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Annual report 2017
DELIVERING
SUSTAINABLE
RETURNS
INVESTMENT SUMMARY
INSIDE THIS REPORT
Centamin plc is a leading
mineral exploration,
development and mining
company dual listed on
the London and Toronto
stock exchanges.
It is a constituent of
the FTSE 250 Index.
Centamin’s principal asset, the Sukari
Gold Mine (“Sukari”), began production in
2009 and is the first modern mechanised
gold mine in Egypt, with an estimated
20 year mine life and forecast to produce
580,000 ounces in 2018.
The Company has established a
longstanding track record of strong
operational and financial performance,
maximising free cash flow generation
and shareholder returns.
SHARE PERFORMANCE
Centamin plc (TSR)
FTSE Gold Mine (TSR)
600
500
400
$
S
U
300
200
100
Strategic focus areas
We have established four areas of strategic focus:
Long term
sustainability
Find out more on pages 22 and 23
Prioritising
stakeholder
returns
Find out more on pages 24 and 25
Optimal
growth
Find out more on pages 26 and 27
Social
responsibility
0
2013
2014
2015
2016
2017
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 US$100 was invested on 31 December 2012.
Front cover image shows mining engineer in the Cleopatra development drive.
Find out more on pages 28 and 29
1
Centamin plc Annual report 2017
STRATEGIC REPORT
STRATEGIC REPORT
Financial highlights
Operational highlights
Investment proposition
Centamin at a glance
2
3
4
6
Chairman’s statement
12
Chief executive
officer’s report
Business model
14
18
DIRECTORS’ REPORT
Introduction
Board of directors
Senior management
Corporate governance
82
92
94
96
Strategic focus
1
Long term
sustainability
22
2
Prioritising
stakeholder returns 24
3
Optimal
growth
4
Social
responsibility
Risk management
Corporate social
responsibility
Operational review
Financial review
26
28
30
38
63
74
Nomination report
Remuneration report
Audit and risk report
98
102
130
FINANCIAL STATEMENTS
Directors’ responsibilities 140
Independent
auditor’s report
141
Consolidated statement of
comprehensive income 146
Consolidated statement
of financial position
147
Consolidated statement
of changes in equity
148
Consolidated statement
of cash flows
149
Notes to the consolidated
financial statements
150
SHAREHOLDER INFORMATION
Company legal form
and structure
Advisers
Glossary
185
187
Forward‑looking
statements
188
IBC
2
Centamin plc Annual report 2017
STRATEGIC REPORT
3
FINANCIAL HIGHLIGHTS
OPERATIONAL HIGHLIGHTS
Free cash flow generation is the fundamental
driver of the business, allowing the Company
to prioritise stakeholder returns.
This year marked another great year of operational milestones,
as a result of our uncompromised commitment to continuous
improvements to productivity and efficiency.
REVENUE
(US$’000)
PROFIT FOR THE YEAR
Before tax
(US$’000)(1)
After EMRA profit
share (US$’000)(1)
EARNINGS PER SHARE
Before profit share
(US cents per share)(1)
After profit share
(US cents per share)(1)
687,387 675,510
266,829
214,755
23.2
18.7
224,094
19.3
109,402
9.5
CASH BALANCES
Cash and cash
equivalents at the
year end (US$’000)
399,873
359,680
2017 QUARTERLY PRODUCTION
(ounces gold)
2017 QUARTERLY ORE PROCESSED
(million tonnes)
SUKARI GOLD MINE OPERATIONS
156,533 154,298
2.90
3.06
3.00
3.07
124,641
109,187
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2017
TOTAL(4)
2017
TOTAL(1,4)
2017
TOTAL(1,4)
2017 EPS BEFORE
PROFIT SHARE
2017 EPS AFTER
PROFIT SHARE
2017
TOTAL(4)
2017
TOTAL PRODUCTION (ounces gold)
2017
TOTAL ORE PROCESSED (million tonnes)
US$676m
2016: US$687m
US$224m
2016: US$267m
US$109m
2016: US$215m
19.3c
2016: 23.2c
9.5c
2016: 18.7c
US$360m
2016: US$400m
544,658
2016: 551,036
12.03
2016: 11.56
• Annual production exceeded
540,000 ounce guidance
• Record annual open pit
production of 70.9Mt mined
• Excellent underground
performance with 1.14Mt ore
mined at 8.28g/t
• Record annual plant
throughput 12.03Mt
• Average head grade 1.57g/t
• Metallurgical recovery 88.1%
ALTERNATIVE PERFORMANCE MEASURES(2,3)
CASH COST OF
PRODUCTION
ALL‑IN
SUSTAINING COST
(US$ per ounce)(1,2)
(US$ per ounce)(1,2)
EBITDA
(US$’000)(1)
FREE CASH FLOW
(US$’000)(2)
554
513
790
372,885
242,018
694
325,927
142,439
CASH
BALANCES
Cash and liquid
assets at the
year end (US$’000)(3)
428,010
417,935
LOST TIME INJURY FREQUENCY RATE
MEDICAL TREATMENT INJURY
SUSTAINABILITY TARGETS
(per 200,000 working hours)
(per 200,000 working hours)
0.69
1.37
1.28
0.36
0.39
0.27
0.26
0.12
0.60
0.39
0.46
0.40
• Zero fatalities
• A year‑on‑year decrease in LTIFR
• Zero severe or major
consequence environmental
incidents
