year pay‑out of approximately
US$178 million, which is equivalent
to approximately 70% of our net free
cash flow for 2016 and follows the
update to our policy announced on
9 January 2017.
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$428 million as at
31 December 2016.
Revenue
Other operating costs
Profit before tax
As a result of the factors outlined
above, the group recorded a profit
before tax for the year ended
31 December 2016 of US$266.8 million
(2015: US$58.4 million).
Tax
The group operates in several countries
and, accordingly, it is subject to, the
various tax regimes in the countries in
which it operates.
Earnings per share
Earnings per share (after profit share) of
18.61 US cents compare with 4.51 US
cents in 2015. The increase was driven
by the factors outlined above.
Comprehensive income
Other comprehensive income
movement was the result of the
revaluation of available‑for‑sale
financial assets.
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 increased by 16%
to US$32.1 million, as a result of:
(a) a US$2.9 million increase in net
foreign exchange movements
from a US$2.1 million gain to a
US$5.0 million gain;
(b) a US$1.0 million decrease in
corporate costs;
(c) a US$5.4 million increase in royalty
paid to the government of the ARE
in line with the increase in gold sales
revenue; and
(d) a US$2.5 million provision for
stock obsolescence against stores
inventory in Egypt.
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.
Revenue from gold and silver sales has
increased by 35% to US$687.4 million
(US$508.4 million in 2015), with an
8% increase in the average realised
gold price to US$1,256 per ounce
(US$1,159 per ounce in 2015) assisted
by a 25% increase in gold sold to
546,630 ounces (437,571 ounces
in 2015).
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 US$24.6 million in relation
to disputed fuel charges (refer to
note 12 to the financial statements for
further information) and has decreased
by 6% to US$389.3 million, as a
result of:
(a) a 8% decrease in total
mine production costs
from US$314.8 million to
US$288.3 million, despite a 5%
increase in processed tonnes offset
with a 7% decrease in mined tonnes
as a result of improved operational
efficiencies and lower overall cost;
(b) a 14% increase in depreciation and
amortisation from US$93.9 million
to US$107.0 million due to higher
production physicals, reclassification
of exploration and evaluation
expenditure to mine development
and an increase in the associated
amortisation charges; and
(c) a 179% decrease in movement in
production inventories costs from
US$7.5 million to (US$5.9) million.
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT 60
61
FINANCIAL REVIEW continued
Financial position
At 31 December 2016, the group
had cash and cash equivalents of
US$399.9 million compared to
US$199.6 million at 31 December
2015. The majority of funds have been
invested in international rolling short
term higher interest money market
deposits.
Current assets have increased
by US$200.8 million or 55% to
US$563.5 million, as a result of:
(a) an increase in net cash inflows of
US$200.3 million (net of foreign
exchange movements);
(b) a US$4.2 million decrease in stores
inventory to US$102.3 million;
(c) a US$2.3 million decrease in
prepayments;
(d) a US$1.1 million increase in gold
sale receivables; and
(e) a US$5.9 million increase in overall
mining stockpiles, gold in circuit
levels and finished goods inventory
values to US$34.2 million.
Non‑current liabilities have increased
by US$0.6 million to US$7.7 million
as a result of an increase in the
rehabilitation provision.
The value of issued capital has
increased by US$1.9 million due to
the vesting of awards.
Share option reserves reported
have increased by US$0.6 million to
US$3.0 million as result of the forfeiture
and vesting of awards and the resultant
transfer to accumulated profits and
issued capital respectively, offset by
the recognition of the share‑based
payments expense for the year.
Accumulated profits increased by
US$168.7 million as a result of a:
(a) US$266.0 million profit for the year
attributable to the shareholders of
the Company; offset by
(b) US$46.1 million in dividend
payments to external shareholders;
comprising a US$22.9 million final
dividend payment for 2015 and a
US$23.1 million interim dividend
payment for 2016; and
(c) US$51.3 profit share charge for
EMRA for the year.
Non‑current assets have decreased
by US$29.1 million or 2.8% to
US$1,023 million, as a result of:
(a) US$56.9 million expenditure for
property, plant and equipment
(comprising of plant and mining
equipment and rehabilitation asset);
(b) US$107.0 million charges for
depreciation and amortisation;
(c) US$49.6 million increase in
exploration and evaluation assets, as
a result of the drilling programmes in
Sukari Hill, the Sukari tenement area,
Burkina Faso and Côte d’Ivoire; and
(d) a US$28.8 million decrease in
prepayments due to the utilisation
of the prior year cumulative advance
payments made to EMRA.
Current liabilities are unchanged at
US$54.5 million. Change in underlying
balances include:
(a) US$4.9 million decrease in trade
payables offset by a $5.8 million
increase in accruals, primarily as a
result of a $4 million EMRA accrual
in trade payables and accruals;
(b) US$6.8 million decrease in tax
liabilities that were settled during
the year; and a
(c) US$5.9 million increase in current
provisions primarily driven by stock
obsolescence and withholding tax
provisions held at year end.
Capital expenditure
The following table provides a breakdown of the total capital expenditure:
Operational fleet expansion
Total expansion – Sukari
Underground mine development – Sukari(1)
Other sustaining capital expenditure
Total sustaining
Exploration capitalised(2)
31 December
2016
US$ million
31 December
2015
US$ million
—
—
39.9
23.7
63.6
49.5
4.5
4.5
31.4
5.1
36.5
34.4
(1) Includes underground exploration drilling.
(2) Includes expenditure in West Africa (US$39 million) and Sukari underground (US$10.5 million of which US$7.5 million is included in AISC).
Diesel fuel dispute
Cash flows
The group is currently involved in a
dispute regarding the price at which
Diesel Fuel Oil (“DFO”) is supplied
to the Sukari Gold Mine. The nature
of this dispute is set out more fully
in note 21. However, in brief, in
January 2012 the group was told by its
fuel supplier (acting on the instruction
of the Egyptian General Petroleum
Corporation (“EGPC”)), that it would
no longer be able to receive DFO at
local (subsidised) prices. The group
subsequently received a demand
from its fuel supplier for repayment
of subsidies received from 2009.
The group has issued court
proceedings in relation to these
demands. However, the group has,
since January 2012, had to pay the full
international price for DFO to ensure
continuity of supply. The group remains
of the view that an instant move to
international prices is not a reasonable
outcome and will look to recover funds
advanced thus far should the court
proceedings be concluded in its favour.
Management recognises the practical
difficulties associated with reclaiming
funds from the government and for
this reason has fully provided against
the prepayment of US$231.2 million
to 31 December 2016 of which
US$24.6 million was provided for
during 2016 as follows:
31 December 31 December
2015
US$’000
2016
US$’000
Included in
cost of sales:
Mine production
costs
Movement
in inventory
(22,844)
(43,808)
(1,784)
(2,931)
(24,628)
(46,739)
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$181.4 million to
US$366.3 million, primarily attributable
to an increase in revenue, due to an
increase in gold sold ounces combined
with a higher average realised price.
Net cash flows used in investing
activities comprise exploration
expenditure and capital development
expenditures including the acquisition
of financial and mineral assets.
Cash outflows have increased by
US$35.1 million to US$105.8 million.
The primary use of the funds was
for investment in underground
development at the Sukari site in Egypt
and exploration expenditures incurred
in West Africa.
Net cash flows generated by
financing activities comprise the
dividend payments made to external
shareholders and profit share to
EMRA in Egypt. During the year
US$46.1 million was paid comprising
the final dividend for 2015 of
US$22.9 million and the interim
dividend for 2016 of US$23.1 million.
A profit share charge of US$51.3 million
was recorded to EMRA during the
year with US$18.5 million paid in cash
during the period. Taxes paid related
predominantly to settling a liability
with the Australian Tax Office of
US$7.6 million.
Exchange rates
Effects of positive exchange
rate changes have increased
by US$6.5 million as a result of
movements of some of the functional
currencies used within the operation
in the year.
The group receives its income
from gold sales in US dollars,
however, it is offset by the fact that
in November 2016, the Egyptian
government floated the Egyptian
pound in an attempt to stabilise its
economy. This has led to a significant
devaluation of the currency which has
led to an increase in inflation. This is a
potential risk for the group as it has led
to increases in the prices of fuel, raw
materials and other goods as well as
pressure to increase staff wages.
EMRA
A significant milestone was achieved
during the year, as the capital
investment in the Sukari operation by
Centamin’s wholly owned subsidiary
Pharaoh Gold Mines (“PGM”) was
recovered from cash flows to the
extent that profit share commenced
during the third quarter. Centamin
had previously elected to make
advance payments against future
profit share from 2013 onwards, to
demonstrate goodwill towards the
Egyptian government. The total value
of these payments, amounting to
US$28.75 million, were recovered
against entitlement to profit share
by the Egyptian Mineral Resources
Authority (“EMRA”). To the end
of 2016, further distributions of
profit share amounting to a total of
US$18.5 million had subsequently
been paid to EMRA with another
US$4 million accrued at year end.
Both EMRA and PGM will benefit from
advance distributions of profit share
on a proportionate basis in accordance
with the terms of the Concession
Agreement and considering ongoing
cash flows, historic costs that are still
to be recovered and any future capital
expenditure.
Ross Jerrard
Chief financial officer
1 February 2017
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT
62
63
FINANCIAL REVIEW continued
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
31 December
2016(1)
US$’000
266,829
(917)
106,973
372,885
Year ended
31 December
2015(1)
US$’000
58,407
(269)
94,051
152,189
(1) Profit before tax, depreciation and amortisation and EBITDA includes a provision to reflect the removal of fuel subsidies (refer to note 12 to the financial
statements for further details).
(2) Cash cost per ounce calculation
Cash costs per ounce is a non‑GAAP financial measure. Cash cost per ounce is a measure of the average cost of
producing an ounce of gold, calculated by dividing the operating costs in a period by the total gold production over the
same period. Operating costs represent total operating costs less administrative expenses, royalties, depreciation and
amortisation. Management uses this measure internally to better assess performance trends for the Company as a whole.
The Company believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors
use such non‑GAAP information to evaluate the Company’s performance and ability to generate cash flow. The Company
believes that these measures provide an alternative reflection of the group’s performance for the current period and
are an alternative indication of its expected performance in future periods. Cash costs is intended to provide additional
information, does not have any standardised meaning prescribed by GAAP and should not be considered in isolation or
as a substitute for measures of performance prepared in accordance with GAAP. This measure is not necessarily indicative
of operating profit or cash flow from operations as determined under GAAP. Other companies may calculate these
measures differently.
Reconciliation of cash cost per ounce
Mine production costs (note 6)
Less: refinery and transport
Movement of inventory
Cash costs
Gold produced – total
Cash cost per ounce
Year ended
31 December
2016(1)
Year ended
31 December
2015(1)
288,317
314,827
(1,564)
(3,876)
282,877
551,036
513
(1,840)
—
312,987
439,072
713
US$’000
US$’000
US$’000
US$’000
oz
US$/oz
(1) Mine production costs, cash costs and cash cost per ounce includes a provision against prepayments recorded commencing in Q4 2012 and going forward
to reflect the removal of fuel subsidies (refer to note 12 to the financial statements for further details).
In June 2013 the World Gold Council, 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.
Reconciliation of AISC per ounce
Mine production costs (note 6)
Royalties
Corporate and administration costs
Rehabilitation costs
Underground development
Other sustaining capital expenditure
By‑product credit
Change of inventories
All‑in sustaining costs(2)
Gold sold – total
AISC per ounce
Year ended
31 December
2016(1)
Year ended
31 December
2015(1)
288,317
314,827
20,575
13,521
581
39,864
23,762
(1,080)
(5,910)
379,630
546,630
694
15,198
14,533
369
31,409
5,145
(1,433)
7,476
387,524
437,571
885
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
oz
US$/oz
(1) Mine production costs, cash costs, AISC, AISC per ounce and cash cost per ounce, includes a provision against prepayments recorded since Q4 2012 to
reflect the removal of fuel subsidies (refer to note 12 to the financial statements for further details).
(2) Includes refinery and transport.
(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
Cash and cash equivalents (note 26)
Bullion on hand (valued at the year end spot price)
Gold sales receivable (note 10)
Available‑for‑sale financial assets (note 15)
Cash and cash equivalents, bullion on hand, gold sales
receivables and available‑for‑sale financial assets
Year ended
31 December
2016
US$’000
Year ended
31 December
2015
US$’000
399,873
199,616
4,998
23,009
130
10,492
20,472
163
428,010
230,743
Centamin plc Annual report 2016STRATEGIC REPORTCentamin plc Annual report 2016STRATEGIC REPORT
64
Centamin plc
Annual report 2016
DIRECTORS’ REPORT
INTRODUCTION
In 2016 we invested in our systems and reporting
processes to further improve the quality of information,
giving the board the best opportunity to make informed
and timely decisions.
Through the financial reporting and
budgeting process together with the
review of operational activity, the board
has considered the short and longer
term strategic focus areas (set out on
page 20), as well as the principal risks,
risk appetite and resulting business
objectives.
Having consulted with the
non‑executive directors and engaged
with an external facilitator who
evaluated the board during the year,
I continue to believe that the format
and composition of the board remains
suitable for the current needs of the
business. This view is supported by
the external facilitator.
In respect to succession planning,
we as a board aim to nurture talent
through the business. Through the
nomination committee, we have
identified key personnel within the
organisation for whom we have
allocated resources and training to
ensure they achieve their potential.
Our CEO, who was the former
COO, is evidence of our commitment
to encourage talent through the
organisation. Now that Andrew has
completed a second year as CEO, I am
pleased to see his continued efforts to
develop and bring about efficiencies
within the organisation, delivering on
our key strategic focus areas.
Our board composition and approach
to leadership are set out in detail
on page 67. 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:
• C1.1. Fair, balanced and
understandable (directors’
responsibilities statement and
assumptions in the audit and
risk report);
• C.1.3. Going concern (directors’
responsibilities statement and
assumptions in the audit and
risk report);
• C.1.2. Business model and delivery
of strategy (strategic report
including the business model);
• C.2.1. Robust assessment
of principal risks (directors’
responsibilities and assumptions
in risk management report);
• C.2.2. Viability statement (risk
management report); and
• C.2.3. Monitoring and review of
effectiveness of risk management
and internal control systems (audit
and risk report).
2016 has been an exceptional
year, with further improvements
in operational efficiency and a
strong financial performance on the
backdrop of a stronger gold price and
operational cost savings. We approach
2017 with a knowledgeable board,
a strong management team and a
clear strategy to deliver substantial
shareholder value.
Josef El‑Raghy
Chairman
1 February 2017
Josef El‑Raghy
Chairman
Dear shareholders
Centamin remained focused on its
drive for productivity and efficiency
at the Sukari Gold Mine, whilst
undertaking a growth strategy aimed
at enhancing shareholder returns over
the long term.
Efficient use of the board’s time and
resources has been a focus this year,
and by working on improvements to
our systems and reports, the board is
in the best possible position to make
informed and timely decisions.
The communication between the
executive and non‑executive directors
is particularly important and by
allowing open discussion on key issues,
Centamin ensures that shareholders
are properly informed about all major
events and results.
65
Governance and code compliance at a glance
LEADERSHIP
EFFECTIVENESS
ACCOUNTABILITY
REMUNERATION
SHAREHOLDERS
Separate roles undertaken
by the chairman and CEO
Senior independent
non‑executive director
and deputy chairman –
Edward Haslam
Majority of independent
non‑executive directors
appointed
External facilitator carried
out a board evaluation
in 2016
External auditor changed
in 2014
Simple but effective
remuneration structure
Internal auditor appointed
in 2015
Shareholder approved
restricted share plan
(approved in 2015)
Engagement with key
shareholders and proxy
advisory bodies
AGMs held with key
directors in attendance
100% attendance at
board and committee
meetings in 2016
Training provided to
directors throughout
the year
Defined strategic
objectives and long term
business viability
Claw back provisions in
employment contracts
and share schemes
Full disclosure of AGM
results on day of meeting
Non‑executive director
meetings held during
the year without
executives present
All directors stand for
re‑election at each AGM
Defined risk strategy and
principal risks explained
Separate shareholder
resolutions for approval
of remuneration policy
and report
Investor meetings, capital
markets day presentation
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 250 listed
companies. It has also incorporated
many additional and voluntary
disclosures in its strategic report.
The Company has applied the main
principles set out in the Code, enabling
shareholders to evaluate how the
principles have been applied.
Compliance statement
The Company is incorporated in Jersey,
Channel Islands. The Company is, by
virtue of the Listing Rules, subject to
the 2014 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 2016, the Company was
in full compliance with the provisions
set out in the Code with the exception
of the following matters:
• 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. Additional
measures remain in place
whereby Edward Haslam (deputy
chairman and senior independent
non‑executive director) takes an
active role to ensure the board’s
ongoing effectiveness in all respects;
and
• the Code requires three
independent non‑executives to
be appointed to the remuneration
committee, however, following the
resignation of Kevin Tomlinson, the
nomination committee and board
approved the appointment of Trevor
Schultz who, as a former executive
director between 2008 and 2014,
is not considered independent.
The nomination report on
page 78 and 79 sets out the review
process in nominating Trevor Schultz
for the committee appointment.
Centamin plc Annual report 2016DIRECTORS’ REPORT 66
67
INTRODUCTION continued
Board overview
Set out below is the board, committee and management structure of Centamin plc.
EXECUTIVE DIRECTORS
NON‑EXECUTIVE DIRECTORS
CENTAMIN PLC
BOARD COMMITTEES
Corporate
management
Operational
management
Audit and risk
Remuneration
and
nomination
Health, safety,
environmental,
sustainability
Compliance
and corporate
governance
How the board of directors operates
The board provides leadership to the
group and sets the group’s values and
standards to ensure that its obligations
to its shareholders are met and the
group complies with both regulatory
and governance requirements.
The board guides and monitors the
business and affairs of the Company
OPERATIONAL HEADS OF DEPARTMENT
on behalf of the shareholders by whom
they are elected and to whom they
are accountable. In carrying out its
responsibilities, the board undertakes
to serve the interests of shareholders,
employees, and the broader
community honestly, fairly, diligently
and in accordance with applicable laws.
Continuous
disclosure
Board composition and attendance
At the date of this report the board is
made up of a chairman, CEO, three
independent non‑executive directors
and one non‑executive director. See
directors’ details on pages 72 and 73.
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.
Executive
Josef El‑Raghy
Andrew Pardey
Non‑executive
Edward Haslam
Trevor Schultz
Mark Arnesen
Mark Bankes
Kevin Tomlinson(1)
Board
(C.) 4 of 4
4 of 4
4 of 4
4 of 4
Health, safety,
environmental
and risk and sustainability
Audit
Compliance
and corporate
governance
Remuneration
Nomination
8 of 8
1 of 1
4 of 4
(C.) 4 of 4
(C.) 3 of 3
4 of 4
(C.) 8 of 8
4 of 4
2 of 2
8 of 8
(C.) 4 of 4
4 of 4
2 of 2
4 of 4
(C.) 4 of 4
1 of 1
4 of 4
1 of 1
3 of 3
2 of 2
2 of 2
(C.) Chairing the meeting and/or chairperson of the board or committee.
(1) Resigned 16 May 2016.
The table excludes meetings held by written resolutions or sub‑committees and reflects membership during 2016.
The board held four meetings during the year and a further four meetings were held by way of unanimous board
written resolution.
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.
Leadership
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.
• 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).
The board sets and implements
the strategic aims and values of the
Company, providing strategic direction
to management. See further details in
the strategic report.
The chief executive officer:
• develops and implements
short, medium and long term
corporate strategies;
• is responsible for day‑to‑day
The chairman, Josef El‑Raghy, is
responsible for ensuring the business
is run in accordance with the board’s
strategy. The CEO, Andrew Pardey,
has the responsibility for implementing
strategy and overseeing the day‑to‑day
running of the business.
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.
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;
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.
The 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.
Details of the senior management team
are set out on pages 74 and 75.
Detailed knowledge of the group’s
activities is essential and, each year,
the board visits 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 board delegates certain of
its responsibilities directly to the
committees (see section below).
Board committees
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. The board is in receipt
of detailed financial and operational
monthly reports as well as the quarterly
and annual financial disclosures.
The board has delegated certain
matters to its committees and their
reports are presented within the
strategic or directors’ reports as
explained in the table below.
Health, safety, environmental and sustainability
committee – strategic report pages 36 to 49.
Audit and risk committee – directors’ report page 106.
Remuneration committee – directors’ report
pages 86 and 87.
CSR report – see the HSES committee report on page 36.
Risk and control environment – see audit and audit and risk
committee on page 106.
Directors’ remuneration report – see pages 82 to 105.
Nomination committee – directors’ report
pages 78 and 79.
Succession planning – see the nomination committee report on
pages 79 to 81.
Compliance and corporate governance –
directors’ report pages 76 and 77.
Compliance statement with the corporate governance code –
see page 65.
Centamin plc Annual report 2016DIRECTORS’ REPORTCentamin plc Annual report 2016DIRECTORS’ REPORT
68
69
INTRODUCTION continued
Board appointments
and independence
When determining whether a
director is independent, the board
has established a directors’ test of
independence policy, which is based
on the definitions of independence in
the Canadian Securities Administrators’
National Instrument 52‑110 – Audit
Committees and the Code.
Based on this policy, the majority of
the board is considered independent
non‑executive directors.
Following the resignation of Kevin
Tomlinson in May 2016, the board
and nomination committee have met
and approved the appointment of
Trevor Schultz (non‑executive director)
as a member of the remuneration
and nomination committees,
and Edward Haslam (deputy
chairman and senior independent
non‑executive director) as a member
of the health, safety, environmental
and sustainability committee.
The Company remains compliant with
the provisions of the Code, whereby
at least half the board, excluding the
chairman, comprises non‑executive
directors who are determined by the
board to be independent.
Key activities of the board in 2016
STRATEGIC
SUKARI
ACTIVITIES
ACTION
Cash generation – production
guidance and cost estimates
Setting budgets, production and cost guidance
for the year.
Approval and announcement of guidance in
January 2016 – re‑guided in August 2016.