• A year‑on‑year increase in
water recycling
• Year‑on‑year reduction in GHG
emissions per tonne milled
• Increase in total community
investment
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2012
2013
2014
2015
2016 2017
2012
2013
2014
2015 2016 2017
2017
TOTAL
2017
TOTAL
US$554/oz
2016: US$513/oz
US$790/oz
2016: US$694/oz
2017
TOTAL (1)
US$326m
2016: US$373m(1,4)
2017
TOTAL
US$142m
2016: US$242m(2,4)
2017
TOTAL(3,4)
US$418m
2016: US$428m
2017
(“LTIFR”)
0.26 (Global LTIFR 0.22)
2016: 0.27
2017
(“MTIFR”)
0.40
2016: 0.46
(1) Excludes fuel subsidy (i.e. based on the full international fuel price), please refer to note 12 to the financial statements for further details.
(2) Cash cost of production and all‑in sustaining cost, EBITDA and free cash flow are non‑GAAP financial performance measures with no standard
meaning under GAAP. Please see the financial review on page 74 for details of non‑GAAP measures.
(3) Includes cash and cash equivalents, bullion on hand, gold sales receivables and available‑for‑sale financial assets. Please see the financial review
for details of non‑GAAP measures.
(4) 2017 totals have been rounded to the nearest US$million. All amounts in the 2017 annual report are in US$ unless otherwise indicated.
Centamin plc Annual report 2017STRATEGIC REPORT 4
5
INVESTMENT PROPOSITION
Centamin is a robust business with excellent long term sustainable
production and significant untapped reserve and resource potential
across its portfolio of assets.
LONG TERM SUSTAINABILITY
PRIORITISING STAKEHOLDER RETURNS
(year ended 31 December 2017)
• Sukari is a large‑scale (544,658oz), bulk tonnage
(70.9Mt mined; 12.0Mt processed), long‑life (at least
20 years from open pit), low cost mine (cash costs
US$554/oz, AISC US$790/oz)
• Strong all‑in sustaining margins (US$471/oz) and return
on capital throughout the cycle
• Maximising cash flow generation (US$359 million)
• Landmark first full year profit share: US$112 million
paid to Egyptian government stakeholder in 2017
• Maintained fourth successive year paying an interim
(2.5 cents per share) and proposed full year dividend
(10 cents per share), totalling 12.5 cents per share for
2017 (totalling US$144 million) subject to AGM approval
• Debt‑free, cash and liquid assets of US$418 million
• 100% free float with strong liquidity (circa 14 million
shares traded per day), as supported by regular investor
relations programmes ensuring clear communication
of the Company strategy to stakeholders
OPTIMAL GROWTH
SOCIAL RESPONSIBILITY
• High‑grade underground production growth potential
• Priority towards safety for our workforce and
from Cleopatra decline development access and
ongoing resource definition drilling as the orebody
remains open at depth and along strike
• Forecasted ramp up in plant throughput with the
•
installation of the fourth secondary crusher
‘Explore to develop’: highly prospective district scale
West African land package
• Resource upgrade at the Doropo Project – 1.35Moz
indicated @ 1.33g/t and 0.9Moz inferred @ 1.2g/t
• Discovery at the ABC Project, 12km gold mineralised
strike, and open along the contact zone between the
Archaean shield and Birrimian domain
• 2018 targeted exploration spend in West Africa
of circa US$22 million
developing their skills
• Contributing positively to the local economy
•
and environment
Initiative to improve reporting towards
Global Reporting Initiative (“GRI”) standards
• The board has approved the preparation of a feasibility study
for the installation of a 15MW solar power plant on site at
Sukari as a lower cost, clean energy alternative for diesel fuel
ESTABLISHED TRACK RECORD
ATTRACTIVE INVESTMENT
• Produced 2.9Moz since first gold pour in 2009,
• Proposed final dividend of 10 cents per share
at an average cash cost of circa US$614/oz
(US$115 million)
• Technical expertise: from mine site to board of directors,
extensive operational experience within the industry and
more specifically building and expanding Sukari
• Resource growth: creating value from discovery
to 11.7Moz mineral resource (as at 30 June 2017),
supporting greater than 20 year life of mine
open pit production profile
• Operational growth: creating value through the original
Stage 1 development of 4Mtpa processing capacity to in
excess of 12Mtpa
• Robust balance sheet with no debt, and cash and
liquid assets of US$418 million(1)
• All shares are publicly traded on the London Stock
Exchange and Toronto Stock Exchange
• FTSE 250 Index constituent
• Strong stock market trading liquidity
(1) 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.
History:
Jun 1995
Sep 2000
May 2005
Apr 2007
Jun 2007
Jun 2009
Nov 2009
Sep 2013
Feb 2014
Aug 2014
Dec 2015
Dec 2016
The 160km2 Concession
Agreement came into
effect following
declaration as Egyptian
Law no. 222
Defined first JORC
resource
Exploitation lease
awarded
Listed on the Toronto
Stock Exchange (ticker:
CEE)
Completed Stage 1
development, 4Mtpa
processing plant
First gold pour (2.9Moz
produced, as at
31 December 2017)
Migrated to the Main
Board of the London
Stock Exchange (ticker:
CEY)
Completed Stage 4
processing plant
expansion to 10Mtpa
All‑share takeover of
Australian listed
Ampella Resources
Maiden interim dividend
declared
Annualised production
targets of 450,000 to
500,000 ounces
Annualised production
targets over 500,000
ounces with production
rates exceeding 11Mtpa
Achieved in 2017:
Operational
• Further reductions in LTIFR –
2017: 0.26 per 100,000 hours
• Production guidance exceeded
for the third consecutive year –
2017: 544,658oz
• Record material mined –
2017: 70.9Mt, a 14% increase on
the prior year
• Record processing plant
throughput – 2017: 12.03Mt,
a 4% increase on the prior year
• Further optimisation of the plant
including upgrades to the Sukari
elution circuit
Financial
• Control over costs with cash cost
guidance improvements over the
last three consecutive years –
2017: US$554/oz
• AISC in line with guidance for
2017: US$790/oz
• Cash and liquid assets at
31 December 2017 of
US$418 million(1)
• Transition from full project cost
recovery to profit share with
EMRA, our Egyptian government
stakeholders
• Fourth consecutive dividend
payout, with a proposed full year
dividend of 10 cents per share
representing a payment of 100%
of free cash flow for 2017
Exploration
• Excellent underground reserve
Corporate governance
• Internal promotion of Ross
growth:
• 51% increase in high‑grade
underground reserve ounces
to 0.8Moz
• 74% increase in underground
reserve tonnes to 4.7Mt
• Doropo Project, Côte d’Ivoire,
updated JORC resource
estimate of 1.35Moz indicated
and 0.9Moz inferred
• ABC Project, Côte d’Ivoire,
delineation of an outcropping
12km gold mineralised structure
Jerrard, CFO, to the board of
directors
• External appointment of Alison
Baker as non‑executive director
• External appointment of Mark
Morcombe as chief
operating officer
• Planned appointment of an
independent non‑executive
chairman in 2018
• Staged rotation of non‑executive
directors
PRODUCTION GROWTH
DIVIDEND YIELD
GROUP CASH FLOW GENERATION
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2017
Production
Cash cost
AISC
Declared full year dividend
(US cents)
Dividend yield
as at 31 Dec
Operating cash flow
Operating cash flow
Free cash flow(2)
Free cash flow
(1) Includes cash and cash equivalents, bullion on hand, gold sales receivables and available‑for‑sale financial assets.
(2) Free cash flow in a non‑GAAP measure defined as net cash generated by operating activities, less net cash used in investing activities, less EMRA
profit share paid (cash). Please see the financial review for details of non‑GAAP measures.
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT
6
CENTAMIN AT A GLANCE
In its eighth year of commercial
production, Sukari enjoyed
another strong year, producing
544,658oz, exceeding our
guidance of 540,000oz.
Sukari Gold Mine
process
plant
Sukari Gold Mine
process
diagram
OPEN PIT
ORE
UNDERGROUND
ORE
PRIMARY CRUSHING
MILL FEED
STOCKPILE 1
PLANT 1
BALL MILL 1
7
Conc.
Tails
Conc.