Cash generation –
operational efficiency
Review proposals for contract tendering and
systems improvements.
Tendering of significant contracts.
Implementation of the Mainpac upgrade (stores
and procurement software).
Shareholder returns –
dividend policy
Review of budgets and forecasts.
Declaration of half‑yearly and final dividends.
Review of cost recovery model and profit share
arrangements.
Approval of revised dividend policy.
Growth strategy – exploration
Review proposals for the Cleopatra decline and
capital expenditure.
Approval of Cleopatra decline and
capital expenditure.
Social responsibility – health
and safety
Sukari operational review, health and safety
statistics and monthly reporting.
Additional detail provided in monthly reporting to
the board.
Review of existing projects and
maintenance programmes.
Existing projects (Marsa Alam power plant and
playground) maintained to required standards.
WEST AFRICA EXPLORATION
ACTIVITIES
ACTION
Health and safety
Integrated reporting of HSES statistics.
Additional detail provided in monthly reporting to
the board.
Growth strategy
Approval of capital expenditure and exploration
drilling programme.
Completion of 2016 drilling programme in Burkina
Faso and Côte d’Ivoire.
Review exploration budgets and relative spend
and results.
Ensure allocation of resources across the prospects
and targeted exploration programmes.
Review of updated resource statement.
Approve announcement for the updated resource
in Côte d’Ivoire.
CORPORATE, LITIGATION
AND RISK
ACTIVITIES
ACTION
Corporate
Litigation
Risk
Update on Market Abuse Regulation (“MAR”) and
related policy changes.
Approval of amended policies and procedures.
Approval and launch of the new corporate website.
Review of the updated corporate website.
Litigation updates on the Company’s ongoing court
hearings (details of which can be found in note 4).
Confirm litigation strategy and approve
court submissions.
Review of the Company’s principal risks, risk
appetite and linkages to long term viability.
Updates to the risk register, internal communication
of the Company’s risk appetite and setting out the
linkages between longer term risks and the ongoing
viability of the business.
PERSONNEL
ACTIVITIES
ACTION
Appointments – nomination
committee recommendations
Personnel requirements following resignation of
senior management and non‑executive director.
Approval of appointment of CFO and
committee appointments.
Succession – nomination
committee recommendations
Review of succession planning, diversity and board
performance and evaluation.
Agreement on timing/priorities for succession
planning for key roles.
Remuneration – remuneration
committee recommendations
Review of KPIs for the executive directors
and senior management and reviewing
performance appraisals.
Approval of awards, vesting criteria and
bonus structure.
CASE STUDY – GOVERNANCE IN ACTION
A major part of the strategic growth in 2016 relates to the review, approval and development of the Cleopatra decline at the north end
of Sukari Hill. An initial capital expenditure commitment of US$11.5 million is required to commence the project and develop phase 1
and phase 2. The board was provided with a management proposal which covered the following key areas:
• executive summary;
• phase 1 and 2 drill meters and estimated development tonnes;
• phase 3 stoping proposals;
• phase 4 access and development proposals; and
• cost estimates and initial returns.
Detailed geological data, including assay results and 3D images of the interpreted mineralised zones were included in the report.
In addition, a clear plan setting out the stage of development in conjunction with the existing operation was provided together with
the infrastructure, equipment and personnel requirements. A breakdown of likely cost and potential grades from the initial stages of
development was provided to the board.
The board unanimously approved the proposal, following which onsite activity commenced to include the first drive development and
underground exploration.
During the approval process, the board discussed the likely future contribution Cleopatra would make to production at Sukari and the
cost/benefit analysis of the development in the context of the wider open pit mine plan and existing underground operation. The board
has substantial experience in mining and are familiar with the ore body. As such, they were able to knowledgeably debate the proposed
approach to the project, whilst equally recognising the benefits of the strategy.
The initial project is aimed at developing infrastructure with the capacity to support mining rates of up to 1Mtpa from this area. Ultimate
production rates will depend on future results from the programme and further development, and would be in addition to the current
underground ore production from the Amun and Ptah declines.
The board reviews any changes to its
charters and policies annually and in
readiness for the introduction of the
Market Abuse Regulation (“MAR”) in
July 2016, certain of the policies and
charters were updated to comply with
MAR. In particular, the Company’s
existing disclosure committee was
placed on a more formal footing, which
is consistent with MAR and updated
procedures and templates were also
approved by the board to comply
with MAR. Training was provided to
the board and senior management
in relation to these changes in the
Company’s policies and procedures.
Amendments to the board and
committee charters are monitored
annually and include the latest
amendments to the 2016 UK
Corporate Governance Code.
The board and audit and risk
committee spent time reviewing their
internal control environment, risk
management processes and internal
and external reporting.
Areas of focus for the board in 2017
Strategic planning – the board
regularly reviews and approves
strategic plans and initiatives put
forward by management and the
executive, including growth proposals
and efficiency initiatives. 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 will continue to
ensure systems remain appropriate to
meet the demands of the business.
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. The board will
continue to work with the internal
auditor, who are now in their second
year to help bring about efficiencies
within the business. The appointment
of BDO LLP as the Company’s
internal auditor has led to a number
of suggestions including formalities
around risk reporting (to the board and
employees), cyber security and related
infrastructure improvements and stock
and inventory management processes.
Reporting and audit – the board,
through the audit and risk committee,
has reviewed and implemented
upgrades to the accounting
systems. This process of review and
enhancement of systems will continue
in 2017 with a view to streamlining
processes and improving the reliability
and timeliness of internal reports.
Centamin plc Annual report 2016DIRECTORS’ REPORTCentamin plc Annual report 2016DIRECTORS’ REPORT 70
71
INTRODUCTION continued
Areas of focus for the board in 2017
continued
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.
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 January 2017 for the
year ended 31 December 2016.
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. The Institute
of Directors were appointed as the
Company’s external facilitator in
May 2016 to assess the effectiveness
of the board. The evaluation covered
six key areas including i) board
dynamics, ii) strategic direction and
clarity of purpose, iii) delegation
to management, iv) stakeholder
engagement v) board process and
vi) risk management.
The full report was presented to the
senior independent non‑executive
director and deputy chairman, Edward
Haslam who discussed the findings
with the non‑executive directors and
separately with the chairman and CEO.
The external facilitator concluded that
“the board is highly cohesive as a
group and appears to discharge the
business of the board effectively, this is
a good board and there are no causes
for concern”.
The recommendations following the
survey can be summarised in three
main areas:
• succession planning approach:
build more formality around
the process with consideration
to diversity;
• induction process: build formality
around the process of induction; and
• roles and responsibilities: continue
to further define the role of the
CEO following his appointment
in February 2015.
The board considered the results of the survey and noted the following in respect to an action plan:
Succession planning
BOARD DISCUSSION
BOARD ACTION PLAN
OWNERS
Review of vacancies within the business
and identify key personnel at head of
department, senior management and
executive levels.
(1) Action recruitment plans for senior
Action 1: CEO.
management and heads of department.
Action 2: Board/nomination committee.
(2) Consider the process for succession
planning and any proposed improvements.
Action 3:
(3) Consider non‑executive director
requirements.
Senior independent
non‑executive director and
deputy chairman/nomination
committee.
Review and monitoring: the action plan will be monitored by the board through monthly board reports which include updates on personnel,
quarterly meetings and annual non‑executive director meetings.
Induction and training
BOARD DISCUSSION
Discuss current process for induction and
training of directors and senior management
and consider improvements and additional
formality where required.
BOARD ACTION PLAN
OWNERS
(1) Review existing induction procedures and
share with the board.
Action 1: CEO aided by the company
secretary and legal counsel.
(2) Update procedures to ensure documents
Action 2/3: Company secretary and legal
are centralised.
(3) Centralise training materials and carry out
periodic review to ensure they remain up
to date.
counsel. Table to the nomination
committee.
Review and monitoring: the action plan will be monitored by the board through updates from the nomination committee.
Roles and responsibilities
BOARD DISCUSSION
BOARD ACTION PLAN
OWNERS
Review division of responsibilities and identify
areas requiring specific allocation. Review
targets set by the remuneration committee
and ensure appropriately defined to measure
performance and segregate specific KPIs.
(1) Discuss with CEO/chairman proposals to
Action 1: Senior independent
help further define roles and responsibilities.
(2) Define CEO responsibilities further
through the job description and balanced
scorecards.
(3) Agree KPIs and performance
measures as part of routine annual
performance appraisal.
non‑executive director and
deputy chairman to meet with
CEO/chairman.
Action 2: Nomination committee to review
job descriptions.
Action 3: Remuneration committee
to recommend KPIs and
performance conditions as part
of the annual review process.
Review and monitoring: the action plan will be monitored by the board through updates from the nomination and remuneration committees.
It is noted that none of the
recommendations and subsequent
actions were seen as weaknesses in
existing procedures or reporting and
represented improvements to existing
processes and procedures.
As a direct result of the internal and
external 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 2017. The recommendations and
any resulting actions were discussed by
the board in 2016 with Edward Haslam
(senior independent non‑executive
director and deputy chair) charged
with implementing any of the required
recommendations.
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 principal 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 30 to 35.
The board is pleased to confirm that
the Company remains in compliance
with best practice guidelines, with
the 2014 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 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
Employees
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 39.
risk assessment.
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 16 to
the financial statements.
The board made the following
recommendations to enhance
the internal control environment
following the review and these are
summarised below:
• continue to upgrade the finance
accounting software in addition
to the work completed in 2016;
• carry out a complete review of
all material and major contracts
in conjunction with the existing
tender process;
• utilise the services of the internal
auditor to evaluate the IT
environment and ensure efficient
use of the existing infrastructure;
and
• continue to build upon the existing
reporting framework with a view to
enhancing the reporting flows from
the business and communicating
the policies, business strategy and
culture to the organisation.
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.
Centamin plc Annual report 2016DIRECTORS’ REPORTCentamin plc Annual report 2016DIRECTORS’ REPORT 72
73
BOARD OF DIRECTORS
Josef El‑Raghy
Chairman
(and CEO until January 2015)
Andrew Pardey
Chief executive officer
(CEO since February 2015)
Edward Haslam
Deputy chairman and senior
independent non‑executive director
Josef El‑Raghy has been responsible for
overseeing the transition of the Company
from small explorer, through construction
and into production.
Andrew Pardey was appointed CEO and
director of the board of Centamin plc on
1 February 2015. Andrew served as general
manager of operations at the Sukari Gold
Mine before his previous appointment as
chief operating officer in May 2012.
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)
Mark Bankes
Independent
non‑executive director
Mark Arnesen
Independent
non‑executive director
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 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 and
holds Bachelor of Commerce and Bachelor
of Accounting degrees from the University
of the Witwatersrand.
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
Board meetings attended 4/4
Board meetings attended 4/4
Board meetings attended 4/4
Board meetings attended 4/4
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
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
Edward has been a non‑executive
director (and chairman from June 2007 to
April 2012) of the LSE listed Talvivaara plc
(since 1 June 2007) and from 1 May 2004
to April 2016 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
an MA in Economics from Cambridge
University, an MSc degree in mining from
the Witwatersrand University and has
completed the Advanced Management
Program at Harvard University.
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 was appointed CEO of ASX listed
Nzuri Copper Limited (formerly Regal
Resources Limited) in August 2016 and
is also the sole director of ARM Advisors
Proprietary Limited. He has also served
on the board of Gulf Industrials Limited.
Committee membership
Audit and risk committee
Remuneration committee (chair)
Nomination committee (chair)
Compliance and corporate
governance committee
Committee membership
HSES committee (chair)
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
Resignations during the year:
Kevin Tomlinson served as a non‑executive director during the year and resigned
on 16 May 2016. Kevin had been a non‑executive director of Centamin plc since
17 January 2012. Kevin attended both board meetings while acting as a director.
Centamin plc Annual report 2016DIRECTORS’ REPORTCentamin plc Annual report 2016DIRECTORS’ REPORT 74
75
SENIOR MANAGEMENT
Finance and business development
Ross Jerrard
Chief financial officer
Andy Davidson
Head of investor relations
Norman Bailie
Group exploration manager
Before joining Centamin as CFO in
April 2016, Ross Jerrard was a partner with
Deloitte. 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. Ross is a member
of the Institute of Chartered Accountants
in Australia, the Institute of Chartered
Accountants in Zimbabwe and the
Australian Institute of Company Directors.
Prior to joining Centamin in August 2012,
Andy Davidson 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.
Norman Bailie joined Centamin in
January 2017 and brings to the role over
25 years’ industry experience in providing
exploration and resource consultancy to all
levels of exploration and mining companies
in West, East and Central Africa and South
America. Norman is an accredited Chartered
Professional Geologist and Manager
through the Geol Soc UK and AusIMM, and
a fellow of IOM3 UK and SEG USA as well
as a competent person under JORC/
43‑101 criteria.
Since 18 April 2016
Since 13 August 2012
Since 26 January 2017
Operations
Youssef El‑Raghy
General manager – Egyptian operations
Terry Smith
General manager – Sukari
Chris Boreham
Underground mine manager – 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 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 of AusIMM and has 30 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
Legal and compliance
Lynne Gregory
General counsel
Before joining Centamin, Lynne Gregory
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 Abou Elailah 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 Le Masurier is a fellow of the
Association of Chartered Certified
Accountants and has over 17 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.
Since 1 September 2013
Since 1 May 2013
Since 8 July 2013
Heidi Brown
Subsidiary director and
company secretary
Heidi Brown 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 23 January 2003
Centamin plc Annual report 2016DIRECTORS’ REPORTCentamin plc Annual report 2016DIRECTORS’ REPORT 76
77
CORPORATE GOVERNANCE
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.
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. The committee’s primary
functions, responsibilities and duties
are set out in the committee charter.
Compliance and corporate
governance committee
As at the date of this report, the
compliance and corporate governance
committee is chaired by Mark Bankes
and its members are Edward Haslam
and Mark Arnesen.
The activities undertaken during the
year included the following:
ACTIVITIES
COMMITTEE COMMENTARY
Review of progress in respect to
the Concession Agreement court
appeal hearing (see note 21 to the
financial statements)
Review of progress in respect to
the DFO litigation (see note 21 to
the financial statements)
Monitoring of government
relations relating to the Concession
Agreement and review of
the timing and mechanism
of profit share
Review updates to the Company’s
policies and procedures following
the introduction of the Market
Abuse Regulation (“MAR”)
Assisting with discussions on
public announcements through
the disclosure committee
Review of the reporting and
disclosure requirements required
by the LSE and TSX
Whist the substantive merits of the case remain strong,
Law no. 32 (which is legislation designed to protect
and encourage foreign investment) should bring a
resolution to this litigation in the Company’s favour.
The committee monitors with interest the outcome of
developments in the appeal challenging the validity
of Law no. 32 and reviews the litigation process in the
Egyptian courts more widely.
The committee was disappointed with the State
Commissioner’s report produced in September this
year, however the report, which is non‑binding, does
not, in the committee’s view, impact the strong merits
of our case. Our legal advisers do not believe the
report properly addresses the key arguments of the
Company’s case. The committee continues to monitor
progress in the Egyptian courts to resolve this dispute.
The committee reviews key correspondence between
senior management and government. With the
onset of profit sharing with the Egyptian government
(“EMRA”) this year, the committee wishes to ensure
that the process is properly managed in accordance
with the Concession Agreement and that all parties
continue to be treated fairly and equitably.
The committee reviewed the impact of MAR and the
consequent amendments to policies and procedures.
There were no significant substantive changes to
the protocols already in place and the committee
considered the Company’s policies particularly in
respect of disclosure and securities trading which were
already more robust than those mandated by MAR.
The committee agreed to place the existing disclosure
committee on a more formal footing.
The committee is active in the review of public
disclosures and continue to review and comment on
such disclosures to ensure messaging and information
is clear and understandable to the market.
Shareholder communication
Key shareholder and investor relations activities held throughout this financial year:
DATE
ACTIVITY
January and February 2016
Investor conference, London
Investor conference, South Africa
March and April 2016
Investor marketing, North America
Investor marketing, London
Analyst site visit, Sukari
May to September 2016
Analyst and investor conference calls
Roadshow, Scotland
Conference, Denver
October and November 2016
Analyst and investor conference calls
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, known as the continuous
disclosure committee, 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.
The committee report to the board
on any matters discussed by the
disclosure committee.
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
1 February 2017
All shareholders are encouraged to
attend our AGM on 21 March 2017,
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, senior
independent non‑executive director
and deputy chairman as well as
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 certain
of the proxy advisory companies,
which provide guidance and voting
recommendations to shareholders,
is discussed by the board.
Shareholder communication is
maintained through the following
key information channels:
• the annual report;
• the notice of annual general
meeting and management
information circular;
• the annual general meeting;
• the annual information form;
• quarterly and half‑yearly financial
and operational reports;
• continuous disclosure requirements
and regulatory announcements;
• webcasts on quarterly and annual
financial and operational results;
• the Company’s website;
• registrar services; and
• electronic and postal notifications.
Centamin plc Annual report 2016DIRECTORS’ REPORTCentamin plc Annual report 2016DIRECTORS’ REPORT
78
79
NOMINATION REPORT
The committee was focused this year on succession
planning, to ensure that the key personnel within the
organisation had the support and training to allow them
to reach their potential.
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 the review of succession plans and
assessing progress to fill key vacancies
within the organisation.
The committee also considered the
role and responsibility of the chairman,
Josef El‑Raghy and the CEO, Andrew
Pardey who was appointed CEO
on 1 February 2015. The interplay
between chairman and CEO is
important and the committee spent
time with both individuals to ensure
their roles were defined and the new
CEO had the required support of the
board and management team.
Following the resignation of our former
CFO, the committee was actively
involved in the recruitment process
to identify and appoint a new chief
financial officer. Ross Jerrard was
appointed and joined the Company
on 18 April 2016. A key consideration
of the committee was the support and
training needed for Ross as an officer
of the Company.
The committee considered the
proposal to appoint Trevor Schultz
as a member of the remuneration
committee and nomination committee,
and Edward Haslam as a member
of the HSES committee. The
appointments followed the resignation
of Kevin Tomlinson in May 2016. In
both cases, the committee evaluated
the composition, experience, balance
and skill set on each of the committees.
Further details are set out opposite.
G Edward Haslam
Chairman of the nomination committee
In 2016, 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
and determined that no changes or
additions were necessary at this time.
Discussions of this nature will continue
in 2017.
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
1 February 2017
The committee met three times during
the year and held one meeting by way
of written resolution. The committee
undertook the following activities:
• reviewed the board succession plans
and progress to fill vacancies among
the senior management team;
• made recommendations to
the board on the appointment
to the committees and senior
management;
• made recommendations as to the
structure, size and composition of
the board and board committees;
• reviewed the competencies, skills,
knowledge and experience of
directors;
• made recommendations for the
appointment and re‑election of
directors to the board;
• considered the requirements for
board diversity (including gender
and ethnic diversity); and
• reviewed the policy on senior
and executive recruitment and
succession planning.
Centamin plc Annual report 2016DIRECTORS’ REPORTCentamin plc Annual report 2016DIRECTORS’ REPORT 80
81
NOMINATION REPORT continued
However, women do still account for
a small percentage of the workforce,
particularly in Egypt where only 1%
of the Egyptian workforce 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 women are
employed throughout the group in
the administrative offices and at the
Company’s headquarters and onsite in
Burkina Faso and Côte d’Ivoire. Of our
West African employees, over 10% are
women working in Ouagadougou as
geologists based at camp. Across the
Company, a number of women hold
senior positions in the areas of legal,
accountancy, HSES and subsidiary
directorships.
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.
Performance evaluation
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 board is assisted by the
nomination committee on its
evaluation of the non‑executive
directors. An external facilitator was
appointed in May 2016 to assess the
effectiveness of the board. The last
review by an external facilitator was
carried out in May 2013. A summary of
the review can be seen in the corporate
governance section on page 70.
The non‑executives also discussed
openly with the executive directors,
the areas they could assist further with
in relation to business development,
succession planning and strategy
relating to the appointment and
retention of key personnel.
Nomination committee
As at the date of this report, the
nomination committee comprises
Edward Haslam (chairman) and
Mark Arnesen, both of whom
are independent non‑executive
directors, and Trevor Schultz, who is a
non‑executive director of the Company.
Trevor was appointed on 1 October
2016 following the resignation of
Kevin Tomlinson in May 2016.
Board diversity
The board set out its updated policy on
recruitment, the selection process and
succession planning in the 2015 annual
report and further considered the
recommendations of the nomination
committee both in connection with
recruitment policy, selection process
and succession planning in 2016.
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 continue to
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,
the committee will continue to appoint
and encourage female professionals
to apply for managerial positions to
ensure a progressive pipeline of talent
within the Company’s management
and senior management team.
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 reviewed its own
membership and performance
and this review was concluded in
December 2016.
The nomination committee had
recommended to the board the
following key appointments:
• appointment of Ross Jerrard as CFO
(as an officer of the Company), who
joined in April 2016;
• appointment of Trevor Schultz on
the remuneration and nomination
committees (as a member of the
committees); and
• appointment of Edward Haslam on
the HSES committee (as a member
of the committee).
Details of the appointment process
for the role of CFO (an officer of the
Company) are set out in the 2015
annual report.
In respect to the appointment of
Trevor Schultz, the committee was
aware of the Corporate Governance
Code (the “Code”) which requires
three independent non‑executives
to be appointed to the remuneration
committee. The committee noted
that as a former executive director
who served on the board between
May 2008 and May 2014, Trevor
Schultz was not considered to be
independent.
The committee gave due
consideration to Trevor’s experience
and expertise and the composition
of the remuneration and nomination
committees, and recommended
his appointment as a member of
the remuneration and nomination
committees, notwithstanding the
technical breach of the Code.
The committee noted that Trevor has
been integral to the establishment of
Sukari as a globally significant gold
mining operation, and oversaw the
construction of the Stage 4 process
plant. He has a unique vantage point
into the workings of the operation,
what the mine is capable of achieving
and also knows the challenges faced
in operating the first modern mine
in Egypt. With these attributes,
the committee considered that
Trevor Schultz will add significant
value, particularly when setting
challenging but realistic performance
targets and critically assessing the
achievements of senior management
and executive directors. In particular,
with a working knowledge of the mine
and practical experience, he is well
positioned to guide the committee
on some of the key nomination and
remuneration decisions regarding
senior management and executive
appointments, retention and salary
as well as identifying key candidates
and existing team members for
succession planning. The proposal to
appoint Trevor Schultz as a member
of the remuneration and nomination
committees was proposed by the
committee and ratified by the board
in August 2016.
The appointment of Edward Haslam
as a member of the HSES committee
was considered by the committee and
approved by the board in August 2016.
The committee and the board
considered Edward’s experience and
expertise and the composition of the
HSES committee.
The committee continues to work
closely with the chairman and
CEO to ensure that the roles and
responsibilities are clearly defined,
and that the CEO has the required
support of the board and senior
management to undertake the
role effectively.
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 external legal
advisers. Topics included a regulatory
update, recent case law discussions
and an update on the new Market
Abuse Regulation.
Centamin plc Annual report 2016DIRECTORS’ REPORTCentamin plc Annual report 2016DIRECTORS’ REPORT 82
83
REMUNERATION REPORT
Our remuneration decisions are designed to motivate and
reward exceptional performance.
1. Introduction and annual statement
As chairman of the remuneration
committee, I am pleased to present
the 2016 remuneration report and 2017
remuneration policy.
The committee maintained a simple yet
effective remuneration structure during
the year, with the key elements of base
salary, bonus and long term restricted
share plan (“RSP”). The report itself
has been modified this year to provide
further information on the committee’s
remuneration decisions and the key
performance targets that are set for
the executive directors.
Changes to the committee
The committee welcomed Trevor
Schultz (non‑executive director) to
the remuneration committee later
in the year, following the resignation
of Kevin Tomlinson. Trevor brings to
the committee a wealth of industry
experience having overseen the
construction of Stage 4 at Sukari.
This unique vantage point into
the workings of the operation and
first‑hand experience of the challenges
faced in operating the first modern
mine in Egypt will add significant value
to the committee.
Edward Haslam
Chairman of the remuneration committee
Single figure remuneration 2016
The following chart summarises the total remuneration to the executive directors in 2016.
Full details are shown in the single figure table.
Josef El-Raghy
£515k
Andrew Pardey
£452k
£103k £39k
£676k
£51k
£435k
£690k
Base salary
Pension
Benefits
Bonus
LTI(1)
Josef El-Raghy
Andrew Pardey
5
%
Corporate objectives
Financial
Operational
Strategic
Individual KPIs
Target
2
2
0
%
%
0
2
%
0
Target 100%
Achieved 75%
30 %
% 1 0 % 1
2
20%
%
0
0
%
1
%
5
1
0
(1) LTI is based on an award of 150% of base salary.
2
0
%
%
0
2
%
6
1
%
6
1
2
2
5
%
30%
Target 100%
Achieved 77%
1
0
%
6
10%
% 10%
2 5 %
20%
2
5
%
Performance
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 cost of
production and all‑in sustaining cost.
The gold and 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.
The performance targets set by
the committee for the RSP and
executive bonuses relate to the
value chain created by the Company.
The relative success of the executives in
implementing the Company’s strategic
aims are assessed by the committee
using a balance scorecard approach.
Some of the key metrics used by the
committee to assess performance can
be summarised as follows:
• safety: improving the health and
safety environment and maintaining
a culture of safety in the workplace
assessed via LTIF rates;
• production: delivering base case
production (ounces produced) and
rewarding maximising the upside
potential of the mine;
• cost control: maintaining cash
cost of production and all‑in
sustaining cost within budgeted
and forecast rates; and
• stakeholders: in‑country
stakeholder management
through co‑operative relations
with government resulting in
operational efficiency.
Additional metrics used by the
remuneration committee to measure
the success of the executive directors
are set out further in the report.
Salary reviews
The committee undertook salary
reviews for both of the executive
directors. The independent salary
review took into consideration the
directors’ personal performance,
their updated roles and responsibilities
and industry benchmarking data.
The committee proposed an
increase of 3% for Josef El‑Raghy
from 1 January 2017 in line with the
average cost of living increase. The
Company’s CEO, Andrew Pardey
received a 7% salary increase effective
from 1 January 2017, to align the
CEO’s base salary closer to the
market median, in accordance with
the Company’s remuneration policy
approved by shareholders in May 2016.
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.
RSP
Andrew Pardey (CEO) will continue
to participate in the RSP in 2017
with an expected grant of up to
150% of base salary to be awarded.
Josef El‑Raghy (chairman) does not
currently participate in the scheme and
as a shareholder(1) with a 4.67% interest
in the Company, Josef El‑Raghy
remains aligned with the interests
of shareholders.
Shareholder consultation
I have engaged with shareholders and
proxy advisory firms during the year,
which has resulted in an improvement
in our disclosures on performance
targets as well as further explanation
on the criteria used to assess
executive performance. Although
our remuneration policy remains
unchanged in all material respects,
we will continue to present our policy
to shareholders annually seeking a
non‑binding vote.
As a non‑UK Company, we are not
required to seek a binding vote for our
remuneration policy, but adhere to the
requirement by presenting the report
annually for approval. We will continue
to engage with shareholders, proxy
advisory firms and other stakeholders
throughout 2017.
Bonus structure
The executive bonus opportunity and
structure for 2016 will remain the same
in 2017. For the executive directors, the
maximum bonus opportunity is 175%.
This bonus opportunity for executive
directors will be reduced to a maximum
bonus opportunity of 125% in any year
where an award under the RSP is made.
Summary
The Company reached a significant
milestone this year having recovered
in excess of US$1 billion of capital
expenditure since production started at
Sukari in late 2010. With an expected
20 year mine life, the Company looks
set to make significant returns to all of
our stakeholders, including our partner,
the Egyptian government. There are
still challenges, particularly in respect
of the ongoing litigation, details of
which are set out in note 21 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 2016 have
been taken by the committee.
The following report has been
made available to the auditor;
PricewaterhouseCoopers LLP, and
section 5 (where indicated), ‘annual
remuneration report’ has been audited
by PricewaterhouseCoopers LLP.
Edward Haslam
Chairman of the
remuneration committee
1 February 2017
(1) Includes the El‑Raghy Family.
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REMUNERATION REPORT continued
Executive directors’ remuneration at a glance
Key operational and financial metrics:
Sukari – Cleopatra
Decline
• KPIs for delivery of strategic
objectives
June 2015 grant – restricted share plan
Performance conditions (threshold at 25% to maximum at 100%):
Exploration in Burkina
Faso and Côte d’Ivoire
• Long term incentives to
identify and deliver on
projects outside of Egypt
The following provides a summary of how the Company has applied the remuneration policy and the linkages to the
Company’s strategy and performance.
The performance measures for bonus awards and the conditions associated with the Company’s restricted share plan
(“RSP”) relate to the following strategic focus areas:
Key measures
1
CASH
GENERATION
IMPACT ON BONUS
AND AWARDS
GROWTH
2
Gold production
• 30% of RSP based on
Self‑funded growth
IMPACT ON BONUS
AND AWARDS
• 30% of RSP based on
reserve replacement
and growth
production growth (CAGR)
• Impacting bonus awards
against guidance published
in January 2016
Cost control
• Impacting bonus award
Optimising production
Stable finances and
shareholder returns
against guidance published
in January 2016
• Bonus structure rewarding
optimisation of the plant
at Sukari
• Personal KPIs for formalising
and implementing sound
policy decisions
3
SHAREHOLDER
RETURNS
IMPACT ON BONUS
AND AWARDS
4
SOCIAL
RESPONSIBILITY
IMPACT ON BONUS
AND AWARDS
Consistent
dividend policy
Shareholder return
relative to peers
• 50% of 2015 RSP grant
Safety record
• LTIFR directly linked to
based on improvements in
EPS (CAGR)
• Delivering shareholder
returns consistent with the
Company’s dividend policy
• 20% of RSP based on
relative performance
against peers (TSR)
bonus structure
Human resources
• HR statistics including
retention, training, reduced
absences linked to
individual KPIs
Government relations
• Maintaining key relationships
linked directly to
individual KPIs
Community initiatives
• Delivery of initiatives linked
to individual KPIs
• 2016 production: 551,036 ounces produced representing a 26% increase on 2015;
• LTIFR: maintained a low levels during the year;
• cash cost of production: decreased to US$513 per ounce produced from US$713 in 2015;
• all‑in sustaining cost: US$694 per ounce sold was below our forecast of US$720‑750;
• EBITDA: US$373 million and an increase of 145% on the prior year;
• EPS: earnings per share (before profit share) of 23.05 US cents up 412% on 4.51 US cents per share in 2015; and
• TSR performance (31 December 2014 – 2016): Centamin is ranked in the upper quartile against its peer group.
Restricted share plan (“RSP”)
The restricted share plan was implemented and approved by shareholders in 2015 and is designed to incentivise
executive directors and senior employees over the longer term (a three to five year period). Of the executive directors,
only Andrew Pardey (CEO) has been granted awards under the RSP to date. The performance conditions for the respective
grants are as follows:
• 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.
2015
Grant
2018
Vesting of award
2020
Release of 50% of award
THREE YEAR PERIOD – PERFORMANCE CRITERIA
TWO YEAR HOLDING PERIOD
June 2016 grant – restricted share plan
Performance conditions (threshold at 25% to maximum at 100%):
• 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.
2016
Grant
2019
Vesting of award
2021
Release of 50% of award
THREE YEAR PERIOD – PERFORMANCE CRITERIA
TWO YEAR HOLDING PERIOD
June 2017 grant – restricted share plan
Performance conditions (threshold at 25% to maximum at 100%):
• 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.
2017
Grant
2020
Vesting of award
2022
Release of 50% of award
THREE YEAR PERIOD – PERFORMANCE CRITERIA
TWO YEAR HOLDING PERIOD
Details of the awards are set out in section 7 of this report.
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REMUNERATION REPORT continued
2. Summary of executive remuneration
Chairman
The base salary for Josef El‑Raghy,
which is paid in sterling, at GBP515,000
for 2016 will rise by 3% effective
from 1 January 2017 to GBP530,450.
An annual pension contribution
of 20% of base salary is made to
Josef El‑Raghy.
Chief executive officer
The base salary for Andrew
Pardey, which is paid in sterling, at
GBP460,000 will rise by 7% effective
1 January 2017 to GBP492,200.
The increase is consistent with the
Company’s remuneration policy and
aligns the base salary closer to the
market median.
The bonus outcome for Josef El‑Raghy
for 2016 was 75% of the maximum
opportunity, which equates to
GBP675,938 and represents 131% 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,
strategic and individual performance
criteria. Full details are on pages 96
and 97.
The bonus outcome for Andrew
Pardey for 2016 was 77% of the
maximum opportunity, which equates
to GBP435,531 and represents
96% of base salary. The bonus
calculation is made by reference to a
balanced scorecard which comprises a
combination of financial, operational,
strategic and individual performance
criteria. The remuneration for Andrew
Pardey in 2016 still positions him below
the median based on the market data.
Andrew Pardey participates in the
RSP and is due to receive awards in
June 2017 of up to 150% of base pay.
These awards remain subject to the
performance conditions set out in the
scheme. The last tranche of awards
made to Andrew Pardey under the
terms of the DBSP, which were issued
prior to his appointment as CEO,
will vest in June 2017.
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 Trevor Schultz. Edward
Haslam and Mark Arnesen 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.
There is no actual or potential conflict
of interest arising from the other
directorships held by members of
the committee.
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, attend meetings
when their own remuneration is under
consideration.
Activities of the committee
COMMITTEE MEMBERS
Edward Haslam (Chairman of the committee)
Mark Arnesen
Trevor Schultz
Kevin Tomlinson
JOINED
2011
2011
2016
ATTENDANCE IN 2016
4 of 4 meetings
4 of 4 meetings
1 of 1 meetings
Resigned 16 May 2016
2 of 2 meetings
The committee met four times in the year and held two meetings by way of written resolution. The business conducted
is set out below.
COMMITTEE MEETING DATE
ACTIVITY
2 March 2016
10 May 2016
• Reviewed DRR for the annual report and finalised the 2016 remuneration policy.
• Finalised performance conditions for the RSP.
• Reviewed the balanced scorecards and key performance measures for the executive
directors and senior management team to ensure they remained appropriate and consistent
with the ongoing business objectives.
• Review of committee charter and approve any minor amendments.
• Confirmation of executive director salaries and benchmark data following the AGM.
• Review of non‑executive director fees.
• Made recommendations to the board to grant awards to Andrew Pardey under the RSP and
awards to senior management under the RSP and DBSP.
3 and 13 June 2016 (written resolution)
• Finalised awards under the RSP and DBPS and finalise the vesting of awards under the DBSP.
8 September 2016
• Review of individual KPIs and assess executive objectives against the balanced scorecards
and strategic objectives.
8 December 2016
• Conducted 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 executive director fees.
• Evaluation of the committee and review of the charter.
• Prepared performance criteria recommendations for 2017 for the executive and senior
management.
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
(“MEIS”) 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 at
GBP8,000 and was appointed by the
remuneration committee.
MEIS is regarded by the committee as
providing independent advice, as MEIS
has no connection with the directors
and officers of the Company other than
this engagement.
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REMUNERATION REPORT continued
There are no material changes
proposed to the policy in 2017,
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
and the application of the policy in
2017 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.
4. Our remuneration policy
Introduction
The remuneration report and the
remuneration policy were put to
shareholders on an advisory basis at
the AGM on 11 May 2016 and the
resolutions were passed by a majority
of 98.58% and 99.13%, respectively.
The remuneration policy and the
directors’ remuneration report as
detailed in the annual report, will
be subject to separate non‑binding
advisory votes at the AGM on 21 March
2017. The remuneration policy will be
effective following the AGM until the
next AGM in 2018.
The policy that was put to shareholders
on 11 May 2016 was on an advisory
basis and remains in force until the
conclusion of the AGM in 2017.
A copy of the policy is available
on the Company’s website.
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 relevant and stretching
incentive arrangements for relevant
employees that are based upon
pre‑agreed performance criteria
against which individuals will then
be tested;
• 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 maintain a meaningful
shareholding in the Company.
REMUNERATION POLICY FOR EXECUTIVE DIRECTORS
ELEMENT
DETAILS
FOR 2016
FOR 2017
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.
Pay is reviewed annually and any change ordinarily takes
effect from 1 January.
The base salary for
2016 was as follows:
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.
Josef El‑Raghy
GBP515,000; and
Andrew Pardey
GBP460,000 (from
1 April 2016).
Benefits
Objective
Benefits may be provided where
necessary to ensure competitive
remuneration packages are
consistent with the market.
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.
A proportion
of benefits
was utilised
in 2016.
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 (to include tax paid on the benefits).
Therefore normal benefits and additional benefits will not
currently exceed 15% of base pay (to include tax paid on
the benefits).
There is no intended
change in the policy
for 2017.
A 3% increase has
been awarded for
Josef El‑Raghy and
a 7% increase for
Andrew Pardey
effective from
1 January 2017.
Josef El‑Raghy
Increase of 3%.
New base salary
GBP530,450.
Andrew Pardey
Increase of 7%.
New base salary
GBP492,200.
Benefits to
remain within
the policy.
REMUNERATION POLICY FOR EXECUTIVE DIRECTORS continued
ELEMENT
DETAILS
FOR 2016
FOR 2017
Pension
Objective
Positioned to ensure
competitive packages and
provision of appropriate income
for executives in retirement.
A payment in lieu of pension will be made which is up
to 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.
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.
Long term incentives
Objective
To align the interests of
the executives with those
of shareholders through a
meaningful ownership of shares.
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.
The threshold is achieved at 25% of the maximum
opportunity and the target is 62.5%. Full details of the
criteria for awarding bonuses are set out on pages 95
to 97.
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.
The RSP was approved at the AGM in 2015. Executive
directors and senior employees may participate in the
scheme at the recommendation of the committee.
The performance conditions of grants made under the
new RSP and the terms of the RSP are set out in section 7.
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 a third at the end of each 12, 24
and 36 month period.
Josef El‑Raghy
receives a cash
payment in lieu of a
pension equivalent
to 20% of his
base salary.
Andrew Pardey does
not currently receive
a pension or a cash
payment in lieu of
a pension.
Out of a maximum
of 175%, actual
outcome for Josef
El‑Raghy was 75%.
Out of a maximum
of 125%, actual
outcome for Andrew
Pardey was 77%.
There is no intended
change to the
pension contribution
for Josef El‑Raghy.
There is no current
intention to award
Andrew Pardey a
pension, however
this will be kept
under review
in 2017.
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.
690,000 awards
were granted to
Andrew Pardey in
June 2016 under the
terms of the RSP.
4,999,000 awards in
total were granted
in June 2016 to
employees.
1.2 million shares
were granted
to employees
under the DBSP
in June 2016.
Awards under the
terms of the RSP
are to be made to
Andrew Pardey in
June 2017.
The RSP is available
to all executives
(and senior
management),
however there are
no current plans
to make awards to
Josef El‑Raghy.
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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 will consider requests
for executive directors to have
non‑executive external appointments,
on the basis 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.
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,
all unvested awards and all vested but
unreleased awards will lapse.
A malus claw back provision has been
included in the RSP which 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.
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 REPORT continued
4. Our remuneration policy continued
Introduction continued
REMUNERATION POLICY FOR EXECUTIVE DIRECTORS continued
ELEMENT
DETAILS
FOR 2016
FOR 2017
Share ownership
requirement
Objective
To encourage ownership of shares
thereby creating a link of interest
between shareholders and the
executives.
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. Personal
holdings from vested shares are to be included in
the calculation.
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 in 2015.
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.
The remuneration committee review all
executive contracts and will determine
the appropriate notice period,
by considering the role and position.
Notice periods would not ordinarily
exceed twelve months.
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:
• 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.
There are no
changes to
the policy.
Josef El‑Raghy
(and family) hold an
interest of 4.67%
in the Company,
which exceeds the
requirements of
the policy.
Andrew Pardey
holds 969,268
shares in the
Company (excluding
unvested awards
under the DBSP and
RSP) which exceeds
the requirements of
the policy based on
the share price at
31 December 2016.
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.
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, 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. Directors’ contractual terms and
conditions, including notice periods,
are reviewed by the remuneration and
nomination committees.
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.
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REMUNERATION REPORT continued
4. Our remuneration policy continued
Policy on external board appointments continued
REMUNERATION POLICY FOR NON‑EXECUTIVE DIRECTORS
ELEMENT
DETAILS
Non‑executive
director fees
Objective
To attract and retain high calibre
non‑executive directors by the
provision of competitive fees.
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.
The fees payable to the deputy chairman and senior
independent non‑executive director (“SNED”) were
reduced in 2015 due to Josef El‑Raghy resuming his
sole role as chairman and assuming responsibility for all
chairmanship duties.
Non‑executive directors do not participate in any incentive
arrangements.
FOR 2016
FOR 2017
There are no
proposed changes
to the fee structure
in 2017. The fees
for the other
non‑executives will
next be reviewed
in 2018.
The fees payable
to the SNED are
subject to an annual
review and there
are no proposed
changes to the fee
structure in 2017.
The following fees
apply in 2016, with
no change to the
fee structure since
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 reflect
the enhanced role
undertaken by
Edward Haslam. The
fee of GBP125,000
remains unchanged
in 2016 and no
further remuneration
has been applied
for additional
committee
membership
during the year.
The fees for the
NEDs and SNED
were reviewed in
2016 and the fees
will remain as for
2016 in 2017.
Feedback from shareholders, as well
as proxy advisers (acting on behalf of
many of our major shareholders) and
meetings held with shareholders and
investors are considered as part of
the Company’s annual remuneration
policy review. Major shareholders
are contacted should there be any
proposed material changes to our
remuneration policy.
Although the committee does not
actively consult with employees on
the remuneration policy, consideration
is given to the base salary increase,
relative performance of the Company
and working conditions of the wider
workforce. The main differences in
determining executive and senior
employee compensation compared
to the wider workforce relates to the
emphasis on rewarding long term
performance, as well as performance at
an operational, strategic and corporate
level. Consideration is also given to the
level of responsibility of executives and
senior employees.
Implementation of policy
The Company intends to implement
the remuneration policy for 2017 as
detailed in this remuneration report.
5. Annual remuneration report
PERFORMANCE TARGETS FOR JOSEF EL‑RAGHY
£77,250
£77,250
£901,250
£450,625
£77,250
£103,000
£103,000
£103,000
£515,000
£515,000
£515,000
11%
15%
74%
7%
6%
Base salary
Pension
Bonus
Benefits
39%
9%
45%
56%
6%
32%
Min
Mid
Max
Min
Mid
Max
PERFORMANCE TARGETS FOR ANDREW PARDEY
£69,000
£575,000
13%
5%
4%
Base salary
£69,000
£287,500
£345,000
£690,000
87%
£69,000
£460,000
£460,000
£460,000
LTI
Bonus
Benefits
25%
32%
30%
40%
38%
26%
Min
Mid
Max
Min
Mid
Max
Incentives
Objective
No incentives.
The non‑executive directors do not participate in any short
or long term incentive plans.
There is no intended
change to the policy
for 2017.
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.
The following graphs set out the
remuneration structure for Josef
El‑Raghy and illustrates the minimum,
to 50% of 175% at target, and 175%
of base for the maximum. There are
no long term incentive elements.
The following graphs set out the
remuneration structure for Andrew
Pardey and shows the minimum,
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
RSP of 150% of his base salary as the
maximum and 75% of base salary at
the target.
Please see the following section for
details of the performance targets and
bonus achievements.
Single figure table in US$ (audited)
What did the executive and non‑executive directors earn in 2016?