Tails
ROM
ROM
GYRATORY
CRUSHER
10xMtpa
GYRATORY
CRUSHER
5xMtpa
SECONDARY CONE
CRUSHERS
NEW SECONDARY CRUSHER
SAG MILL 1
BALL MILL 2
FLOTATION CIRCUIT 1
PLANT 2
MILL FEED
STOCKPILE 2
SAG MILL 2
FLOTATION CIRCUIT 2
BALL MILL 3
Carbon columns
DUMP LEACH
Solution
Tails
Solution
Tails
CONCENTRATE CIRCUIT
FINE-GRINDING
(VERTIMILL & SMDS)
TAILINGS STORAGE FACILITY
Production
Processing plant
Open pit
Underground
ELUTION & ELECTROWINNING
“OXIDE” CIL CIRCUIT
Operational excellence is fundamental to our business.
Continued drive for productivity and efficiency resulted in
achieving record throughput, reflecting the ongoing
improvement on availability and productivity of the circuit.
The Sukari plant processed 12.0Mt of ore in 2017, a
4% increase on the prior year (11.6Mt in 2016). Metallurgical
recoveries of 88.1% was a decrease from 89.4% in 2016.
Installed additional elution capacity, and ongoing
optimisations include automating the flotation circuit,
both of which we expect to lift recoveries back up to
target of 90%.
The open pit delivered 70.9Mt of total material movement
in 2017, a 14% increase on the prior year (62.2Mt in 2016).
Ore mined of 16.1Mt at an average grade of 0.66g/t
(10.95Mt at 0.93g/t in 2016) including 4.0Mt of material sent
to the dump leach ponds at a grade of 0.29g/t (0.12Mt at
0.21g/t in 2016). This increase was related to improved
mining productivity and equipment utilisation.
Ore production from the underground mine was 1.14Mt,
a 12% increase on the prior year (1.02Mt in 2016), at
an average head grade of 8.28g/t. In 2018, we forecast
ramping up underground ore production to 1.3Mt,
a projected 13% increase on 2017.
A total of 6,943 metres of development was completed, of
which 5,490 metres was mineralised (3,839 metres in the
Amun area, and 1,651 metres in the Ptah area) and associated
with stoping blocks to be mined over the coming years.
UNDERGROUND ORE MINED AND AVERAGE GRADE
LOCATION OF THE SUKARI GOLD MINE
ORE PROCESSED AND FEED GRADE
Alexandria
Cairo
Egypt
Sukari
14
12
10
8
6
4
2
0
Million tonnes
Grade (g/t)
2.5
Ore
processed
Feed grade
2.0
1.5
1.0
0.5
0.0
2013
2014
2015
2016
2017
OPEN PIT MINING
Million tonnes
Grade (g/t)
1.4
Million tonnes
Grade (g/t)
12.0
18
16
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
0.4
0.2
0.0
2013
2014
2015
2016
2017
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0
Ore
processed
Stoping
ore
Mined grade
10.0
8.0
6.0
4.0
2.0
0.0
2013
2014
2015
2016
2017
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT 8
9
CENTAMIN AT A GLANCE
continued
Sukari Gold Mine
orebody
diagram
Sukari –
production upside potential
Our updated Mineral Reserve and
Resource statement of total reserves
of 8.0Moz and Measured and
Indicated Resources of 11.7Moz,
as at 30 June 2017, reiterated the
long term sustainability of the Sukari
open pit and the further expansion
opportunities for the high‑grade
underground operations.
Processing
Plant throughput: current forecast processing rates of
12.3Mtpa, with potential to exceed a throughput of
12.5Mtpa with ongoing process optimisation.
Plant recovery: current forecast metallurgical recoveries
of 89%, with potential to sustain circa 90% with ongoing
processing optimisation.
Open pit
Fleet capacity: the mining fleet has total capacity above
current forecast rates of 75Mtpa and therefore offers the
potential to further improve scheduling of open pit ore.
Underground
Infrastructure capacity: current forecast ore mining rates
of 1.3Mtpa, with theoretical capacity to reach circa 1.5Mtpa
from the existing Amun and Ptah declines as development
progresses.
Decline development: Horus and Amun decline
development provides future access to lower Amun/Osiris
and Ptah zones. Cleopatra decline at the north‑eastern
region of Sukari Hill has capacity to support mining rates of
up to 1Mtpa. Ultimate production rates will depend on
results from the ongoing exploration drilling programme.
Reserve
Excellent underground reserve replacement supports our
expectation for further reserve growth over the coming
years as underground development and exploration
continues.