Executives
Salary
2016
Salary
2015
Benefits
2016
Benefits
2015
Bonus
2016
Bonus
2015
LTI
2016
LTI
2015
Pension
2016
Pension
2015
Total
2016
Total
2015
Josef El‑Raghy
691,998
763,372
47,758
38,347 831,719
907,945
Andrew Pardey
607,475
591,996
62,511
80,752 535,906
390,600
Total
1,299,473 1,355,368 110,269
119,099 1,367,625 1,298,545
Nil
Nil
Nil
Nil 138,402
152,674 1,709,877 1,862,338
Nil
Nil
Nil 1,205,892 1,063,348
Nil 138,402
152,674 2,915,769 2,925,686
Non‑Executives
Fees
2016
Fees
2015
Benefits
2016
Benefits
2015
Bonus
2016
Bonus
2015
LTI
2016
LTI
2015
Pension
2016
Pension
2015
Total
2016
Total
2015
Edward Haslam
165,661
208,289
Mark Bankes
112,649
128,651
Mark Arnesen
112,649
120,223
Trevor Schultz
100,934
113,516
Kevin Tomlinson
38,887
113,516
Total
530,780
684,195
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 165,661
208,289
— 112,649
128,651
8,429 112,649
128,651
— 100,934
113,516
—
38,887
113,516
8,429 530,780
692,623
Notes to table:
• Josef El‑Raghy and Andrew Pardey are paid in sterling.
• There have been no vesting events in respect to the RSP during 2015 or 2016 and a value cannot be attributed to the performance conditions, as they will be
evaluated based on the Company’s results in 2017. Therefore the LTI for Andrew Pardey is reflected as nil. Details of the grants made to Andrew Pardey under
the terms of the RSP can be found on page 99.
• The pension payable to Josef El‑Raghy represents a cash payment in lieu of contributions to a pension scheme.
• Superannuation contributions were paid by the Company in 2015 in respect to Mark Arnesen and this is included in the 2015 pension column.
• Directors’ remuneration paid in foreign currency was converted at an average rate during the year. The average GBP:US$ exchange rate for 2016 was 1.3437.
Bonus accruals for 2016 applied an exchange rate of GBP:US$1.23.
• Kevin Tomlinson resigned as a non‑executive director on 16 May 2016.
Centamin plc Annual report 2016DIRECTORS’ REPORTCentamin plc Annual report 2016DIRECTORS’ REPORT
94
95
REMUNERATION REPORT continued
5. Annual remuneration report continued
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 2016
As at
31 December 2015
GBP65,000 (US$79,980)
GBP65,000 (US$96,353)
GBP10,000 (US$12,305)
GBP10,000 (US$14,824)
GBP5,000 (US$6,152)
GBP5,000 (US$7,412)
Deputy chairman and senior independent director
GBP125,000 (US$153,808)
GBP125,000 (US$185,295)
Notes to table:
• As the Company has an executive chairman, Edward Haslam undertakes an enhanced role as deputy chairman and senior non‑executive chairman. These
duties are reflected in this fee. The fee remains unchanged in 2016 and no further remuneration has been applied for additional committee membership.
• These amounts include any statutory superannuation payments where applicable.
• The Company reviewed the non‑executive director fees during 2016 and no increases were proposed.
• The non‑executive directors do not participate in any of the Company’s share plans or incentive plans.
Base pay
Remuneration of the executive
directors and the senior management
team is considered against three
criteria: i) general pay levels and pay
increases throughout the Company;
ii) the performance and skills of the
individual; and iii) market data.
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, at GBP515,000 for
2016 will rise by 3% effective from
1 January 2017, in line with the cost
of living increase.
Base salary for Andrew Pardey, which is
paid in sterling, at GBP460,000 will rise
by 7% effective from 1 January 2017,
to align the CEO’s base salary closer to
the market median, in accordance with
the Company’s remuneration policy
approved by shareholders in May 2016.
• 30% – the individual tasks
are based on executive
development and succession
planning, communications of
business strategy, and in‑country
stakeholder management and
shareholder relations.
2016 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 between
70% business and 30% individual
targets as follows:
• 70% – the business targets are
based on:
• 20% – financial (profitability/
financial position, total cost
against budgeted total cost);
• 20% – operational (meeting
production guidance,
CSR development and
implementation of the
operational objectives);
• 20% – strategic measures
For Andrew Pardey, the bonus is split
between 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
(M&A opportunities, strategic
management and formalisation
of the business strategy);
• 10% corporate (maintaining
governance improvements,
shareholder relations and in‑country
stakeholder management).
• 30% – the individual tasks are
sound corporate governance
and structure, maintaining
shareholder relations, board
leadership and effective
management of the board).
based on building the management
team, maintaining and improving
standards of health and safety and
environmental matters; and building
the management team and senior
staffing levels.
Background to remuneration decisions
linked to the strategic priorities
Cash generation:
• 551,036 ounces produced
(re‑guided upwards during the
year) representing a 26% increase
on 2015;
• 2016 production at
US$513/oz cash cost of
production and US$694/oz AISC;
• further production upside/lower
cash costs at Sukari for no material
capex; and
• US$400 million in cash at
31 December 2016.
Shareholder returns:
Social responsibility:
• 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.
Growth:
• exploration/development to
be funded from cash reserves
after dividend;
• significant Sukari reserve expansion
potential, especially via high grades
from the underground operation;
• exploration at Sukari to include
developing the Cleopatra decline; and
• advanced exploration in Burkina
Faso and highly prospective
tenements in Côte d’Ivoire.
• LTIFR rates at Sukari remained
at low levels during 2016 of
0.27 per 200,000 working hours;
• training and staff development;
• community projects; and
• government relations.
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
illustrated in the following graphs
and reflected in the remuneration
tables below.
Performance targets for 2016
PRODUCTION
Threshold
Target
Max
600
550
z
o
0
0
0
‘
500
450
400
AISC
950
900
z
o
/
$
S
U
850
800
750
LTIFR
i
s
r
u
o
h
g
n
k
r
o
w
0
0
0
,
0
0
2
r
e
p
0.14
0.12
0.08
0.06
0.04
0.02
0
EBITDA
350
m
$
S
U
300
250
100%
% Awarded
Production
80%
60%
40%
20%
0%
100%
% Awarded
AISC
80%
60%
40%
20%
Threshold
Target
Max
100%
% Awarded
LTIFR
80%
60%
40%
20%
0%
100%
% Awarded
EBITDA
80%
60%
40%
20%
Threshold
Target
0%
Max
200
Threshold
Target
0%
Max
Centamin plc Annual report 2016DIRECTORS’ REPORTCentamin plc Annual report 2016DIRECTORS’ REPORT
Threshold
Maximum
Actual
Awarded
opportunity
Financial (25%)
EBITDA ($m)
15%
96
REMUNERATION REPORT continued
5. Annual remuneration report in US$ continued
2016 – bonus achieved for Josef El‑Raghy (audited)
Performance
measure
Target
Maximum
Awarded
Business targets
Financial (see breakdown below)
Operational (see breakdown below)
Individual targets
Strategic
Corporate
Individual KPI
20%
20%
20%
10%
30%
Total
100%
35%
35%
35%
17.5%
52.5%
175%
100%
75%
50%
100%
67%
Performance targets achieved for the financial and operational performance measures:
Achieved of
the maximum
bonus
opportunity
20%
15%
10%
10%
20%
75%
Achieved of
the maximum
bonus
Category
Performance % of bonus
opportunity
measure
Financial (20%)
EBITDA ($m)
10%
Operational (20%)
All‑in sustaining cost
($ per ounce)
Production
(‘000 ounces)
LTIFR
10%
15%
5%
235
900
423
0.12
287
810
517
0.01
373
100%
694
100%
551
0.27
100%
0%
10%
10%
15%
0%
Notes to table:
• Threshold achievement represents 25% of the bonus opportunity for the respective performance measure.
• Maximum achievement represents 100% of the bonus opportunity for the respective performance measure.
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
Strategic
• Maintaining the dividend payout in accordance with the policy.
• Exceeding the operational and financial metrics.
• Resource/reserve replacement and expansion at Sukari, with a focus on the high‑grade underground.
• Exploration programme over licence areas in Burkina Faso and Côte d’Ivoire.
Corporate
• Corporate governance improvements – engagement programme with shareholders.
• Continued hand over of roles and responsibilities to the CEO.
• Maintain sound corporate governance and structure, board leadership and effective management of the board,
executive development and succession planning.
Individual KPIs
• Presenting at key seminars and investor conferences throughout the year.
• 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.
• Formalisation and communications of business strategy.
•
In‑country stakeholder management and shareholder relations.
On this basis, the committee determined that 75% of the maximum bonus of 175% of Josef El‑Raghy’s 2016 base salary
had been achieved. This resulted in a payment of GBP675,938 (US$831,719).
97
Achieved of
the maximum
bonus
opportunity
25%
20%
10%
6%
16%
77%
Achieved of
the maximum
bonus
2016 – bonus achieved for Andrew Pardey (audited)
Performance
measure
Target
Maximum
Awarded
Business targets
Financial (see breakdown below)
Operational (see breakdown below)
Individual targets
Strategic
Corporate
Individual KPI
25%
25%
10%
10%
30%
Total
100%
31%
31%
12.5%
12.5%
37.5%
125%
100%
80%
100%
60%
53%
Performance targets achieved for the financial and operational performance measures:
Category
Performance % of bonus
opportunity
measure
Operational (25%)
All‑in sustaining cost
($ per ounce)
Production
(’000 ounces)
LTIFR
10%
20%
5%
Threshold
Maximum
Actual
Awarded opportunity
235
900
423
0.12
287
810
517
0.01
373
100%
15%
694
100%
551
0.27
100%
0%
10%
20%
0%
Notes to table:
• Threshold achievement represents 25% of the bonus opportunity for the respective performance measure.
• Maximum achievement represents 100% of the bonus opportunity for the respective performance measure.
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:
Andrew Pardey
ACHIEVED
Strategic
• Exceeding the operational and financial metrics.
• Development of Cleopatra.
• Further optimisation of the process plant (throughput rates).
• Sukari reserve expansion potential, especially via high grades from the underground.
• Exploration programme over licence areas in Burkina Faso.
• Exploration programme over licence areas in Côte d’Ivoire.
Corporate
• Health and safety – safety record of 0.27 LTIFR in 2016.
• Maintaining low LTI rates and aiming for a zero‑harm safety record throughout the group’s operations.
• Labour productivity has improved with Sukari expansion.
Individual KPIs
• Management of team and senior staffing levels.
• Moving forward key objectives as CEO.
On this basis, the committee determined that 77% of the maximum bonus of 125% of Andrew Pardey’s 2016 base salary
had been achieved. This resulted in a payment of GBP435,531 (US$535,906) for 2016.
Centamin plc Annual report 2016DIRECTORS’ REPORTCentamin plc Annual report 2016DIRECTORS’ REPORT
98
99
REMUNERATION REPORT continued
5. Annual remuneration report in US$ continued
Performance targets for the financial and operational performance measures for 2017 are as follows:
The objectives for 2017 are set against the balanced scorecard. For both executive directors, the performance will be
measured against a combination of EBITDA and AISC (financial targets) and production and LTIFR (operational targets)
as illustrated below, together with strategic, corporate and individual KPIs:
Performance targets for 2017
PRODUCTION
z
o
0
0
0
‘
650
600
550
500
450
400
AISC
z
o
/
$
S
U
800
780
760
740
720
700
680
660
Threshold
Target
Max
Threshold
Target
Max
100%
% Awarded
Production
80%
60%
40%
20%
0%
100%
% Awarded
AISC
80%
60%
40%
20%
0%
LTIFR
i
s
r
u
o
h
g
n
k
r
o
w
0
0
0
,
0
0
2
r
e
p
0.3
0.25
0.2
0.15
0.1
0.05
0
Threshold
Target
Max
EBITDA
400
350
m
$
S
U
300
250
200
Threshold
Target
Max
100%
% Awarded
LTIFR
80%
60%
40%
20%
0%
100%
% Awarded
EBITDA
80%
60%
40%
20%
0%
2017 bonus
For Josef El‑Raghy the bonus for 2017
is based upon the balanced scorecard
approach, as follows:
• 70% – the business targets are
based on:
• 40% – financial and operational
(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.
For Andrew Pardey the bonus for
2017 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
• 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).
Financial
Performance
measure
EBITDA ($m)
Operational
Production (’000 ounces)
All‑in sustaining cost ($ per ounce)
Strategic
Corporate
Individual KPIs
LTIFR
Balanced scorecard
Balanced scorecard
Balanced scorecard
% of bonus
% of bonus
opportunity for
opportunity for
Josef El‑Raghy Andrew Pardey
10%
10%
15%
5%
20%
10%
30%
15%
10%
20%
5%
10%
10%
30%
Threshold
Maximum
297
790
486
0.27
363
711
594
0.01
Notes to table:
• Threshold achievement represents 25% of the bonus opportunity for the respective performance measure.
• Maximum achievement represents 100% of the bonus opportunity for the respective performance measure.
• The table does not represent a forecast, rather the targets are prepared internally for the purpose of incentivising and rewarding executives.
Pension arrangements (audited)
Josef El‑Raghy is entitled to a payment in respect of pension entitlement equal to 20% of base pay. No other pensions or
payments in lieu of pensions have been made by the Company to the directors.
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 (“RSP”) for directors and
senior management.
Andrew Pardey was granted 690,000 awards in 2016 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. The final tranche of the grants awarded
under the DBSP prior to Andrew becoming a director will vest in June 2017. Vested awards received by Andrew Pardey in
2016 under the DBSP amounted to 553,333 shares. Under the terms of the DBSP, the participant receives vested shares by
virtue of their continued employment with the Company on anniversary of the award over the three‑year vesting period.
Award
DBSP 11 October 2012
Granted
500,000
DBSP 4 June 2013
1,260,000
0.5886
840,000
Value of award
at grant date
in US$
(per share)(1)
Total
vested
Total
unvested
1.6265
500,000
Total
vested
in 2016
—
420,000
—
—
DBSP 4 June 2014
400,000
1.0526
133,334
133,333
133,333
DBSP TOTAL
RSP 4 June 2015
900,000
Footnote 2
2,160,000
1,473,334
133,333
553,333
Performance
conditions
Service
conditions
Service
conditions
Service
conditions
—
—
900,000
690,000
— Performance
conditions
— Performance
conditions
RSP 4 June 2016
690,000
Footnote 3
(1) The fair value of the DBSP was calculated using the closing share price on the grant date (converted from GBP:US$) and no other factors were taken into
account in determining the fair value. See note 27 to the financial statements for details of the RSP valuation.
(2) The value of the award granted under the terms of the RSP on 4 June 2015 in US$ is 20% TSR: 0.7894; 50% EPS: 0.9994; 30% production: 0.9994.
(3) The value of the award granted under the terms of the RSP on 4 June 2016 in US$ is 20% TSR: 0.9107; 30% reserve growth: 20% EBITDA: 1.46 30%
gold production: 1.46. See pages 104 and 105 for the performance conditions of the RSP.
Centamin plc Annual report 2016DIRECTORS’ REPORTCentamin plc Annual report 2016DIRECTORS’ REPORT
100
101
REMUNERATION REPORT continued
5. Annual remuneration report in US$ continued
Long term incentives – shares award table (audited) continued
SCHEME SUMMARY
DBSP scheme(1)
Type: deferred bonus share award.
Award: discretionary bonus award.
RSP award in June 2016
Type: restricted share plan.
Award: based on 150% of salary.
Value: see note 28 to the financial statements.
Value: see note 28 to the financial statements.
Performance period: vesting in trances over three years from date
of grant.
Performance measures: service conditions.
Performance period: 31 December 2016 to 31 December 2019.
Vesting period: June 2019 vesting period with a further two year
holding period for 50% of the vested award.
Performance measures: see note 28 to the financial statements.
(1) Grants under the DBSP were made to Andrew Pardey before he became a director.
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.
Date of agreement
Notice period
Expiry date
Pension
Benefits
Annual bonus
Long term incentives
Termination payment
JOSEF EL‑RAGHY
8 May 2015.
ANDREW PARDEY
8 May 2015.
Twelve months’ notice from either party.
Twelve months’ notice from either party.
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.
Eligible to participate in the new RSP.
Eligible to participate in the new RSP.
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 months’
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 months’
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 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 shares awarded by the Company are included in the calculation.
The following table shows the current shareholding of each of the directors.
Name
Executive directors(2)
Josef El‑Raghy
Andrew Pardey
Non‑executive directors(2)
Edward Haslam
Trevor Schultz
Mark Bankes
Mark Arnesen
As at
31 December
2016
Percentage
of base
salary/fees(3,4)
53,849,372
14,115%
969,268(1)
284%
102,056
30,000
150,000
49,000
110%
50%
238%
77%
(1) Excludes unvested awards under the DBSP and RSP.
(2) No other executive directors or non‑executive directors hold shares, share options or awards that are subject to performance measures.
(3) There have been no changes to directors‘ shareholdings from 31 December 2016 to the date of this report.
(4) The valuation of the shareholdings are based on the share price at 31 December 2016.
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 six years.
Centamin plc
FTSE Gold Mine
FTSE 250
200
150
$
S
U
100
50
0
2011
2012
2013
2014
2015
2016
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 (chairman/CEO)
2012 (chairman/CEO)
2013 (chairman/CEO)
2014 (chairman/CEO)
2015 (chairman)
2016 (chairman)
Single figure
remuneration
US$1,290,742
US$1,920,644
US$2,020,562
US$2,073,192
US$1,862,338
US$1,709,877
Annual
bonus as %
of maximum
Long term
incentives
65%
80%
75%
80%
70%
75%
Nil
Nil
Nil
Nil
Nil
Nil
Centamin plc Annual report 2016DIRECTORS’ REPORTCentamin plc Annual report 2016DIRECTORS’ REPORT
102
103
REMUNERATION REPORT continued
6. Comparative remuneration data (audited) continued
Performance graph and CEO remuneration table continued
CEO – Andrew Pardey
2015 (eleven months as CEO)
2016
Single figure
remuneration
US$1,063,348
US$1,205,892
Annual
bonus as %
of maximum
68%
77%
Long term incentives
RSP award
150% of base salary
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 (Centamin employee remuneration)(1)
Centamin’s chief executive officer
Percentage change between
31 December 2015 and 31 December 2016
‑3%
13%
(1) Based on the average number of employees of the Centamin group in 2016: 1,490 (2015: 1,462 employees). See page 133 for details on the devaluation of EGP.
Relative spend on pay
The following table proves an illustration of the relative spend on pay to place the directors’ pay in the context of the wider
group finances.
Comparator group (Centamin employee remuneration)(1)
Remuneration of Centamin’s executive directors
Remuneration of Centamin’s non‑executive directors
Distributions to Centamin shareholders(2)
Percentage change between
31 December 2015 and 31 December 2016
‑3%
0%
‑13%
+36%
(1) Based on the average number of employees of the Centamin group in 2016: 1,490 (2015: 1,462 employees).
(2) The percentage change relates to distributions to shareholders based on the amount paid during 2015 and 2016.
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.
7. Long term incentive arrangements
Introduction
Centamin introduced a long term incentive scheme which was approved by shareholders at the AGM on 18 May 2015.
The scheme was introduced to provide a suitable recruitment and retention tool for any new or promoted executives and
incentivise executive directors and senior management. 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.
Summary of the restricted share plan (“RSP”)
The RSP provides the right for the Company to grant awards to employees of the Company or any of its subsidiaries.
Eligibility
Awards may be granted under the RSP to all persons who at the date at which the award is granted under the RSP are
employees of the group, though at present it is envisaged that awards will be reserved for senior management in the group.
The remuneration committee decides to whom awards are granted, the number of ordinary shares falling under an award and
the precise nature of the performance conditions. No awards may be granted more than ten years after the date on which the
RSP was adopted by the Company.
Granting of awards Awards may be granted under the RSP at any point during the 28 day period following adoption of the RSP, the 42 day period
Anti‑dilution
and scheme limits
Award price
Exit events
Leavers
following the announcement of the annual, quarterly or half‑year results of the Company or at any other period in which the
directors of the Company deem that awards should be granted due to exceptional circumstances. In no circumstances shall
awards be made at a time when their grant would be prohibited by or in breach of any law, regulation with force of law, or rule of
an investment exchange on which shares are listed or traded. The shares to be transferred pursuant to vested awards may either
be newly issued shares, treasury shares, or existing shares to be transferred pursuant to the Company’s employee benefits trust,
the trustees of which are Computershare Trustees (Jersey) Limited.
The overall number of shares transferred or transferable pursuant to awards, when aggregated with all employee share plans
operated by the Company (dilutive shares) cannot exceed 10% of the issued share capital of the Company in any ten‑year rolling
period when added to the dilutive shares. The overall number of shares transferred or transferable pursuant to awards for the
benefit of executives, when aggregated with all executive share plans operated by the Company (executive dilutive shares)
cannot exceed 5% of the issued share capital of the Company in any ten‑year rolling period when added to the executive
dilutive shares. For the purposes of these limits, treasury shares will count as newly issued shares where required by institutional
investor guidelines. Awards or other rights to acquire shares which have lapsed or have been renounced do not count towards
this limit. The aggregate market value of any award received by an award holder may not (assessed on the value of the shares at
the date of granting the award), exceed 150% of the award holder’s total remuneration as at the date of the grant of the award.
In circumstances that the remuneration committee determine as being exceptional, that limit may be increased to 250% for a
particular award.
Award holders are not required to make any payment to participate in the RSP and no price is payable by the award holders to
enable shares to be transferred.
In the event of a takeover, scheme of arrangement, winding up or compulsory acquisition of the Company, the vesting of an
award may be accelerated. A proportion of the shares subject to an award equivalent to the proportion of the vesting period
which has passed at the date of the exit event (rounded down to the nearest month) shall vest, subject to the extent the
performance conditions have been met, to be determined at the discretion of the remuneration committee. In the event of an
internal reorganisation of the group which results in a new holding company and where the shareholders of the new holding
company, immediately after it has obtained control, are substantially the same as the shareholders of the Company, awards may
not vest or lapse but will be replaced by new awards over shares in the new holding company.
Where an award holder leaves employment with the group, their award will immediately suspend and will lapse upon the expiry
of 30 days from the date of leaving, unless the remuneration committee determines that the award holder should be entitled to
retain their award. Where the remuneration committee permits the leaver to retain their award, a proportion of the award will vest
over a proportion of the award shares which is equivalent to the proportion of the vesting period which has passed at the date of
leaving (rounded down to the nearest month) subject to the extent the performance conditions have been met, to be determined
at the discretion of the remuneration committee. The resulting shares will be issued or transferred to the award holder on the date
they would have received them, had they not left (subject to the same transfer in two equal tranches). An award granted under the
RSP is not transferable. Awards will also lapse if an award holder is declared bankrupt or attempts to assign their award.
Status of shares
The shares acquired under the RSP will rank pari passu with the Company’s issued ordinary shares.
Alteration
of awards
Amendments
to the RSP and
assumption
of awards
If there is a variation of the share capital of the Company, including a rights issue, consolidation, sub‑division or reduction of
share capital that effects the value of awards under the RSP, the remuneration committee may adjust the awards in a manner that
they deem to be fair and reasonable.
The RSP may at any time, on the recommendation of the remuneration committee be amended or added to in any respect,
provided that prior approval of the Company has been obtained in a general meeting for alterations or additions to the rules of
the RSP which are to the advantage of award holders in respect of the rules governing eligibility, entitlement to acquisition of
shares under an award, to whom awards can be granted, RSP limits and individual limits on participation and the adjustment of
awards on a variation of share capital. Awards granted under previous schemes operated by the Company may be assumed into,
or satisfied under, the RSP. Minor amendments to benefit the administration of the RSP, to take account of a change in legislation
or to obtain or maintain favourable tax, exchange control or regulatory treatment for award holders or group companies would
not require approval in a general meeting.
Malus claw
back provision
This 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”.
Following the adoption of the restricted share plan, the Company has granted the following awards:
June 2015
5,145,000 conditional awards to employees of the group (of which 900,000 awards were made to Andrew Pardey, CEO).
June 2016
4,999,000 conditional awards to employees of the group (of which 690,000 awards were made to Andrew Pardey, CEO).
In total, 35 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.
Centamin plc Annual report 2016DIRECTORS’ REPORTCentamin plc Annual report 2016DIRECTORS’ REPORT
104
105
REMUNERATION REPORT continued
7. Long term incentive arrangements
continued
Summary of the restricted share plan
(“RSP”) continued
The awards to be granted in June 2017
will vest in June 2020 (with 50% of the
vested shares deferred for a further two
years) and will be subject to satisfaction
of the performance conditions over
the three‑year financial period ended
31 December 2019:
• 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 (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;
• 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 2016
to the most recent reserve estimate
prior to vesting) compared with the
cumulative reserves mined from
31 December 2016 to 31 December
2019. All 30% of the award will
vest if the ratio is 100%. 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 over
the three‑year period to December
2019. If a compound annual
growth rate of 3.5% of EBITDA
is achieved by 2019, all 20% of
the award tranche shall vest. If
EBIDTA in 2019 is maintained at
the levels achieved in 2016, 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
performance criteria will be assessed
based on the financial year ended
31 December 2019; and
• gold production: 30% of the award
shall be assessed by reference
to compound growth in gold
production over the three‑year
period to December 2019. If a
compound annual growth rate of
3.5% of gold production is achieved
by 2019, all 30% of the award
tranche shall vest. If gold production
in 2019 is maintained at the levels
achieved in 2016, 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 optimization.
The awards granted on 4 June 2016
will vest on 4 June 2019 (with 50%
of the vested shares deferred for a
further two years) and will be subject
to satisfaction of the performance
conditions over the three‑year financial
period ended 31 December 2018:
• 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;
• 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 over
the three‑year period to December
2018. If a compound annual growth
rate of 9% of EBITDA is achieved,
all 20% of the award tranche shall
vest. If a compound annual growth
rate of 5% 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 over the three‑year
period to December 2018.
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.
The awards granted on 4 June 2015
will vest on 4 June 2018 (with 50%
of the vested shares deferred for a
further two years) and will be subject
to satisfaction of the performance
conditions over the three‑year financial
period ended 31 December 2017:
• 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”)
over the three‑year period to
December 2017. 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 over the three‑year
period to December 2017.
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.
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. Additional grants were
awarded in June 2014 and June 2016
to new and existing participants which
also vest 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 fifth year,
provides a simple yet effective
incentive to senior management and
senior employees below board level,
motivating and retaining individuals
over the longer term. 26 employees
remain in the scheme, including heads
of department and senior personnel
based onsite, as well as members of
the senior management team located
at the head office.
At the AGM of the Company on
11 May 2016 the following votes
for and against the adoption of the
remuneration report were as follows:
Approval of the remuneration report
806,745,332 (98.58%)
11,641,708 (1.42%)
12,406,078
Approval of the remuneration policy
811,706,430 (99.13%)
7,155,779 (0.87%)
11,930,910
For
Against
Withheld
This report was approved by the board of directors and signed on its behalf by:
Edward Haslam
Chairman of the remuneration committee
1 February 2017
Centamin plc Annual report 2016DIRECTORS’ REPORTCentamin plc Annual report 2016DIRECTORS’ REPORT
106
107
AUDIT AND RISK REPORT
The committee was encouraged by the work carried out in
2016 by management to improve the control environment
through upgrades in IT systems and streamlining policies
and procedures.
Dear shareholders
This report provides a summary
of the activities undertaken by our
independent audit and risk committee
during 2016. The report looks at the
involvement of the committee in
respect of the work carried out by the
external auditor, the appointment and
scope of the internal audit function
and the development of the control
environment in compliance with the
2014 Corporate Governance Code
(the “Code”).
Audit committee composition
and effectiveness
The audit and risk committee has
three independent non‑executive
directors, Mark Bankes, Edward Haslam
and me as chairman. Biographies
of the members of the committee
can be found on pages 72 and 73.
All committee members attended all
eight scheduled meetings during 2016.
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 committee meetings are regularly
attended, by invitation, by the
chairman, CEO and CFO along with
the company secretary and general
counsel. PwC is 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.
In addition to the scheduled quarterly
meetings, the committee also meet, by
way of conference calls, at least once
a quarter to review the draft quarterly
and annual financial statements.
Mark Arnesen
Audit and risk committee chairman
A summary of the committee’s responsibilities and activities carried out during 2016 are set out below:
TOPICS
COMMITTEE RESPONSIBILITIES
External auditor
Approval of the external audit plan and assess the effectiveness of the external auditor.
Internal audit
Approval of the scope of the internal audit function and review of work carried out in 2016.
New appointment
Ensuring an effective hand over of responsibility to the newly appointed CFO.
Financial reporting
Making recommendations to the board for the approval to the quarterly, half‑year and annual results.
Reporting
timeframes
Risk reporting
Review of the accelerated timetable for the production of the annual report and financial statements which were
supported by improvements in monthly financial reporting and quarterly and half‑yearly results.
Review and monitoring of the risk management processes including periodic reviews of the corporate, strategic
and operational risks.
Internal controls
Review of the internal control environment, to include controls over financial reporting, budgeting and reporting
obligations.
Accounting for
transactions
Review of the cost recovery model together with the timing and mechanism for profit sharing.
Dividends
Ensure the dividend proposals are in‑line with the group policy and making recommendations to the board.
General
Oversight for the preparation of major subsidiary accounts, the repatriation of funds through the corporate structure,
the treasury policy and the re‑organisation of the West African holding structure.
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.
The committee considered the results
and noted that there were no proposed
changes to the composition. The board
also conducted an evaluation of the
committee, its composition, experience
and activities during the year and there
were no proposed changes to the
composition of the committee.
The committee considered the action
plan for 2017 which included (but not
limited to) the following areas:
• a review of the scope of the internal
audit function to ensure the tasks
are aligned with the business needs;
• the support and development of
the risk reporting to assist further
defining the Company’s risk
appetite; and
• assisting the dissemination of key
messages about the Company’s
culture, attitude to risk and
risk tolerances throughout the
organisation (see risk management
report in the strategic report for
more details).
Centamin plc Annual report 2016DIRECTORS’ REPORTCentamin plc Annual report 2016DIRECTORS’ REPORT 108
109
AUDIT AND RISK REPORT continued
Significant issues highlighted during the year by the committee
TOPIC
SIGNIFICANT ISSUE
SUMMARY OF THE SIGNIFICANT ISSUE
KEY ACTION POINTS
The following significant issues were considered by the committee during the year (full details and analysis are set out in
note 4 to the financial statements).
Dividend
policy
Company policy
TOPIC
SIGNIFICANT ISSUE
SUMMARY OF THE SIGNIFICANT ISSUE
KEY ACTION POINTS
Accounting treatment
Cost recovery
and profit
share
Accounting for
transactions
Valuation of
stores and
consumables
inventory
Accounting for
transactions
Impairment
of assets
(other than
financial
assets)
Going concern
Accounting
basis of
preparation
A full analysis has been performed by
management on the cost recovery model
(“CRM”), the timing and mechanism for
profit share.
The committee reviewed the approach taken
in reconciling the CRM, the requirements
under the concession agreement and the
correspondence with government (EMRA)
on the timing, payment process and allocation
between the parties.
Inventory is required to be carried at the lower
of cost or net realisable value. For inventory
of this nature, a write down to net realisable
value will generally occur when the inventory
is damaged or obsolete. The committee
considered management’s proposals in
respect to the valuation of inventory. The
committee agreed with management that
there was no requirement for a write off if
inventory, however, in respect of inventory
obsolescence, a provision of US$2.5 million
had been applied.
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 the assessment as to the possibility
of whether impairment losses have arisen,
the committee reviewed:
• exploration and evaluation assets and
activity for indicators of impairment;
• management’s assessment of the factors
in IFRS 6 and IAS 36 as they apply to
E&E assets for Sukari, Burkina Faso and
Côte d’Ivoire.
Committee actions
• Approval of CRM.
• Agreement on timing and mechanism of profit
sharing going forward in compliance with
the CA.
• Agreement to residual cost recovery payments
eligible for recovery in accordance with the
concession agreement.
Management actions
• Profit share payments to EMRA and repayment
of advance distributions commenced in
October 2016.
• Accounting for profit sharing and residual cost
recovery payments.
Committee actions
• Review of management accounting papers.
• Monitoring the cost and timing of the planned
system improvements.
Management actions
• A review of inventory holding periods,
identification of slow moving and obsolete
stock was implemented by management
during the year.
Inventory software systems were upgraded
in 2016 to help further identify and
categorise stock.
•
Committee actions
• The committee reviewed the papers presented
by management in respect to IAS 6 and IAS 36
and were in agreement with the conclusions
set out above.
Management actions
• Preparation of the impairment review for
presentation to the committee, to include
the key assumptions such as:
•
forecast gold prices;
• discount rates;
• production volumes;
•
• costs and recovery rates.
reserves and resources report; and
The directors performed an assessment of the entity’s ability to continue as a going concern at the
end of each reporting period. The period of the assessment covered at least twelve months from
date of signing the financial statements. In addition to the twelve month going concern consideration
the directors assessed the Company’s prospects over the longer term, specifically addressing a
period of five years as part of the overall viability statement. Details of the viability statement and
review assessment can be found in the strategic report on page 31.
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 21 to the financial statements;
•
forecast gold price;
• production volumes; and
• costs and recovery rates.
These financial statements for the year ended 31 December 2016 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.
Due to the strong financial position of
the Company and the ongoing cash flow
generation from the Sukari Gold Mine,
the committee and the board considered
the Company’s dividend policy and full year
dividend proposals. The board approved
an update to the Company’s dividend policy
whereby the board will aim to approve
an annual dividend of at least 30% of the
Company’s net cash flow after sustaining
capital costs and following the payment of
profit share due to the government of Egypt.
Committee actions
• The committee reviewed the papers presented
by management and recommended to
the board the review and approval of the
proposed interim and final dividend proposals.
Management actions
• Preparation of the dividend proposal
papers and associated cash flow projections
and forecasts.
Fair, balanced and understandable
The committee was satisfied that
the controls over the accuracy and
consistency of the information in the
2016 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.
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 during the year
were sufficiently weighted against
longer term growth expectations,
as Sukari’s production is optimised.
In addition, the expectations around
the exploration projects in Burkina
Faso and Côte d’Ivoire were balanced
against the expected time horizon
for advanced exploration projects to
reach production.
• is the annual report clear and
understandable?
• 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 recommended that the
key strategic priorities be integrated
throughout the report to help investors
understand the linkages between risk,
strategy and performance. In addition,
consideration was given to include
narrative in the front half of the report
to ensure the key items drawn from the
financial statements were appropriately
addressed in both the strategic and
directors’ reports.
A further review of the report was
carried out to remove repetition
(where possible) to further streamline
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.
External auditor
During 2016, the Company’s external
auditor, PricewaterhouseCoopers
LLP (“PwC”) attended committee
meetings to present its detailed
audit plan and final audit review and
recommendations. The committee
agreed with the audit approach at the
planning stage and agreed with the
materiality thresholds and key audit risk
areas identified by PwC.
During the year the Financial Reporting
Council’s Audit Quality Review Team
(“FRC Review Team”) carried out a
review of the external audit file for the
annual report 2015. There was one
minor recommendation and the review
by the FRC Review Team has now
been closed.
Centamin plc Annual report 2016DIRECTORS’ REPORTCentamin plc Annual report 2016DIRECTORS’ REPORT 110
111
AUDIT AND RISK REPORT continued
External auditor 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 2016 to improve
our stock handling and inventory
systems onsite, to help improve our
reporting and inventory management.
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. A detailed questionnaire
is completed by the audit committee
to help with the evaluation process.
Following the evaluation process, key
findings are relayed to the audit partner
and 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 audit
partner throughout the statutory audit
and management has also worked
directly with the audit team. PwC has
also had open access to the board
of directors.
The audit team visited Sukari regularly
to carry out inventory, controls and
substantive testing. PwC also visited
our legal advisers in Cairo and carried
out audit work at our administrative
offices in Egypt and Jersey.
Having carried out the evaluation,
the committee is satisfied that the
audit engagement for the financial
year ended 2016 was both effective
and added value to the group.
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$626k, there were non‑audit services
carried out by PwC during the year
of US$15k. Full details are set out in
note 23 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
in 2014, allowing for a further two
years before rotation is required.
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.
Appointment of the internal auditor
BDO LLP, the group’s externally
appointed internal auditor, carried
out a detailed review of the IT systems
throughout the group, focusing in
detail on the IT environment. The audit
team spent time in Egypt to evaluate
the IT infrastructure and compile
their report.
BDO LLP provided a list of
recommendations to the committee
which included proposals to enhance
the IT environment and make better
use of the existing infrastructure and
the system in place. The action plan
and progress updates, following
the initial internal audit review, will
be monitored by the committee
throughout 2017.
IT STRATEGY
IT INFRASTRUCTURE
IT SECURITY
IT development and resource consideration
Enterprise architecture planning
IT security policies
Availability, capacity, and performance
forecasting
IT asset management
Logical security
Administrators
Remote access
Application access controls
Physical security
Mobile devices
Data back‑ups
The scope of work for 2017, which was developed after consultation with the management team, the committee and
BDO LLP, will develop the initial IT review and put in place an action plan to include penetration testing, which will help
identify any weaknesses in cyber security.
2017 AUDIT PLANNING
Follow‑up audit
BDO LLP will carry out follow‑up work on the reports prepared in 2015 which related to:
• core financial controls; and
•
risk management.
Tendering and
procurement, contract
management,
payments audit
BDO LLP will undertake a review of tendering, contract management and payments, with the primary focus being
at SGM. The scope will cover:
•
tendering and procurement (focus on large contracts commenting on the design of, and adherence to,
the overall process);
• contract management procedures;
•
• cash management (insofar as payments are concerned).
testing of contract payments (focus on accuracy and pricing); and
IT penetration testing
BDO LLP will undertake penetration testing in order to provide assurance over the security of Centamin’s IT
systems. This will cover:
• search for network vulnerabilities;
• search for web infrastructure vulnerabilities;
• attempt to penetrate systems using vulnerabilities; and
follow‑up testing to confirm fixes to issues identified.
•
Key financial processes
A review of controls within specified key financial processes including:
• financial close processes; and
• gold book and sales cycle controls.
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 2017.
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 the internal control
environment from BDO LLP.
Risk assessment
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.
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 following diagram illustrates the
structure for risk review and reporting
across the organisation:
BOARD – OVERALL RESPONSIBILITY FOR RISK
EXECUTIVE AND MANAGEMENT
WORKING GROUP
Detailed assessment of operational
and corporate risks
AUDIT AND RISK COMMITTEE
Review risk structure
and effectiveness
EXTERNAL AUDIT
Review of control environment
and risk statements
MANAGEMENT
Responsibility for managing
the risk framework
OPERATIONS
HODs to identify risks and
perform risk assessment
PRIMARY RISK REVIEW
COMMITTEES (OTHER)
Consider risks impacting
committee objectives
INTERNAL AUDIT
Assess effectiveness of controls,
risk mitigation, risk reporting
SECONDARY RISK REVIEW
– EVALUATION
THIRD RISK REVIEW
– ASSURANCE
Centamin plc Annual report 2016DIRECTORS’ REPORTCentamin plc Annual report 2016DIRECTORS’ REPORT 112
113
AUDIT AND RISK REPORT continued
Risk assessment continued
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.
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 IT systems
at Sukari and Alexandria, Egypt;
• external audit work culminating
in the annual and half‑yearly
audit report;
• quarterly risk reporting to
include analysis on corporate
and operational risks, mitigation
(including insurance cover),
operational level 4/5 incident
reporting and corrective action; and
• policy updates and review.
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.
Targets in 2017
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 2017 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 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 Code 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 31
and our going concern statement can
be found on page 114.
Having considered the risks in detail,
the principal risks have been identified
and are set out on pages 32 to 35.
The risks reflected in the matrix and
the mitigating actions reflect the
principal risks to the Company and its
stakeholders.
Control environment
Full details of the risk management and
control environment are set out in the
strategic report. 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.
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.
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.
For and on behalf of the audit and
risk committee of Centamin plc.
Mark Arnesen
1 February 2017
The committee was encouraged by the
developments during the year, which
included the following:
• upgrade of Mainpac, an accounting
system for managing the
supply chain;
• update of the 2016
accounting manual;
• comprehensive review of the
existing board and committee
charters and key corporate policies;
• review of the existing supply manual
and a delegated authorities manual;
and
• the development of a standard
template for all contracts to include
standard terms and conditions.
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, in 2015, was an important
step in the Company’s evolution,
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 31 and the directors’
report on page 114.
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.
Centamin plc Annual report 2016DIRECTORS’ REPORTCentamin plc Annual report 2016DIRECTORS’ REPORT 114
Centamin plc
Annual report 2016
FINANCIAL STATEMENTS
DIRECTORS’ RESPONSIBILITIES
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 2016 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 provides the
information necessary for shareholders
to assess the Company’s position and
performance, business model and strategy.
The directors have undertaken a robust
assessment of the principal risks impacting
the Company. The assessment identified
strategic and operational risks at a corporate
level and principal risks impacting our
operations in Egypt and West Africa.
Details of the risk assessment can be found
in the audit and risk report on pages 111
and 112 and the risk management section
on pages 30 to 35.
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 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 1 February 2017
and signed on their behalf by:
Andrew Pardey
Ross Jerrard
Chief executive officer
Chief financial officer
1 February 2017
1 February 2017
115
INDEPENDENT AUDITOR’S REPORT
to the members of Centamin plc
Report on the group financial statements
Our opinion
Our audit approach
Context
The scope of our audit
and our areas of focus
Centamin plc is listed on the London Stock
Exchange and its principal operation is
the Sukari Gold Mine in Egypt. Production
continues to increase and this together
with the positive impact on profitability
of strong gold prices set the context
for our audit in 2016. In addition to the
operation of Sukari the group continues its
exploration programme in Burkina Faso and
Côte d’Ivoire.
Overview
• Overall group materiality: $6.8 million
which represents 5% of three‑year
average profit before tax, after
exceptional items (2015: $5.4 million).
The higher materiality reflects the higher
profitability of the group.
• We focused our audit procedures on the
Sukari Gold Mine, as well as performing
audit procedures over the group’s
significant exploration and corporate
operations. Two components were
subject to an audit of their complete
financial information whilst a further four
were subject to specific audit procedures
over material balances. Audit procedures
were performed in Egypt and Jersey.
• All audit work on the areas of
focus was performed by the group
engagement team.
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
2016 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 and Article 4 of the
IAS Regulation.
What we have audited
The financial statements, included within the
annual report, comprise:
• the consolidated statement of financial
position as at 31 December 2016;
• 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 IFRS as adopted by
the European Union, and applicable law.
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 116. 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 2016, one addition was made to
our areas of focus whilst one other was
removed. Amounts due to the government
with respect to operating and exploration
properties was added this year. With the
commencement of profit share payments
to the Egyptian Mineral Resource Authority
(“EMRA”) management were required
to use judgment in their determination
of the amount of profit share payable for
the period.
Taxation was removed as an area of focus in
2016 as the material tax liability which arose
in the prior period was event driven and
did not reoccur. As a result there were no
material tax balances in the current period.
Centamin plc Annual report 2016FINANCIAL STATEMENTS
116
117
INDEPENDENT AUDITOR’S REPORT continued
to the members of Centamin plc
AREA OF FOCUS
HOW OUR AUDIT ADDRESSED THE AREA OF FOCUS
How we tailored the audit scope
Materiality
The appeal before the Supreme Administrative Court in Egypt
concerning the validity of the Sukari Concession Agreement
Refer to page 143 (note 21 to the financial statements) and pages 34
and 35 (principal risks).
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 Gold Mine 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
$867.7 million at 31 December 2016.
The outcome of this case is subject to significant uncertainty due to
ongoing political, social and economic volatility in Egypt.
The claim before the Administrative Court
concerning diesel fuel disputes
Refer to page 143 (note 21 to the financial statements) and pages 34
and 35 (Principal risks).
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
$231.2 million and the potential amount that the group could have to
pay if they lose the historical case is EGP403 million (approximately
US$21.8 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.
In 2016, 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, in note 21 to
the financial statements. No contingent asset has been recognised.
Amounts due to the government with respect to
operating and exploration properties
Refer to page 135 (note 7 to the financial statements) and pages 34
and 35 (Principal risks).