Sukari mineral reserve and resource
estimate highlights (as at 30 June 2017)
• Total mineral reserve estimate of 8.0Moz gold, with an
increase in underground reserves offsetting total mining
production of 1Moz from 30 June 2015 to 30 June 2017:
• 7.2Moz gold open pit reserves, including stockpiles,
underpinning more than 20 years of sustainable
production at current mining rates;
• 159Mt at a grade of 1.0g/t in proven open pit
reserves, with 70% of in‑pit reserves now in the
highest confidence reserve classification compared to
57% as at 30 June 2015;
• 0.8Moz Au at 4.5g/t of underground proven and
probable reserves, including development ore (0.6Mt
at 0.9g/t), a 51% increase in ounces;
• 0.8Moz Au at 5.1g/t underground proven and
probable reserves, excluding development ore;
• 4.7Mt of underground reserve tonnes, a 74% increase.
• Total measured and indicated mineral resource
estimate of 11.7Moz Au:
• 1.6Moz Au of underground resources, a 60% increase;
• 7.4Mt of underground resource tonnes, a 59%
increase in tonnes with grade maintained at 6.8g/t;
• 1.9Mt at 8.9g/t in measured underground resources,
a 37% increase in grade.
Open pit
operation
at Sukari
Gold Mine
Sukari – reserve and resource
Sukari mineral reserve
Proven and probable
– open pit
– inc. stockpiles (Proven)
– underground
– inc. development (Probable)
Total mineral reserves
Sukari mineral resource
Measured and indicated
Inferred
Tonnes
(‘000)
Grade
(g/t Au)
Gold
(Moz)
229
239
4.7
5.4
244
385
25
1.00
0.93
5.1
4.5
1.00
0.95
0.80
7.0
7.2
0.8
0.8
8
11.75
0.64
The effective date of the reserve and resource statement is 30 June 2017, in accordance with NI 43‑101.
Totals may not equal the sum of the components due to rounding adjustments.
Based on open pit mined surface as at 30 June 2017, underground mine workings as at 30 June 2017, and a gold price of US$1,300 per ounce.
Mineral resources are reported inclusive of those resources converted to proven and probable mineral reserves.
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT
10
11
Engineer
monitoring the
power station
at Sukari
Gold Mine
Exploration
drilling in
West Africa
CENTAMIN AT A GLANCE
continued
Exploration
focused growth
Centamin has an excellent
exploration track record
and 2017 was no different.
Sukari exploration
Drilling from underground remains a focus of the Sukari
exploration programme as ongoing development improves
access to define the potential high‑grade extensions of the
deposit. The Sukari orebody remains open at depth and
further underground drilling will take place during 2018.
During 2017, development of the Cleopatra decline,
within the north‑eastern Cleopatra zone of Sukari,
continued with 1,486 metres of decline development
completed. The Cleopatra decline infrastructure is
engineered to support mining rates of up to 1Mtpa
from this area, in addition to the current underground
ore production from the Amun and Ptah declines.
Actual mining rates will depend on the results from
the development and exploration drilling programme
currently underway.
There are four exploration rigs allocated to focus on
underground reserve replacement and resource expansion
drilling as the orebody remains open in multiple directions.
Two rigs are allocated to Cleopatra and two for the Amun,
Ptah and Horus regions.
Within the wider 160km2 Sukari exploitation lease, a
number of additional prospect areas have been identified
by reconnaissance field work, including geophysical and
geochemical surveys and, where appropriate, preliminary
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.
We believe in the regional prospectivity within Côte d’Ivoire
such that we are looking to double our existing 3,231km2 footprint,
with a further 3,187km2 under application.
Exploration during 2018 will be aimed at resource expansion and
infill drilling at the Doropo Project and defining a maiden resource
at the ABC Project.
Côte d’Ivoire
Burkina Faso
Centamin has made significant progress in Côte d’Ivoire
during 2017, conducting both regional reconnaissance
and preliminary ground work, combined with detailed
wide‑spaced drilling.
Further drilling at the Doropo Project in north‑east Côte
d’Ivoire, covering five prospects within a 5km radius, has
resulted in an updated resource estimate of 1.35Moz
indicated at a grade of 1.3g/t and a 0.9Moz inferred
resource at a grade of 1.2g/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.
During 2017, the exploration programme involved a
thorough review of all work that has been undertaken on
the project. Drilling recommenced in December 2017,
targeting extensions and parallel structures to the existing
resources. Further drilling is planned during 2018, 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.
YEAR
2017
2016
INDICATED
Mt Au g/t Au Moz
INFERRED
Mt Au g/t Au Moz
Mt
INDICATED
Au g/t
Au Moz
Mt
INFERRED
Au g/t
Au Moz
32.5
1.33
1.35
24.75
1.20
0.9
34.2
1.7
1.92
25
1.7
1.33
5.8
1.62
0.30
25.39
1.26
1.03
METRES DRILLED IN CÔTE D’IVOIRE 2017
METRES DRILLED IN BURKINA FASO 2017
Diamond
Reverse circulation
Air core
Auger
4,880
Diamond
68,600
Reverse circulation
63,733
Air core
10,743
Auger
0
0
12,926
39,995
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT
12
13
CHAIRMAN’S STATEMENT
Open pit
mining fleet
Josef El‑Raghy
Chairman
The past year has seen the Company firmly
consolidate its position globally as one of the leading
low cost gold producers.
Dear shareholders,
On behalf of the board, it gives me
pleasure to present the 2017 results.
Strength throughout the cycle
Testament to the quality of our team
and the quality of our assets, the past
year has seen the Company firmly
consolidate its position globally as
one of the leading low cost gold
producers. The Sukari Gold Mine
produced 544,658 ounces of gold in
2017, at cash costs of US$554/oz and
all‑in sustaining costs of US$790/oz at
an average realised gold price of
Our governance principles
The board’s main responsibilities
are to develop, review and
monitor the Company’s long term
business strategies and provide
strategic direction to
management. See page 84 for
details of our main governance
principles covering:
• Leadership
• Effectiveness
• Accountability
• Remuneration
• Shareholder engagement
US$1,261/oz, generating US$676 million
in revenue, US$326 million in EBITDA
and US$224 million in pre‑tax profits.
Commercially in operation for eight
years, Sukari has maintained
year‑on‑year cash costs in the lowest
quartile in the industry, averaging
US$614/oz since commercial
production commenced in 2010.
Our aim is to deliver strong
performance under any market
conditions. In what has been a more
challenging market, Centamin’s
stringent cost reduction strategies and
working capital efficiencies have
enabled the Company to generate
strong all‑in sustaining margins of
US$471/oz, down from US$562/oz in
2016, generating significant cash flow
of US$359 million, only marginally
lower than the US$366 million
achieved in 2016. A 24% increase in
fuel costs combined with a scheduled
30% increase in sustaining capital
expenditure in 2017 (largely due to
equipment rebuilds), were offset by
reductions in non‑sustaining
exploration expenditure and cost
reduction strategies delivering all‑in
sustaining costs of US$790/oz, exactly
in line with guidance for 2017. The
increase in production costs and the
slight decrease in produced ounces
led to an 8% increase in unit cash costs
of production to US$554/oz for 2017,
well below our US$580/oz guidance
for 2017 and extremely competitive
within the global gold industry.
Consistent strategy
Over the past 20 years the Company
has been committed to building a
modern gold mining industry in Egypt,
a country which straddles the
economic diversity of Africa and the
Middle East, a strategically vital
economy in a region that has been
associated with several significant
challenges, and a country located on
one of the last remaining
underdeveloped gold belts, the
Arabian Nubian Shield. There have
been various public views expressed
about Egypt in the international arena
that simply do not correlate with the
experience that Centamin has had, as
one of the largest foreign investors in
this dynamic country. Having worked
closely with Centamin since its
founding, particularly with my father
and family, through to today’s highly
experienced board, Centamin has put
Egypt firmly on the map of gold
exporting countries. Significantly,
Sukari has produced every single
commercial ounce of gold that Egypt
has exported over the past eight
years, which by the end of 2017 stood
at over 2.9 million ounces.
The modern infrastructure and
operations established at Sukari,
supported by a minimum of a 20‑year
mine life with untapped underground
resource upside, provide the solid
foundation from which Centamin will
continue to generate meaningful cash
flow. Our robust balance sheet, which
remains debt free, allows us to
continue investing in future growth
– whether that is organically across our
portfolio of assets and/or through
seizing value accretive opportunities
which are in line with our strategic
objectives.
Delivering substantial
stakeholder returns
Free cash flow generation is the
fundamental driver of the business,
allowing the Company to prioritise
stakeholder returns. The success of
Sukari, which today employs over
1,350 Egyptian nationals directly and
many more indirectly throughout its
supply chain, is further underpinned
by direct cash returns to date to the
Egyptian State of US$272 million
through royalties and profit share
(excluding taxes on salaries, fuel and
other sources of fiscal revenue). In
total, the Company, with the support
of its shareholders, has directly
invested, and fully recovered, more
than US$1.1 billion into the Egyptian
economy. This simply could not have
happened without the patient support
of our Egyptian stakeholders, who
have benefited from seeing Sukari
grow from an exploration licence into
one of the largest gold producing
mines in the world.