The group operates across a number of jurisdictions and, like most
groups, is subject to periodic challenges by the government on
amounts owed with respect to the Sukari operations in Egypt and the
exploration properties in West Africa.
The amounts owed to EMRA with respect to the profit sharing
arrangement under the Concession Agreement are based on
management’s best judgment of the probable amount of the profit
share liability.
As at 31 December 2016 the group has an expense of $51.3 million
and a net payable/receivable of $4 million as the result of profit sharing
and cost recovery mechanisms under the Concession Agreement,
which we considered merited our focus.
Amounts owed to the government in Burkina Faso and Côte
d’Ivoire were not material during the year; however the risk of
uncertainty due to payments owed to the government will increase
as exploration continues.
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.
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 that 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 21 to the financial statements and
determined that they were consistent with the requirements of IFRS
and the results of our audit work.
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.
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.
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.
With regards to amounts owed to EMRA, we held discussions with
management regarding their calculation of the amount due and
obtained the calculation.
We agreed the amounts in the calculation to source documentation
and where elements of the calculation were subject to uncertainty,
we tested management’s assessment of the probable amount of the
liability to satisfy ourselves that amounts due to government had
been appropriately recorded. Where management had obtained
independent legal or expert advice, we obtained that advice and
evaluated the competency of the experts involved to assess the
key assumptions.
We also performed procedures to ensure the completeness
of amounts due to government, with no material unrecorded
amounts identified.
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 $6.8 million
materiality
(2015: $5.4 million).
How we
determined it
5% of three‑year average
profit before tax, after
exceptional items.
Rationale for We used the profit before
benchmark
tax after exceptional items
benchmark and took a
applied
three‑year average to
eliminate the effects
of gold price volatility.
We chose profit before tax
after exceptional items as
it is the key indicator of the
financial performance of
the group.
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 and exploration activity in Egypt,
with exploration activity in 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. Specific audit procedures were
performed over material balances relating
to the group’s exploration and corporate
activities. 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.
Other required and voluntary reporting
ISAs (UK & IRELAND) REPORTING
We agreed with the audit committee that
we would report to them misstatements
identified during our audit above $338,000
(2015: $270,000) as well as misstatements
below that amount that, in our view,
warranted reporting for qualitative reasons.
Going concern
Under the Listing Rules we are required
to review the directors’ statement, set
out on page 114, in relation to going
concern. 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.
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:
• materially inconsistent with the information in the audited financial statements; or
• apparently materially incorrect based on, or materially inconsistent with, our knowledge of
the group acquired in the course of performing our audit; or
• otherwise misleading.
•
the statement given by the directors on page 114, in accordance with provision C.1.1 of the
UK Corporate Governance Code (the “Code”), 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.
We have no exceptions to report.
•
the section of the annual report on pages 109 and 110, as required by provision C.3.8 of the
Code, describing the work of the audit committee does not appropriately address matters
communicated by us to the audit committee.
We have no exceptions to report.
Centamin plc Annual report 2016FINANCIAL STATEMENTSCentamin plc Annual report 2016FINANCIAL STATEMENTS 118
119
INDEPENDENT AUDITOR’S REPORT continued
to the members of Centamin plc
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 114 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.
We have nothing material to add or to draw
attention to.
the disclosures in the annual report that describe those risks and explain how they are being
managed or mitigated.
We have nothing material to add or to draw
attention to.
the directors’ explanation on page 31 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 nothing material to add or
to draw attention to.
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
we have also reviewed the statement
that the directors have chosen to make in
relation to the longer‑term viability of the
group. 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 the 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.
In our opinion, the information given in the
corporate governance statement set out on
pages 71 and 155 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, based on the work
undertaken in the course of the audit:
• 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; and
• the strategic report and the directors’
report have been prepared in
accordance with applicable legal
requirements.
In addition, in light of the knowledge
and understanding of the group and its
environment obtained in the course of the
audit, we are required to report if we have
identified any material misstatements in the
strategic report and the directors’ report.
We have nothing to report in this respect.
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 United Kingdom
Companies Act 2006 (“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.
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 114, the directors are responsible for
the preparation of the financial statements
and for being satisfied that they give a true
and fair view.
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
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.
With respect to the strategic report and
directors’ report, we consider whether those
reports include the disclosures required by
applicable legal requirements.
Richard Spilsbury
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and
Recognised Auditors
appropriate to the group’s circumstances
and have been consistently applied and
adequately disclosed;
London
1 February 2017
• the reasonableness of significant
accounting estimates made by the
directors; and
• the overall presentation of the financial
statements.
(a) The maintenance and integrity of the
Centamin plc website is the responsibility
of the directors; the work carried out by the
auditor 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.
Centamin plc Annual report 2016FINANCIAL STATEMENTSCentamin plc Annual report 2016FINANCIAL STATEMENTS 120
121
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2016
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2016
Revenue
Cost of sales
Gross profit
Other operating costs
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:
Profit/(loss) 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 before profit share:
Basic (cents per share)
Diluted (cents per share)
Earnings per share after profit share:
Basic (cents per share)
Diluted (cents per share)
31 December
2016
US$’000
31 December
2015
US$’000
687,387
(389,276)
298,111
(32,077)
(122)
917
266,829
(821)
266,008
(51,253)
214,755
508,396
(416,242)
92,154
(27,722)
(6,294)
269
58,407
(6,837)
51,570
—
51,570
214,755
51,570
45
45
(212)
(212)
214,800
51,358
23.049
22.935
18.608
18.516
4.506
4.441
4.506
4.441
Notes
5
6
6
14
6
8
7
15
25
25
25
25
The above audited consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Non‑current assets
Property, plant and equipment
Exploration and evaluation asset
Prepayments
Other receivables
Total non‑current assets
Current assets
Inventories
Available‑for‑sale financial assets
Trade and other receivables
Prepayments
Cash and cash equivalents
Total current assets
Total assets
Non‑current liabilities
Provisions
Total non‑current liabilities
Current liabilities
Trade and other payables
Tax liabilities
Provisions
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share option reserve
Accumulated profits
Total equity attributable to:
– owners of the parent
Total equity
31 December
2016
US$’000
31 December
2015
US$’000
Notes
13
14
12
10
11
15
10
12
26
17
16
8
17
18
19
868,926
153,918
295
81
871,467
152,077
28,750
60
1,023,220
1,052,354
136,562
134,775
130
24,870
2,028
399,873
563,463
163
23,784
4,330
199,616
362,668
1,586,683
1,415,022
7,697
7,697
47,991
—
6,476
54,467
62,164
7,139
7,139
47,138
6,837
576
54,551
61,690
1,524,519
1,353,332
667,472
3,048
853,999
665,590
2,469
685,273
1,524,519
1,524,519
1,353,332
1,353,332
The above audited consolidated statement of financial position should be read in conjunction with the accompanying notes.
The consolidated financial statements on pages 114 to 154 were approved by the board of directors on 1 February 2017 and signed on its
behalf by:
Andrew Pardey
Ross Jerrard
Chief executive officer
Chief financial officer
1 February 2017
1 February 2017
Centamin plc Annual report 2016FINANCIAL STATEMENTSCentamin plc Annual report 2016FINANCIAL STATEMENTS
122
123
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2016
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2016
Balance as at 1 January 2016
Profit for the year
EMRA profit share
Other comprehensive income for the year
Total comprehensive income for the year
Issue of shares
Transfer of share‑based payments
Recognition of share‑based payments
Dividend paid
Issued
capital
US$’000
665,590
—
—
—
—
(17)
1,899
—
—
Share
option
reserve
US$’000
Accumulated
profits
US$’000
Total
equity
US$’000
2,469
685,273
1,353,332
—
—
—
—
—
(1,899)
2,478
266,008
(51,253)
45
266,008
(51,253)
45
214,800
214,800
—
—
—
(17)
—
2,478
—
(46,073)
(46,073)
Balance as at 31 December 2016
667,472
3,048
853,999
1,524,519
Balance as at 1 January 2015
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Issue of shares
Transfer of share‑based payments
Recognition of share‑based payments
Dividend paid
Balance as at 31 December 2015
Issued
capital
US$’000
661,573
—
—
—
38
3,979
—
—
665,590
Share
option
reserve
US$’000
Accumulated
profits
US$’000
Total
equity
US$’000
4,098
667,702
1,333,373
—
—
—
—
(3,979)
2,350
—
2,469
51,570
(212)
51,358
—
—
—
(33,787)
51,570
(212)
51,358
38
—
2,350
(33,787)
685,273
1,353,332
The above audited consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Cash flows from operating activities
Cash generated in operating activities
Taxes paid
Finance income
Net cash generated by operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Exploration and evaluation expenditure
Finance income
Net cash used in investing activities
Cash flows from financing activities
EMRA prepayment
Dividend paid
EMRA profit share
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effect of foreign exchange rate changes
31 December
2016
US$’000
31 December
2015
US$’000
Notes
26(b)
374,811
185,811
(7,599)
(917)
—
(269)
366,295
185,542
(57,204)
(49,487)
917
(36,554)
(34,372)
269
(105,774)
(70,657)
—
(46,073)
(18,503)
(64,576)
195,945
199,616
4,312
(5,000)
(33,787)
—
(38,787)
76,098
125,659
(2,141)
199,616
6
7
7
Cash and cash equivalents at the end of the period
26
399,873
The above audited consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Centamin plc Annual report 2016FINANCIAL STATEMENTSCentamin plc Annual report 2016FINANCIAL STATEMENTS
124
125
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2016
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,
Burkina Faso, Côte d’Ivoire, United Kingdom
and Australia. It is the parent company of
the group, comprising the Company and its
subsidiaries and joint arrangements.
Registered office and principal place
of business:
Centamin plc
2 Mulcaster Street
St Helier, Jersey JE2 3NJ
The nature of the group’s operations and
its principal activities are set out in the
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 US 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 2016, 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 2016, 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.
Comparative figures
Certain comparative figures have been
reclassified to conform with the financial
statement presentation adopted for the
current year. These are categorisation
changes for comparison purposes
only and have no effect on results
as previously reported.
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.
Sukari Gold Mines (“SGM”) is jointly
owned by PGM and EMRA on a 50%
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, the provisions
of which are described more fully below,
whilst PGM is responsible for funding 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% of
SGM’s net production surplus which is
defined as ‘revenue less payment of the
fixed royalty to Arab Republic of Egypt
(“ARE”) and recoverable costs’. However,
in accordance with the terms of the
Concession Agreement, in the first and
second years in which there is a profit share,
PGM will be entitled to an additional 10%
of net production surplus and an additional
5% in the third and fourth years. 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 2016 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 21,
the operation of the mine has been
affected by two legal actions. The first of
these followed from a decision taken by
Egyptian General Petroleum Corporation
(“EGPC”) to charge international, not
local (subsidised) prices for the supply of
DFO, and the second arose as a result of
a judgment of the Administrative Court of
first instance in relation to, amongst other
matters, the Company’s 160km2 exploitation
lease. In relation to the first decision, the
Company remains confident that in the
event that it is required to continue to pay
international prices, the mine at Sukari will
remain commercially viable. Similarly, the
Company remains confident that the appeal
it has lodged in relation to the decision of
the Administrative Court will ultimately be
successful, although final resolution of it
may take some time. On 20 March 2013,
the Supreme Administrative Court upheld
the Company’s application to suspend the
decision until the merits of the Company’s
appeal were considered and ruled on, thus
providing assurance that normal operations
will be able to continue during this process.
In the unlikely event that the group is
unsuccessful in either or both of its legal
actions, and that the operating activities
are restricted to a reduced area, it is the
director’s 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.
Centamin plc Annual report 2016FINANCIAL STATEMENTSCentamin plc Annual report 2016FINANCIAL STATEMENTS 126
127
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
3. Summary of significant
accounting policies continued
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 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;
• 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;
• 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 remeasurement 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
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.
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 (“AFS”) financial assets
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. Fair value is
determined in the manner described in
note 27. 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.
Loans and receivables
Trade receivables, loans and other
receivables that have fixed or determinable
payments that are not quoted in an
active market are classified as loans
and receivables. Loans and receivables
are measured at amortised cost using
the effective interest rate method less
impairment. Interest is recognised by
applying the effective interest rate except
for short term receivables when the
recognition of interest would be immaterial.
Impairment of financial assets
Financial assets, other than those at 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.
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.
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 AFS equity instruments, any
subsequent increase in fair value after an
impairment loss is recognised in other
comprehensive income.
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:
• the rights to tenure of the area of interest
are current; and
• at least one of the following conditions
Derecognition of financial assets
is also met:
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.
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.
• 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
• 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.
Centamin plc Annual report 2016FINANCIAL STATEMENTSCentamin plc Annual report 2016FINANCIAL STATEMENTS 128
129
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
3. Summary of significant
accounting policies continued
Superannuation continued
Foreign currencies
The individual financial statements of
each group entity are presented in its
functional currency being the currency of
the primary economic environment in which
the entity operates. For the purpose of
the consolidated financial statements, the
results and financial position of each entity
are expressed in US dollars, which is the
functional currency of 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.
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 22).
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.
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.
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.
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:
•
it is probable that the future economic
benefit (improved access to the ore
body) associated with the stripping
activity will flow to the entity;
• the entity can identify the component of
the ore body for which access has been
improved; and
• 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.
Centamin plc Annual report 2016FINANCIAL STATEMENTSCentamin plc Annual report 2016FINANCIAL STATEMENTS 130
131
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
3. Summary of significant
accounting policies continued
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 payments’; and
• assets (or disposal groups) that are
classified as held for sale in accordance
with IFRS 5 ‘Non‑current assets held
for sale’.
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.
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 28.
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
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.
Restoration and rehabilitation
A provision for restoration and rehabilitation
is recognised when there is a present legal
or constructive obligation as a result of
exploration, development and production
activities undertaken, it is probable that
an outflow of economic benefits will be
required to settle the obligation, and the
amount of the provision can be measured
reliably. The estimated future obligations
include the costs of dismantling and removal
of facilities, restoration and monitoring of
the affected areas. The provision for future
restoration costs is the best estimate of the
present value of the expenditure required
to settle the restoration obligation at the
reporting date. 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.
Centamin plc Annual report 2016FINANCIAL STATEMENTSCentamin plc Annual report 2016FINANCIAL STATEMENTS 132
133
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
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; and
•
litigation.
The key assumptions previously applied in
impairment reviews are:
•
forecast gold prices;
• discount rate;
• production volumes;
• reserves and resources report; and
• costs and recovery rates.
Litigation
The group exercises judgment in measuring
and recognising provisions and the
exposures to contingent liabilities related
to pending litigation, as well as other
contingent liabilities (see note 21 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 21 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
remains 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.
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 21
to the financial statements;
•
forecast gold price;
• production volumes; and
• costs and recovery rates.
These financial statements for the year
ended 31 December 2016 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 22 to
the financial statements).
Egyptian pound
The group operates predominantly in
Egypt. The group receives its income from
gold sales in US dollars, however, it is
offset by the fact that in November 2016,
the Egyptian government floated the
Egyptian pound in an attempt to stabilise
its economy. This has led to a significant
devaluation of the currency which has led
to an increase in inflation. This is a potential
risk for the group as it has led to increases
in the prices of fuel, raw materials and
other goods as well as pressure to increase
staff wages.
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
Gold Mine is based on reserve estimates.
Management and directors believe that
these estimates are both realistic and
conservative, based on current information.
EMRA profit share
Payments made to EMRA pursuant to the
provisions of the Concession Agreement
are recognised as a variable charge in the
income statement (below profit after tax)
of Centamin, which leads to a reduction
in the earnings per share. The profit share
payments during the year will be reconciled
against SGM’s audited June 2017 financial
statements. Any variation between
payments made during the year (which are
based on the Company’s estimates) and
the audited financial statements, may result
in a balance due and payable to EMRA
or advances to be offset against future
distributions.
Key sources of estimation uncertainty
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.
5. Revenue
An analysis of the group’s revenue for the year, from continuing operations, is as follows:
Gold sales
Silver sales
All gold and silver sales during the year were made to a single customer in North America.
31 December
2016
US$’000
31 December
2015
US$’000
686,306
1,081
687,387
506,963
1,433
508,396
Centamin plc Annual report 2016FINANCIAL STATEMENTSCentamin plc Annual report 2016FINANCIAL STATEMENTS
134
135
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
6. Profit before tax
Profit for the year has been arrived at after crediting/(charging) the following gains/(losses) and expenses:
Cost of sales
Mine production costs
Movement in inventory
Depreciation and amortisation
Finance income
Interest received
Other operating costs
Corporate compliance
Office related depreciation
Auditing fees
Corporate consultants
Communications and IT
Salary and wages
Travel, accommodation and entertainment
Office rents and lease payment
Other administration expenses
Impairment reversal
Insurances
Other taxes
Stock obsolescence
Employee equity settled share‑based payments
Fixed royalty – attributable to the Egyptian government
Foreign exchange gain net
Finance charges
Provision for restoration and rehabilitation – unwinding of discount
Impairment of exploration and evaluation assets(1)
(1) Refer to note 14 for further details.
31 December
2016
US$’000
31 December
2015
US$’000
(288,317)
(314,827)
5,926
(106,885)
(389,276)
(7,476)
(93,939)
(416,242)
31 December
2016
US$’000
31 December
2015
US$’000
917
269
(1,746)
(1,556)
(87)
(641)
(370)
(169)
(5,353)
(859)
(156)
(207)
484
(225)
(1,400)
(2,500)
(2,478)
(20,575)
5,025
(239)
(581)
(111)
(573)
(751)
(206)
(6,929)
(1,212)
(185)
(140)
526
(120)
(516)
—
(2,350)
(15,198)
2,141
(180)
(362)
(32,077)
(27,722)
31 December
2016
US$’000
31 December
2015
US$’000
(122)
(6,294)
7. EMRA profit share
EMRA is entitled to a share of 50% of SGM’s net production surplus which can be defined as ‘revenue less payment of the fixed royalty to
Arab Republic of Egypt (“ARE”) and recoverable costs’. However, in accordance with the terms of the Concession Agreement, in the first
and second years in which there is a profit share, PGM will be entitled to an additional 10% of net production surplus and an additional 5%
in the third and fourth years.
Income statement
EMRA profit share
Balance sheet
EMRA advance profit share prepayment
EMRA profit share accrual
31 December
2016
US$’000
31 December
2015
US$’000
(51,253)
—
—
4,000
28,750
—
Entitlements to EMRA pursuant to the provisions of the Concession Agreement are recognised as a variable charge in the income
statement (below profit after tax) of Centamin, which leads to a reduction in the earnings per share. The profit share payments during the
year will be reconciled against SGM’s audited June 2017 financial statements.
Any variation between payments made during the year (which are based on the Company’s estimates) and the audited financial statements,
may result in a balance due and payable to EMRA or advances to be offset against future distributions. This will be reflected as an accrual
or prepayment in each reporting period.
Centamin elected to make advance payments against future profit share from 2013 onwards and the value of these payments amounted
to US$28.75 million. These payments were recovered by PGM during the year by way of net off against EMRA’s entitlement to profit share
during the period.
Cash flows
EMRA profit share entitlement
EMRA prepayment
EMRA recovery of prepayment
EMRA accrual
EMRA cash payments during the period
31 December
2016
US$’000
31 December
2015
US$’000
51,253
—
(28,750)
(4,000)
18,503
—
5,000
—
—
5,000
EMRA and PGM benefit from advance distributions of profit share which are made on a weekly/fortnightly basis and proportionately in
accordance with the terms of the Concession Agreement. Future distributions will take into account ongoing cash flows, historic costs that
are still to be recovered and any future capital expenditure. The profit share payments during the year will be reconciled against SGM’s
audited June 2017 financial statements.
Subsequent to year end further profit share advance distributions totalling US$7 million have been made to EMRA.
Centamin plc Annual report 2016FINANCIAL STATEMENTSCentamin plc Annual report 2016FINANCIAL STATEMENTS
136
137
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
8. Tax
The group operates in several countries and, accordingly, it is subject to the various tax regimes in the countries in which it operates. From
time to time the group is subject to a review of its related tax filings and in connection with such reviews, disputes can arise with the taxing
authorities over the interpretation or application of certain rules to the group’s business conducted within the country involved. If the group
is unable to resolve any of these matters favourably, there may be an adverse impact on the group’s financial performance, cash flows or
results of operations. In the event that management’s estimate of the future resolution of these matters changes, the group will recognise
the effects of the changes in its consolidated financial statements in the period that such changes occur.
In Australia, Centamin Egypt Limited and Pharaoh Gold Mines NL have elected to form a tax‑consolidated group and therefore are treated
as a single entity for Australian income tax purposes. Pharaoh Gold Mines NL benefits from the “Branch Profits Exemption” whereby
foreign branch income will generally not be subject to Australian income tax.
In Egypt, Centamin has entered into a concession agreement that provides that the income generated by Sukari Gold Mining Company’s
activities is granted a long term tax exemption from all taxes imposed in Egypt.
Tax recognised in profit is summarised as follows:
Tax expense
Current tax
Current tax expense in respect of the current year
Deferred tax
Total tax expense
31 December
2016
US$’000
31 December
2015
US$’000
(821)
—
(821)
(6,837)
—
(6,837)
The tax expense for the year can be reconciled to the profit per the consolidated statement of comprehensive income as follows:
Profit before income tax
Tax expense calculated at 0% (2015: 0%)(1) of profit before tax
Tax effect of amounts which are not deductible/taxable in calculating taxable income:
Effect of tax different tax rates of subsidiaries operating in other jurisdictions
Tax expense for the year
31 December
2016
US$’000
31 December
2015
US$’000
266,829
—
(821)
(821)
58,407
—
(6,837)
(6,837)
(1) The tax rate used in the above reconciliation is the corporate tax rate of 0% payable by Jersey corporate entities under the Jersey tax law (2015: 0%).
There has been no change in the underlying corporate tax rates when compared to the previous financial period.