In July, we declared an interim
dividend of 2.5 US cents per share,
a 25% increase on the 2016 interim
payment. Following another year of
strong operational and financial
performance, including paying out
US$112 million in profit share, the
board of directors are delighted to
propose a final dividend for 2017 of
10 US cents per share, for approval at
the forthcoming annual general
meeting (“AGM”) on 26 March 2018.
This represents a proposed total
dividend of 12.5 US cents per share,
full year payout of US$144 million,
which is equivalent to approximately
100% of our free cash flow in 2017.
This level of payment is consistent with
the Company’s policy of returning
cash in excess of US$250‑300 million
that is not required for growth
projects.
Board and management changes
Our commitment to robust corporate
governance and the disciplined
execution of our fiduciary duties forms
a core pillar to Centamin and, in order
to grasp the opportunities that lie in
front of Centamin, the Company has
striven to improve on every aspect of
its business beyond simply producing
profitable gold ounces and lowering
cash costs. In this regard, we are
delighted to welcome Alison Baker as
an independent non‑executive
director to the board. Alison will play
an important part in the ongoing
development of our corporate
governance initiatives. We also warmly
welcome Ross Jerrard, our chief
financial officer, to the board. Ross
joined Centamin’s senior management
team in 2016 as chief financial officer,
and has been instrumental in
transforming our reporting systems
throughout the group. Lastly, I am
delighted to welcome Mark Morcombe
to the senior management team, as
chief operating officer (“COO”).
Mark is a very accomplished, well
respected mining engineer, who
brings a vast amount of relevant
African open pit and underground
experience.
Under the strong stewardship of your
CEO, Andrew Pardey, who helped
build Sukari in his various roles,
including as general manager and
then COO, I believe that the Company
is in a position of considerable
strength to see sustainable and
consistent growth over the coming
years. The board has embarked on the
process, with an executive search firm,
of finding an independent
non‑executive chairman to succeed
me. As announced recently, it is my
intention to resign from my position no
later than the end of December 2018,
and continue my support of Centamin
as a committed shareholder. I want to
thank the board for their support
during my tenure and I wish them well
for what remains an exciting future for
the Company.
On that note, I thank all shareholders
for their support over the years, which
has seen Centamin grow from a small
Australian listed exploration company
into one of the largest gold producers
listed on the London and Toronto
Stock Exchanges. We welcome you to
attend our AGM, which will be held in
Jersey on 26 March 2018. I would also
like to thank all of our incredible staff
whose contributions have made the
Company what it is today.
By order of the board for and on
behalf of Centamin plc.
Josef El‑Raghy
Chairman
31 January 2018
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT
14
15
CHIEF EXECUTIVE OFFICER’S REPORT
Process plant
at Sukari
Gold Mine
Andrew Pardey
Chief executive officer
We successfully delivered against our strategic
objectives, generating significant cash flow and
delivering exploration led growth.
During 2017, Centamin successfully
delivered against our strategic
objectives to generate significant cash
flow, maintain substantial stakeholder
returns, deliver exploration led growth
and ensure ongoing commitment to
workplace safety.
In its eighth year of commercial
production, Sukari enjoyed another
strong year, producing
544,658 ounces, exceeding our
guidance of 540,000 ounces. Integral
to this success are our people. 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 onsite
health and safety development has
resulted in a circa 4% reduction in lost
time injury frequency rate to 0.26.
We continue to take the appropriate
measures in striving to achieve a
zero‑harm workplace.
Driving productivity
This year marked another great year
of operational milestones, as a result
of our uncompromised commitment
to continuous improvements to
productivity and efficiency.
The open pit delivered a record
70.9Mt of material mined, a 14%
increase on 2016, and the processing
plant achieved record throughput of
12.0Mt, up 4% on 2016. Both mining
and plant throughput volumes
represent the eighth successive year
of growth. Throughout 2017, ongoing
improvements to the operation,
utilisation and availability of our fixed
assets have been a key driver in
achieving these milestones. For
example, renewed operator training
has improved productivity of the
loading fleet. Furthermore, proactive,
preventative maintenance and systems
implementation to improve efficiency
across procurement warehousing and
plant and equipment maintenance
throughout 2016 and 2017 has
resulted in improved mining
productivity throughout the year.
The increase in tonnes through the
plant slightly impaired metallurgical
recoveries, which were 88.1%,
marginally below budget. Further
optimisation on improving recoveries
is underway. Projects undertaken
include the installation of VisioFroth;
the commissioning of a second acid
wash column; an expansion of the
elution circuit by installing a third
elution column with supporting
infrastructure and an extra
electrowinning cell; an automated
control monitoring system that aims to
increase the flotation mass pull;
reducing the CIL tailings losses with
improved carbon management and
carbon monitoring techniques.