Tax recognised in the balance sheet is summarised as follows:
Current tax liabilities
Current tax payable
Tax consolidation
Relevance of tax consolidation to the consolidated entity
31 December
2016
US$’000
31 December
2015
US$’000
—
—
(6,837)
—
Companies within the group’s wholly owned Australian resident entities formed a tax‑consolidated group with effect from 1 July 2003.
The head entity within the tax‑consolidated group is Centamin Egypt Limited. The members of the tax‑consolidated group are Pharaoh
Gold Mines NL, Viking Resources NL and North African Resources NL.
Nature of tax funding arrangements and tax‑sharing agreements
Entities within the tax‑consolidated group have entered into a tax funding arrangement and a tax‑sharing agreement with the head entity.
Under the terms of the tax‑funding agreement, Centamin Egypt Limited and each of the entities in the tax‑consolidated group have agreed
to pay a tax‑equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity. Such amounts
are reflected in amounts receivable from or payable to other entities in the tax‑consolidated group.
The tax‑sharing agreement entered into between members of the tax‑consolidated group provides for the determination of the allocation
of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been
recognised in the financial statements in respect of this agreement as payment of any amounts under the tax‑sharing agreement is
considered remote.
9. Segment reporting
The group is engaged in the business of exploration and mining of precious metals only, which represents a single operating segment.
The board is the group’s chief operating decision maker within the meaning of IFRS 8.
Non‑current assets other than financial instruments by country:
Egypt
Ethiopia
Burkina Faso
Côte d’Ivoire
Australia
Jersey
10. Trade and other receivables
Non‑current
Other receivables – deposits
Current
Gold and silver sales debtors
Other receivables
31 December
2016
US$’000
31 December
2015
US$’000
899,852
970,376
—
105,432
17,870
3
63
336
76,209
5,316
2
115
1,023,220
1,052,354
31 December
2016
US$’000
31 December
2015
US$’000
81
81
60
60
31 December
2016
US$’000
31 December
2015
US$’000
23,009
1,861
24,870
20,472
3,312
23,784
Trade and other receivables are classified as loans and receivables and are therefore measured at amortised cost.
All gold and silver sales during the year were made to a single customer in North America and are neither past due or impaired.
The average age of the receivables is nine days (2015: 14 days). No interest is charged on the receivables. There are no trade receivables
past due and impaired at the reporting date, and thus no allowance for doubtful debts has been recognised. Of the trade receivables
balance, the gold sales debtor is all a receivable from Asahi Refining of Canada. The amount due has been received in full subsequent to
year end. Other receivables represent GST and VAT amounts owing from the various jurisdictions that the group operates in and inventory
returns to vendors where refunds are expected to occur.
The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.
Centamin plc Annual report 2016FINANCIAL STATEMENTSCentamin plc Annual report 2016FINANCIAL STATEMENTS
138
139
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
11. Inventories
Diesel Fuel Oil (“DFO“) dispute
Mining stockpiles and ore in circuit
Stores inventory
12. Prepayments
Current
Prepayments
Fuel prepayments
Non‑current
EMRA
Others
Movement in fuel prepayments
Balance at the beginning of the year
Fuel prepayment recognised
Less: provision charged to:(1)
Mine production costs
Property, plant and equipment
Inventories
Fuel advance down payment
Balance at the end of the year
31 December
2016
US$’000
31 December
2015
US$’000
34,217
102,345
136,562
28,291
106,484
134,775
31 December
2016
US$’000
31 December
2015
US$’000
1,151
877
2,028
1,161
3,169
4,330
31 December
2016
US$’000
31 December
2015
US$’000
—
295
295
28,750
—
28,750
31 December
2016
US$’000
31 December
2015
US$’000
3,169
23,014
—
42,472
(22,844)
(43,808)
(2,269)
(193)
—
877
—
1,336
3,169
3,169
(1) The cumulative fuel prepayment recognised and provision charged as at 31 December 2016 is as follows:
231,218
Fuel prepayment recognised (US$’000)
Provision charged to:
Mine production costs (US$’000)
Property, plant and equipment (US$’000)
Inventories (US$’000)
Fuel advance down payment (US$’000)
(218,000)
(14,120)
(1,390)
3,169
As more fully described in note 21 below, the group is currently involved in court action concerning the price at which it is supplied with
DFO. Since January 2012, the group has had to pay for DFO at the international price rather than the subsidised price which it believes
it is entitled to. It is seeking recovery of the funds advanced since 2012 through court action. However, management recognises the
practical difficulties associated with reclaiming funds from the government and for this reason has, fully provided against the prepayment
of US$231.2 million to 31 December 2016 of which US$24.6 million was provided for during 2016.
In order to allow a better understanding of the financial information presented within the consolidated financial statements, and specifically
the group’s underlying business performance, the effect of the Diesel Fuel Oil dispute is shown below.
This has resulted in a net charge of US$24.6 million in the profit and loss.
31 December 2016
31 December 2015
Before
adjustment
US$’000
Adjustment
US$’000
Total
US$’000
Before
adjustment
US$’000
Adjustment
US$’000
Total
US$’000
Cost of sales
Mine production costs
Movement in inventory
Depreciation and amortisation
(265,473)
(22,844)
(288,317)
(271,019)
7,710
(1,784)
(106,885)
(364,648)
—
(24,628)
5,926
(106,885)
(389,276)
(4,545)
(93,939)
(43,808)
(2,931)
—
(314,827)
(7,476)
(93,939)
(369,503)
(46,739)
(416,242)
The effect on earnings per share is shown below:
31 December 2016
31 December 2015
Before
adjustment
US$’000
Adjustment
US$’000
Total
US$’000
Before
adjustment
US$’000
Adjustment
US$’000
Total
US$’000
Earnings per share before profit share:
Basic (cents per share)
Diluted (cents per share)
Earnings per share after profit share:
Basic (cents per share)
Diluted (cents per share)
25.183
25.058
20.742
20.639
(2.134)
(2.123)
(2.134)
(2.123)
23.049
22.935
18.608
18.516
8.590
8.467
8.590
8.467
(4.084)
(4.025)
(4.084)
(4.025)
4.506
4.441
4.506
4.441
Centamin plc Annual report 2016FINANCIAL STATEMENTSCentamin plc Annual report 2016FINANCIAL STATEMENTS
140
141
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
13. Property, plant and equipment
15. Available‑for‑sale financial assets
Office
equipment
US$’000
Buildings
US$’000
Plant and
equipment
US$’000
Mining
equipment
US$’000
Mine
development
properties
US$’000
Capital
work in
progress
US$’000
Cost
Balance at 31 December 2015
5,535
Additions
Disposals
Transfers
547
(30)
—
1,194
825
—
—
582,854
241,316
316,304
1,474
(215)
—
8,733
(558)
—
2,075
—
47,523
32,469
43,306
—
—
Total
US$’000
1,179,672
56,960
(803)
47,523
Balance at 31 December 2016
6,052
2,019
584,113
249,491
365,902
75,775
1,283,352
Accumulated depreciation
Balance at 31 December 2015
(4,867)
Depreciation and amortisation
(558)
Disposals
25
(293)
(119)
—
(98,504)
(29,496)
87
(100,826)
(103,715)
(29,424)
(47,376)
640
—
Balance at 31 December 2016
(5,400)
(412)
(127,913)
(129,610)
(151,091)
—
—
—
—
(308,205)
(106,973)
752
(414,426)
Cost
Balance at 31 December 2014
5,401
1,186
565,836
221,178
232,921
116,772
1,143,294
Additions
Increase in rehabilitation asset
Disposals
Transfers
103
—
—
31
8
—
—
—
Balance at 31 December 2015
5,535
1,194
Accumulated depreciation
Balance at 31 December 2014
(4,280)
Depreciation and amortisation
(587)
Disposals
—
Balance at 31 December 2015
(4,867)
Net book value
(234)
(59)
—
(293)
147
—
—
16,871
582,854
(67,980)
(30,524)
—
3,779
—
(202)
16,561
241,316
(72,339)
(28,663)
176
—
3,762
—
28,781
—
—
79,621
(113,084)
32,818
3,762
(202)
—
316,304
32,469
1,179,672
(69,497)
(34,218)
—
—
—
—
—
(214,330)
(94,051)
176
308,205
(98,504)
(100,826)
(103,715)
As at 31 December 2015
As at 31 December 2016
668
652
901
1,607
484,350
456,200
140,490
119,882
212,589
214,811
32,469
75,775
871,467
868,926
No impairment review was performed in 2015 or 2016 as no indicators of impairment were identified.
14. Exploration and evaluation asset
Balance at the beginning of the period
Expenditure for the period
Transfer to property, plant and equipment
Impairment of exploration and evaluation asset
Balance at the end of the period
31 December
2016
US$’000
31 December
2015
US$’000
152,077
49,487
(47,524)
(122)
153,918
123,999
34,372
—
(6,294)
152,077
Balance at the beginning of the period
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
2016
US$’000
31 December
2015
US$’000
163
(78)
45
—
130
409
(560)
(212)
526
163
The available‑for‑sale financial asset at period end relates to a 5.33% (2015: 6.66% equity interest in Nyota Minerals Limited (“Nyota”),
a public listed company and a 0.43% interest in Kefi Minerals plc, an AIM listed company.
Management made the decision to sell its interest in Nyota and the financial asset is classed as a current asset.
16. Trade and other payables
Trade payables
Other creditors and accruals
31 December
2016
US$’000
31 December
2015
US$’000
23,734
24,257
47,991
28,630
18,508
47,138
Trade payables principally comprise the amounts outstanding for trade purchases and ongoing costs. The average credit period taken for
trade purchases is 22 days (2015: 22 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.
17. Provisions
Current
Employee benefits(1)
Withholding tax
Stock obsolescence
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
2016
US$’000
31 December
2015
US$’000
367
3,609
2,500
6,476
7,697
7,697
7,139
(23)
581
7,697
456
120
—
576
7,139
7,139
3,015
3,762
362
7,139
The exploration and evaluation asset relates to the drilling, geological exploration and sampling of potential ore reserves and can be
attributed to Egypt (US$30.5 million) Burkina Faso (US$105.6 million) and Côte d’Ivoire (US$17.8 million).
(1) Employee benefits relate to annual, sick and long service leave entitlements.
(2) The provision for restoration and rehabilitation represents the present value of the directors’ best estimate of the future outflow of economic benefits
that will be required to remove the facilities and restore the affected areas at the group’s sites discounted by 8.17% (2015: 8.17%). This restoration and
rehabilitation estimate, which is reviewed on an annual basis, has been made on the basis of benchmark assessments of restoration works required following
mine closure and after taking into account the projected area to be disturbed over the life of the mine, being 20 years. The annual review undertaken as at
31 December 2016 has resulted in no change to the provision.
Centamin plc Annual report 2016FINANCIAL STATEMENTSCentamin plc Annual report 2016FINANCIAL STATEMENTS
142
143
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
18. Issued capital
Fully paid ordinary shares
Balance at beginning of the period
Issue/(cancelled) of shares
Transfer from share option reserve
Balance at end of the period
31 December 2016
31 December 2015
Number
US$’000
Number
US$’000
1,152,107,984
665,590
1,152,107,984
661,573
—
—
(17)
1,899
—
—
38
3,979
1,152,107,984
667,472
1,152,107,984
665,590
The authorised share capital is an unlimited number of no par value shares.
At 31 December 2016 the Company held 2,109,710 ordinary shares in treasury (2015: 5,659,709 ordinary shares). These shares are held by
the trustee pursuant to the deferred bonus share plan.
Fully paid ordinary shares carry one vote per share and carry the right to dividends. See note 29 for more details of the share options.
19. Share option reserve
Share option reserve
Share option reserve
Balance at beginning of the period
Share‑based payments expense
Transfer to accumulated profits
Transfer to issued capital
Balance at the end of the period
31 December
2016
US$’000
31 December
2015
US$’000
3,048
2,469
31 December
2016
US$’000
31 December
2015
US$’000
2,469
2,937
(459)
(1,899)
3,048
4,098
2,456
(106)
(3,979)
2,469
The share option reserve arises on the grant of share options to employees under the employee share option plan. Amounts are transferred
out of the reserve and into issued capital when the options and warrants are exercised/vested. Amounts are transferred out of the reserve
into accumulated profits when the options and warrants are forfeited.
20. Commitments for expenditure
(a) Capital expenditure commitments
Plant and equipment(1)
No longer than one year
Longer than one year and not longer than five years
Longer than five years
31 December
2016
US$’000
31 December
2015
US$’000
—
—
—
—
—
—
—
—
(1) As a result of the completion of Stage 4, the group had no commitments for capital expenditure as at 31 December 2016.
(b) Operating lease commitments
The future aggregate minimum lease payments under non‑cancellable operating leases are as follows:
Office premises
No longer than one year
Longer than one year and not longer than five years
Operating lease commitments are limited to office premises in Jersey.
31 December
2016
US$’000
31 December
2015
US$’000
56
47
103
68
119
187
21. Contingent liabilities and contingent assets
Contingent liabilities
Fuel supply
In January 2012, the group received a letter from Chevron (its then fuel supplier) 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, for EGP403 million (approximately US$21.8 million at current
exchange rates).
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.
In September 2016, the State Commissioner’s Office produced a report containing non‑binding recommendations for the Administrative
Court in which the case is proceeding. The report’s findings were unfavourable to the group. The group’s legal advisers do not believe the
report properly addresses the substantive merits of the group’s case and, as such, the Company continues vigorously to pursue its claim.
The Company has prepared a response to the report which it will submit at the next hearing in the case. The group remains of the view that
an instant move to international fuel prices is not a reasonable outcome and will look to recover funds advanced thus far should the court
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$231.2 million. Refer to note 12 of the accompanying
financial statements for further details on the impact of this provision on the group’s results for 2016.
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.
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 no. 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 under way.
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. The appeal was stayed by the Supreme Administrative Court in June 2016 until the
Supreme Constitutional Court rules on the validity of Law no. 32 of 2014. If the Supreme Constitutional Court upholds Law no. 32, the
group is advised that it will benefit from its provisions. In the event that the Supreme Constitutional Court rules that Law no. 32 is invalid,
the group remains confident that its appeal will be successful on the merits.
Centamin plc Annual report 2016FINANCIAL STATEMENTSCentamin plc Annual report 2016FINANCIAL STATEMENTS
144
145
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
21. Contingent liabilities and contingent assets continued
Contingent liabilities continued
Concession Agreement court case continued
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 under way. 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 2015: nil).
22. Subsidiaries
The parent entity of the group is Centamin plc, incorporated in Jersey, and the details of its subsidiaries are as follows:
Centamin Egypt Limited
Pharaoh Gold Mines NL (holder of an Egyptian branch)
Sukari Gold Mining Co
Viking Resources Limited (in liquidation)
North African Resources NL (in liquidation)
Centamin West Africa Holdings Limited
Sheba Exploration Limited (holder of an Ethiopia branch)
Sheba Exploration Holdings Limited(1)
Centamin Group Services Limited
Centamin Holdings Limited
Centamin Limited
Ampella Mining Limited
Ampella Share Plan Limited
Ampella Mining Gold Pty Limited
West African Gold Reserve Pty Limited
Ampella Mining Gold SARL
Ampella Mining SARL
Ampella Mining Côte d’Ivoire
Centamin Côte d’Ivoire
Ampella Mining Exploration CDI
Centamin Exploration CI
Ampella Resources Burkina Faso
Konkera SA
(1) Previously Sheba Exploration (UK) Plc.
Ownership interest
Country of
incorporation
31 December
2016
%
31 December
2015
%
Australia
Australia
Egypt
Australia
Australia
UK
UK
UK
Jersey
Jersey
Bermuda
Australia
Australia
Australia
Australia
Burkina Faso
Burkina Faso
Côte d’Ivoire
Côte d’Ivoire
Côte d’Ivoire
Côte d’Ivoire
Burkina Faso
Burkina Faso
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
90
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
90
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 Gold Mine site. The exploitation
lease was signed by PGM, EMRA and the Egyptian Minister of Petroleum and gives tenure for a period of 30 years, commencing
24 May 2005 and extendable by PGM for an additional 30 years upon PGM providing reasonable commercial justification.
In 2006 SGM was incorporated under the laws of Egypt. SGM was formed to conduct exploration, development, exploitation and
marketing operations in accordance with the 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 had not recovered its
cost and accordingly, no EMRA entitlement had been recognised at that date. During 2016 payments to EMRA commenced as advance
profit share distributions. Any payment made to EMRA pursuant to these provisions of the Concession Agreement will be recognised as a
variable charge in the income statement.
The Concession Agreement grants certain tax exemptions, including the following:
•
from 1 April 2010, being the date of commercial production, the Sukari Gold Mine is entitled to a 15‑year exemption from any taxes
imposed by the Egyptian government on the revenues generated from the Sukari Gold Mine. 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.
23. Auditor’s remuneration
The analysis of the auditor’s remuneration is as follows:
Fees payable to the Company’s auditor and its associates for the audit of the Company’s
annual financial statements
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
31 December
2016
US$’000
31 December
2015
US$’000
386
10
94
490
109
15
—
—
27
151
375
—
150
525
104
22
—
—
14
140
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.
Centamin plc Annual report 2016FINANCIAL STATEMENTSCentamin plc Annual report 2016FINANCIAL STATEMENTS
146
147
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
24. Joint arrangements
The consolidated entity has an interest in the following joint arrangement:
Name of joint operation
Egyptian Pharaoh Investments(1)
(1) Dormant company.
Percentage interest
31 December
2016
%
31 December
2015
%
50
50
The group has a US$1 (cash) interest in the above joint operation. The amount is included in the consolidated financial statements of the
group. There are no capital commitments arising from the group’s interests in the joint operation as disclosed in note 21.
25. Earnings per share (“EPS“)
Basic earnings per share(1)
Diluted earnings per share(1)
Basic earnings per share(2)
Diluted earnings per share(2)
(1) Before profit share.
(2) After profit share.
Basic earnings per share
31 December
2016
US cents
per share
31 December
2015
US cents
per share
23.049
22.935
18.608
18.516
4.506
4.441
4.506
4.441
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:
Earnings used in the calculation of basic EPS(1)
Earnings used in the calculation of basic EPS(2)
(1) Before profit share.
(2) After profit share.
31 December
2016
US$’000
31 December
2015
US$’000
266,008
214,755
51,570
51,570
31 December
2016
Number
31 December
2015
Number
Weighted average number of ordinary shares for the purpose of basic EPS
1,154,085,388
1,144,499,697
Diluted earnings per share
The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows:
Earnings used in the calculation of diluted EPS(1)
Earnings used in the calculation of diluted EPS(2)
(1) Before profit share.
(2) After profit share.
Weighted average number of ordinary shares for the purpose of basic EPS
Shares deemed to be issued for no consideration in respect of employee options
31 December
2016
US$’000
31 December
2015
US$’000
266,008
214,755
51,570
51,570
31 December
2016
Number
31 December
2015
Number
1,154,085,388
1,144,499,697
5,755,404
16,649,502
Weighted average number of ordinary shares used in the calculation of diluted EPS
1,159,840,792
1,161,149,199
No potential ordinary shares were excluded from the calculation of weighted average number of ordinary shares for the purpose of diluted
earnings per share.
26. Notes to the statements of cash flows
(a) Reconciliation of cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents includes cash on hand and at bank and deposits.
Cash and cash equivalents
(b) Reconciliation of profit for the year to cash flows from operating activities
Profit for the year
Add/(less) non‑cash items:
Depreciation/amortisation of property, plant and equipment
Increase/(decrease) in provisions
Foreign exchange rate (gain)/loss
Impairment (reversal of)/loss on available‑for‑sale financial assets
Impairment of exploration and evaluation assets
Share‑based payments expense
Changes in working capital during the period:
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
Decrease in prepayments
Decrease/(increase) in trade, tax and other payables
Cash flows generated from operating activities
(c) Non‑cash financing and investing activities
During the year there have been no non‑cash financing and investing activities.
27. Financial instruments
(a) Group risk management
31 December
2016
US$’000
31 December
2015
US$’000
399,873
199,616
31 December
2016
US$’000
31 December
2015
US$’000
266,008
51,570
106,973
6,458
(4,312)
45
122
2,478
(1,085)
(1,787)
2,302
(2,391)
374,811
94,051
11,231
(3,471)
(526)
6,294
2,350
1,188
5,853
549
16,722
185,811
The group manages its capital to ensure that entities within the group will be able to continue as a going concern while maximising the
return to stakeholders through the optimisation of the cash and equity balance. The group’s overall strategy remains unchanged from the
previous financial period.
The group has no debt and thus not geared at the year end or in the prior year. The capital structure consists of cash and cash equivalents
and equity attributable to equity holders of the parent, comprising issued capital and reserves as disclosed in notes 18 and 19. The group
operates in Australia, Jersey, Egypt, Burkina Faso and Côte d’Ivoire. None of the group’s entities are subject to externally imposed
capital requirements.
The group utilises inflows of funds toward the ongoing exploration and development of the Sukari Gold Mine in Egypt, and the exploration
projects in Burkina Faso and Côte d’Ivoire.
Categories of financial assets and liabilities
Financial assets
Available‑for‑sale assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
31 December
2016
US$’000
31 December
2015
US$’000
130
399,873
24,870
424,873
163
199,616
23,784
223,563
47,991
47,138
Centamin plc Annual report 2016FINANCIAL STATEMENTSCentamin plc Annual report 2016FINANCIAL STATEMENTS
148
149
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
27. Financial instruments continued
(b) Financial risk management and objectives
The group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential risk
adverse effects and ensure that net cash flows are sufficient to support the delivery of the group’s financial targets whilst protecting future
financial security. The group continually monitors and tests its forecast financial position against these objectives.
The group’s activities expose it to a variety of financial risks: market; commodity; credit; liquidity; foreign exchange; and interest rate.
These risks are managed under board approved directives through the audit 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
2016
US$’000
31 December
2015
US$’000
31 December
2016
US$’000
31 December
2015
US$’000
31 December
2016
US$’000
31 December
2015
US$’000
1,303
113
1,416
391
391
1,025
332
146
478
390
390
88
4,114
17
4,131
628
628
3,503
2,800
17
2,817
10,905
10,905
(8,088)
705
—
705
7,780
7,780
(7,075)
1,411
—
1,411
9,402
9,402
(7,991)
Financial assets
Cash and cash equivalents
Available‑for‑sale assets
Financial liabilities
Trade and other payables
Net exposure
The following table summarises the sensitivity of financial instruments held at the reporting date to movements in the exchange rate of the
Great British pound, Egyptian pound and Australian dollar to the US dollar, with all other variables held constant. The sensitivities are based
on reasonably possible changes over a financial period, using the observed range of actual historical rates.
US$/GBP increase by 10%
US$/GBP decrease by 10%
US$/A$ increase by 10%
US$/A$ decrease by 10%
US$/EGP increase by 10%
US$/EGP decrease by 10%
Impact on profit
Impact on equity
31 December
2016
US$’000
31 December
2015
US$’000
31 December
2016
US$’000
31 December
2015
US$’000
(81)
81
(314)
314
639
(639)
(35)
35
737
(737)
726
(726)
(10)
10
(2)
2
—
—
(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 amounts shown above are the main currencies which the group is exposed to. Centamin also has small deposits in euro (US$114,553)
and West African franc (US$505,182), and net payables of US$593,457 in euro and US$1,134,928 in West African franc. A movement of
10% up or down in these currencies would have a negligible effect on the assets/liabilities.
The group has not entered into forward foreign exchange contracts. Natural hedges are utilised wherever possible to offset foreign currency
liabilities. The Company maintains a policy of not hedging its currency positions and maintains currency holdings in line with underlying
requirements and commitments.
(d) Commodity price risk
The group’s future revenue forecasts are exposed to commodity price fluctuations, in particular gold prices. The group has not entered into
forward gold hedging contracts.
(e) Interest rate risk
The group’s main interest rate risk arises from cash and short term deposits and is not considered to be a material risk due to the short term
nature of these financial instruments. Cash deposits are placed on term period of no more than 30 days at a time.
The financial instruments exposed to interest rate risk and the group’s exposure to interest rate risk as at balance date were as follows:
Weighted
average
effective
interest rate
%
Less than
one month
US$’000
One to
twelve
months
US$’000
More than
twelve
months
US$’000
Total
US$’000
31 December 2016
Financial assets
Variable interest rate instruments
Non‑interest bearing
Financial liabilities
Variable interest rate instruments
Non‑interest bearing
31 December 2015
Financial assets
Variable interest rate instruments
Non‑interest bearing
Financial liabilities
Variable interest rate instruments
Non‑interest bearing
(f) Liquidity risk
0.24
—
—
—
0.22
—
—
—
200,330
24,320
224,650
—
47,991
47,991
53,471
24,059
77,530
—
47,138
200,223
—
200,223
—
—
—
146,093
—
146,093
—
—
—
—
—
—
—
—
—
—
—
—
—
400,553
24,320
424,873
—
47,991
47,991
199,564
24,059
223,623
—
47,138
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.
Centamin plc Annual report 2016FINANCIAL STATEMENTSCentamin plc Annual report 2016FINANCIAL STATEMENTS
150
151
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
27. Financial instruments continued
(f) Liquidity risk continued
31 December 2016
Financial assets
Variable interest rate instruments
Non‑interest bearing
Financial liabilities
Variable interest rate instruments
Non‑interest bearing
31 December 2015
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
200,330
24,320
224,650
—
47,991
47,991
53,471
25,531
79,002
—
47,138
47,138
200,223
—
200,223
—
—
—
146,093
—
146,093
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
400,553
24,320
424,873
—
47,991
47,991
199,564
25,531
225,095
—
47,138
47,138
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.
(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
Level 1
130
Level 1
163
2016
Level 2
Level 3
—
2015
—
Level 2
Level 3
—
—
Total
130
Total
163
There were no financial assets or liabilities subsequently measured at fair value on Level 3 fair value measurement bases.
28. Share‑based payments
Restricted share plan
The Company’s shareholder approved restricted share plan (“RSP”) allows the Company the right to grant Awards (as defined below) to
employees of the group. Awards may take the form of either conditional share awards, where shares are transferred conditionally upon the
satisfaction of performance conditions; or share options, which may take the form of nil cost options or have a nominal exercise price, the
exercise of which is again subject to satisfaction of applicable performance conditions.
The awards due to be granted in June 2017 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
page 104 of the directors’ remuneration report. These measures are assessed by reference to current market practice and the remuneration
committee will have regard to current market practice when establishing the precise performance conditions for awards.
To date the Company has granted the following conditional awards to employees of the group.
June 2015 Awards
Of the 5,145,000 awards granted on 4 June 2015 under the RSP, 3,845,000 awards remain granted to eligible participants (18 in total) and
apply the following performance criteria:
• 20% of the Award shall be 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.
June 2016 Awards
Of the 4,999,000 awards granted on 4 June 2016 under the RSP, 4,704,000 awards remain granted to eligible participants (31 in total)
applying the following performance criteria:
• 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 mineral reserve replacement and growth;
• 20% of the Award shall be assessed by reference to compound growth in EBIDTA; and
• 30% of the Award shall be assessed by reference to compound growth in gold production.
Conditional share awards and options together constitute “Awards” under the plan and those in receipt of Awards are “Award Holders”.
A detailed summary of the scheme rules is set out in the 2015 AGM proxy materials which are available at www.centamin.com. In brief,
Awards will vest following the passing of three years from the date of the Award and vesting will be subject to satisfaction of performance
conditions. The above measures are assessed by reference to current market practice and the remuneration committee will have regard to
market practice when establishing the precise performance conditions for future Awards.
Where the performance conditions have been met, in the case of conditional Awards, 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 awards granted during the period:
Grant date
Number of instruments
TSR: fair value at grant date GBP(1)
TSR: fair value at grant date US$(1)
Reserve: fair value at grant date GBP(1)
Reserve: fair value at grant date US$(1)
EBITDA: fair value at grant date GBP(1)
EBITDA: fair value at grant date US$(1)
Gold production: fair value at grant date GBP(1)
Gold production: fair value at grant date US$(1)
Vesting period (years)
Expected volatility
Expected dividend yield (%)
RSP 2016
4 June 2016
4,999,000
0.6300
0.9107
1.0100
1.4600
1.0100
1.4600
1.0100
1.4600
3.0
42.14%
1.84%
(1) The vesting of 20% of the awards granted under this plan are dependent on a TSR performance condition. As relative TSR is defined as a market condition
under IFRS 2 ‘Share‑based Payments’, this requires that the valuation model used takes into account the anticipated performance outcome. We have
therefore applied a Monte‑Carlo simulation model. The simulation model takes into account the probability of performance based on the expected
volatility of Centamin and the peer group companies and the expected correlation of returns between the companies in the comparator group.
The remaining 80% of the awards are subject to reserve, EBITDA and gold production performance conditions. As these are classified as
non‑market conditions under IFRS 2 they do not need to be taken into account when determining the fair value. These grants have been valued
using a Black‑Scholes model. The fair value calculated was then converted at the closing GBP:US$ foreign exchange rate on that day.
Centamin plc Annual report 2016FINANCIAL STATEMENTSCentamin plc Annual report 2016FINANCIAL STATEMENTS
152
153
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
28. Share‑based payments continued
Deferred bonus share plan (“DBSP”)
In 2012, the Company implemented the DBSP, which is a long term share incentive arrangement for senior management (but not executive
directors) and other employees (participants).
On 4 June 2013, the group offered to both the beneficiaries of the shares awarded under the Employee Loan Funded Share Plan (“ELFSP”)
and to the majority of the beneficiaries of the options granted under the Employee Option Scheme (“EOS”) the choice to replace their
awards and options with awards under the DBSP. The group has accounted for this change as modifications to the share‑based payment
plans and will be recognising the incremental fair value granted, measured in accordance with IFRS 2, by this replacement over the vesting
period of the new DBSP awards.
Under this offer, each participant has been granted a number of awards under the DBSP equivalent to the number of shares or options held
under the ELFSP and EOS respectively. Such DBSP awards shall be subject to the terms and conditions of the DBSP and shall ordinarily vest
in three equal tranches on the anniversary of the grant date, conditional upon the continued employment with the group. All offers made to
participants were accepted. The award of the deferred shares will not have any performance criteria attached. They will however be subject
to a service period.
DBSP awards granted during the period:
Grant date
Number of instruments
Share price/fair value at grant date GBP(1)
Share price/fair value at grant date US$(1)
Vesting period (years)(2)
Expected dividend yield (%)
DBSP 2016
4 June 2016
1,200,000
1.0600
1.5323
1‑3
n/a
(1) The fair value of the shares awarded under the DBSP were calculated by using the closing share price on grant date, converted at the closing GBP:US$
foreign exchange rate on that day. No other factors were taken into account in determining the fair value of the shares awarded under the DBSP.
(2) Variable vesting dependent on one to three years of continuous employment.
Historic plans
The historic plans, namely the Executive Directors’ Loan Funded Share Plan (“EDLFSP”) and ELFSP 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 consolidated statement of comprehensive income.
29. 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
31 December
2016
US$
31 December
2015
US$
8,011,016
6,184,750
—
7,764
2,310,743
10,329,523
—
22,025
1,810,805
8,017,580
30. Related party transactions
(a) Equity interests in related parties
Equity interests in subsidiaries
Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 22.
Equity interests in associates and jointly controlled arrangements
Details of interests in joint ventures are disclosed in note 24.
(b) Key management personnel compensation
Details of key management personnel compensation are disclosed above in note 29.
(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 2016 are as follows:
31 December 2016
J El‑Raghy(2)
T Schultz
G Haslam
M Arnesen
M Bankes
A Pardey
R Jerrard
Y El‑Raghy
T Smith
A Davidson
L Gregory
D Le Masurier
H Brown
Balance at
1 January
2016
Granted as
remuneration
(“DBSP”)
Granted as
remuneration
(“RSP”)
Net other
change(1)
Balance at
31 December
2016
71,445,086
30,000
102,056
49,000
150,000
2,968,800
—
780,633
675,000
620,000
430,000
500,000
650,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
690,000
875,000
140,000
160,000
210,000
150,000
160,000
(17,595,714)
53,849,372
—
—
—
—
30,000
102,056
49,000
150,000
(966,199)
2,692,601
—
(51,103)
(175,000)
(30,000)
(80,000)
(120,000)
875,000
869,530
660,000
800,000
500,000
540,000
460,000
60,000
(250,000)
(1) “Net other change” relates to the on‑market acquisition or disposal of fully paid ordinary shares.
(2) Includes the El‑Raghy family.
Since 31 December 2016 to the date of this report there have been no transactions notified to the Company under DTR 3.1.2.R.
The details of the movement in key management personnel equity holdings of fully paid ordinary shares in Centamin plc during the
financial period ended 31 December 2015 are as follows:
Balance at
1 January
2015
Granted as
remuneration
(“DBSP”)
Granted as
remuneration
(“RSP”)
Net other
change(1)
71,445,086
30,000
102,056
15,000
150,000
24,400
2,185,000
637,414
300,000
450,000
300,000
300,000
550,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
900,000
200,000
400,000
200,000
150,000
200,000
100,000
Balance at
31 December
2015
71,445,086
30,000
102,056
49,000
150,000
24,400
—
—
—
34,000
—
—
(116,200)
2,968,800
(56,781)
(25,000)
(30,000)
(20,000)
—
—
780,633
675,000
620,000
430,000
500,000
650,000
31 December 2015
J El‑Raghy(2)
T Schultz
G Haslam
M Arnesen
M Bankes
K Tomlinson
A Pardey
Y El‑Raghy
T Smith
A Davidson
L Gregory
D Le Masurier
H Brown
(1) “Net other change” relates to the on market acquisition or disposal of fully paid ordinary shares.
(2) Includes the El‑Raghy family.
Centamin plc Annual report 2016FINANCIAL STATEMENTSCentamin plc Annual report 2016FINANCIAL STATEMENTS
154
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
COMPANY LEGAL FORM AND STRUCTURE
(h) Transactions with other related parties
32. Subsequent events
As referred to in note 31 subsequent to the
year end, the board of directors announced
a final dividend for 2016 of 13.5 US cents
per share. Subject to shareholder approval
at the annual general meeting on 21 March
2017, the final dividend will be paid on
31 March 2017 to shareholders on the
record date of 3 March 2017.
There were no other significant events
occurring after the reporting date requiring
disclosure in the financial statements.
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.
31. Dividends per share
The dividends paid in 2016 were
US$46,072,599 and are reflected in the
consolidated statement of the changes in
equity for the period (2015: US$33,786,831).
A final dividend in respect of the year ended
31 December 2016 of 13.5 US cents per
share, totalling US$155,534,578 has been
proposed by the board of directors and
is subject to shareholder approval at the
annual general meeting on 21 March 2017.
These financial statements do not reflect this
dividend payable.
30. Related party transactions continued
(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 2016 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$69,600 or
US$51,710 (31 December 2015: A$62,595
or US$46,820).
(f) Transactions with the
government of Egypt
Royalty costs attributable to the
government of Egypt of US$20,574,673
(2015: US$15,197,860) were incurred in 2016.
Profit share to EMRA of US$51,253,333
wasincurred in 2016.
(g) Gold sales agreement
On 20 December 2016, SGM entered into
a contract with the Central Bank of Egypt
(“CBE”). The agreement provides that the
parties may elect, on a monthly basis, for the
CBE to supply SGM with its local Egyptian
currency requirements for that month
(approximately EGP50 million). In return,
SGM will provide the equivalent amount in
US dollars to purchase refined gold bullion
from SGM’s refiner, Asahi Refining, on CBE’s
behalf. This transaction has been entered
into as SGM requires local currency for its
operations in Egypt (it receives its revenue
for gold sales in US dollars). No transactions
have been entered into at the date of this
report, pursuant to this agreement.
155
Centamin plc
Annual report 2016
SHAREHOLDER INFORMATION
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 corporate body 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.
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 22 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 member’s 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.
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 2016 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
The issued capital of the Company at the date of this report is 1,152,107,984 ordinary shares.
As at
31 December
2016
1,152,107,984
2,109,710
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 notes 18 and 19 to the
financial statements.
Centamin plc Annual report 2016FINANCIAL STATEMENTS
156
157
COMPANY LEGAL FORM AND STRUCTURE continued
Substantial shareholders
Summary table of dividends declared by Centamin plc
Based on shareholder disclosures 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
BlackRock Inc.
VanEck Inc.
Aberdeen Asset Management Group
Josef El‑Raghy(2)
Dimensional Fund Advisors
Norges Bank Investment Management
Majedie Investments
(1) Information at 30 December 2016.
(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:
• no person other than the substantial
shareholders detailed above has
an interest of 3% or more in the
Company’s capital;
• the Company is not aware of any
persons who, directly or indirectly, jointly
or severally, exercise or could exercise
control over the Company; and
• 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.
Shareholding
% holding
172,374,768
14.96
71,501,833
60,348,271
53,849,372
49,622,555
35,178,526
34,562,322
6.49
5.48
4.67
4.51
3.19
3.14
The following dividends have been declared
in respect to the financial year ended
31 December 2016:
2016 interim dividend
An interim dividend of 2 US cents per share
on Centamin plc ordinary shares (totalling
approximately US$23 million) was declared
on 10 August 2016. The interim dividend for
the half‑year period ending 30 June 2016
was paid on 7 October 2016 to shareholders
on the register on the record date of
9 September 2016.
2016 final dividend
A final dividend of 13.5 US cents per
share on Centamin plc ordinary shares
(totalling approximately US$155.5 million)
was proposed by the directors on
1 February 2017. The final dividend for the
financial year ended 31 December 2016 will
be paid on 31 March 2017 to shareholders
on the register on the record date of
3 March 2017, subject to approval at the
AGM on 21 March 2017. The ex‑dividend
date is 2 March 2017 for LSE listed
shareholders and 1 March 2017 for TSX
listed shareholders.
Dividend policy
Centamin announced its dividend policy
on 16 May 2014 which was based on the
financial condition of, and outlook for, the
Company and its cash flow and financing
needs. An updated dividend policy was
announced by the Company on 9 January
2017, and is noted below:
“The Company’s dividend policy sets a
minimum pay‑out level relative to cash flow
while considering the financial condition
of, and outlook for, the Company. When
determining the amount to be paid the
board will take into consideration the
underlying profitability of the Company
and significant known or expected funding
commitments. Specifically, the board will
aim to approve an annual dividend of at
least 30% of the Company’s net cash flow
after sustaining capital costs and following
the payment of profit share due to the
government of Egypt.”
2016
2015
2014
Interim
Declared on: 10 August 2016
Declared on: 12 August 2015
Declared on: 14 August 2014
Amount: 2.00 US cents per share
Amount: 0.97 US cents per share
Amount: 0.87 US cents per share
Paid on: 7 October 2016
Paid on: 9 October 2015
Paid on: 3 October 2014
Total: approximately US$23 million
Total: approximately US$11 million
Total: approximately $10 million
Final
Proposed on: 1 February 2017
Declared on: 11 May 2016
Declared on: 18 May 2015
Declared date: 21 March 2017
Amount: 1.97 US cents per share
Amount: 1.99 US cents per share
Amount: 13.5 US cents per share
Paid on: 27 May 2016
Paid on: 29 May 2015
To be paid on: 31 March 2017
Total: approximately US$22.7 million
Total: approximately $22.7 million
Total: approximately US$155.5 million
AGM
All shareholders are encouraged to attend our AGM on 21 March 2017, which will be held in Jersey. This will be an excellent
opportunity to meet members of the team.
Financial calendar
21 March 2017
Annual general meeting to be held in Jersey
10 April 2017
Q1 2017 preliminary production results
3 May 2017
Results for the quarter ended 31 March 2017
10 July 2017
Q2 2016 preliminary production results
3 August 2017
Results for the quarter ended 30 June 2017
9 October 2017
Q3 2016 preliminary production results
2 November 2017 Results for the quarter ended 30 September 2017
Company details
Centamin plc (LSE:CEY, TSX:CEE)
ISIN: JE00B5TT1872
LEI: 213800PDI9G7OUKLPV84
Company number: 109180
Centamin plc Annual report 2016SHAREHOLDER INFORMATIONCentamin plc Annual report 2016SHAREHOLDER INFORMATION
158
GLOSSARY
AFS
DBSP
FRC
available‑for‑sale financial assets
deferred bonus share plan
Financial Reporting Council
AIF
Annual Information Form
AISC
DFO
Diesel Fuel Oil
directors
all‑in sustaining costs
the directors of the board of Centamin plc
Alecto
Alecto Minerals plc
AML
Ampella Mining Limited
AN
ammonium nitrate
ARE
Arab Republic of Egypt
ASIC
Australian Securities Investments
Commission
assay
qualitative analysis of ore to determine
its components
Au
chemical symbol for the element gold
board
the board of directors of the group
CA
Concession Agreement
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
E&E
exploration and evaluation
EDLFSP
executive director loan funded share plan
EGPC
The Egyptian General Petroleum
Corporation
ELFSP
employee loan funded share plan
EMRA
Egyptian Mineral Resource Authority
EOS
FVTPL
financial liabilities at fair value
grade
relative quantity or the percentage of ore
mineral or metal content in an ore body
GST
goods and services tax
g/t
gram per metric tonne
HOD
heads of department
IFRS
International Financial Reporting Standards
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
employee option scheme
inferred resource
cash and cash equivalents, bullion
on hand, gold sales receivable and
available‑for‑sale financial assets
a non‑GAAP financial measure. Any other
companies may calculate these measures
differently. Bullion on hand is valued at the
year end spot price
CBE
Central Bank of Egypt
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
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
159
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
MAR
Market Abuse Regulation
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
Mt
million tonnes
MTIFR
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
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
R&R
resources and reserves
ROM
run of mine
RSP
restricted share plan
SEDAR
system for electronic document
analysis and retrieval
SGM
Sukari Gold Mines
SNED
senior independent non‑executive director
TOFA
taxation of financial arrangements
VAT
value added tax
medical treatment injury frequency
ounce or oz
troy ounce (= 31.1035 grams)
PGM
Pharaoh Gold Mines NL
Mtpa
million tonnes per annum
NCI
non‑controlling interest
NED
non‑executive director
net production surplus or profit share
revenue less payment of the 3% royalty
to Arab Republic of Egypt (“ARE”) and
recoverable costs
Centamin plc Annual report 2016SHAREHOLDER INFORMATIONCentamin plc Annual report 2016SHAREHOLDER INFORMATION 160
ADVISERS
Registrar services
Jersey, Channel Islands
Computershare Investor Services
(Jersey) Plc
Queensway House
Hilgrove Street
St Helier
Jersey JE1 1ES
Canada
Computershare
100 University Avenue
8th Floor
Toronto ON M5J 2Y1
Public relations
Buchanan
107 Cheapside
London EC2V 6DN
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.
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
US 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 risk management of
this report. 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.
Information of a scientific or technical nature
in this document have been prepared by
qualified persons, as defined under the
Canadian NI 43‑101.
Designed and produced by
www.lyonsbennett.com
The paper used in this report is produced using virgin wood fibre from well‑managed forests with FSC©
certification. All pulps used are elemental chlorine free and manufactured at a mill that has been awarded
the ISO 14001 and EMAS certificates for environmental management. The use of the FSC© logo identifies
products which contain wood from well‑managed forests certified in accordance with the rules of the
Forest Stewardship Council.
Printed by CPI Colour, an FSC© and ISO 14001 accredited company, who is committed to all round
excellence and improving environmental performance as an important part of this strategy.
Centamin plc Annual report 2016SHAREHOLDER INFORMATION CENTAMIN.COM
Registered office
2 Mulcaster Street
St Helier
Jersey JE2 3NJ
Egypt
361 EI‑Horreya Road
Sedi Gaber
Egypt
T: +44 (0)1534 828 700
F: +44 (0)1534 731 946
T: +20 (0)3541 1259
F: +20 (0)3522 6350
Australia
57 Kishorn Road
Mount Pleasant
Western Australia 6153
T: +61 (0)8 9316 2640
F: +61 (0)8 9316 2650
E: info@centamin.com
E: pgm@centamin.com
E: centamin@centamin.com.au