Creating value through the drillbit
Centamin has an excellent exploration
track record and 2017 was no different.
Our updated mineral reserve and
resource statement of total reserves of
8.0Moz and measured and indicated
resources of 11.7Moz, as at 30 June
2017, reiterated the long term
sustainability of the Sukari open pit
and the further expansion
opportunities for the high‑grade
underground operations.
Sukari underground drilling resulted
in a 51% increase in underground
reserves to 0.8Moz and a 74%
increase in reserve tonnes to 4.7Mt
Underground exploration at Amun
and Ptah was very successful during
2017, identifying potential high‑grade
zones at Horus and demonstrating the
prospectivity of the Osiris and Bast
sectors within the Amun zone and the
gap between Anum and Ptah
respectively.
Underground
development
drive
Medium term organic growth at Sukari
is likely to be driven by increased
underground production levels,
displacing lower‑grade open pit ore.
In particular, the Cleopatra exploration
decline was advanced during the year
to establish drill platforms within
Sukari to test the contact zone at the
northern end of the porphyry for
similar mineralisation to that currently
being mined at Amun and Ptah. Initial
drill results confirmed the presence of
prospective structures within the
porphyry which may be used to target
future development of the decline and
the Company reported encouraging
results from the contact zone between
the porphyry and the surrounding
meta‑sedimentary rock. Drilling
continues and will, over the course of
2018, guide future development plans
for Cleopatra. Even though Cleopatra
is an exploration project, the decline
has been built to the same
specification as Amun and Ptah with
potential capacity of around 1Mtpa of
additional underground ore,
dependent on the results of the
ongoing exploration programme.
Doropo and the ABC Project have the
potential to develop further as drilling
continues and form part of the strong
base for Centamin’s exploration and
development pipeline including
Burkina Faso and the near mine
targets at Sukari.
Strengthening
established partnerships
Last year marked 22 years in
partnership under our Concession
Agreement with the Arab Republic of
Egypt. Last year was also the first full
year profit share payout to the
government under our profit share
arrangement. The smooth transition
from US$1.1 billion project cost
recovery in late 2016 to this year’s first
full year US$112 million profit share
payout (totalling circa US$159 million
paid to date), is testament to the
strength of our established
relationship with the Egyptian
government and our excellent team
and framework in place in Alexandria
and Cairo, led by Youssef El‑Raghy,
the General Manager of Egyptian
Operations.
West African developments
The resource at our Doropo Project in
Côte d’Ivoire has been increased from
the maiden resource announced in
January 2017 to 1.3Moz (contained
gold) indicated and 0.95Moz inferred.
This resource is located with an area of
25km2 and within a comfortable haul
from a potential central processing
facility.
The Doropo resource is located within
a granite domain that had previously
been dismissed as not being
prospective for significant gold
mineralisation. The team in Côte
d’Ivoire has successfully proved its
ability to define a resource area that is
still open and with further
geochemical anomalies in the area
that still need to be drill tested for
further prospective gold
mineralisation. Test work has
continued to confirm that the gold
from this area can be extracted using
conventional CIL or heap leaching
methods. Whilst undertaking this work
in Doropo, the team has also been
very active on the ABC Project area on
the west side of Côte d’Ivoire.
Although at an early stage in the
exploration pipeline, initial results from
first pass drilling have confirmed a
mineralised corridor of over 12km in
strike length.
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT 16
17
CHIEF EXECUTIVE OFFICER’S REPORT
continued
As with any partnership, nurturing that
relationship is paramount to its
success. Centamin maintains regular
executive and senior management
contact with respective government
and industry partners, establishing
open lines of communication
throughout our Finance, Operations
and in‑country Corporate Affairs
departments. We would like to thank
our supportive stakeholders, and we
look forward to the long term
relationship of substantial profit share
resulting from the operation and
growth of our world class asset.
The year ahead
We look forward to delivering solid
growth in 2018 with gold production
guidance of 580,000 ounces, a 6%
increase over 2017 production, at a
lower all‑in sustaining cost of
US$770/oz. Cash costs are expected
to be US$555/oz, in line with 2017
actuals, driven by increased
production offsetting expected higher
fuel and reagent input costs.
With the installation of the fourth
secondary crusher, we are targeting
record processing plant throughput of
12.3Mt. The mine plan forecasts a
relatively balanced quarter‑on‑quarter
production profile throughout the
year. The underground is scheduled to
mine an increased 1.3Mt ore at a
grade of 7.2g/t; comprising a 65:35
split between stoping and
development ore, respectively.
The improvement in total tonnes from
underground will be driven by
increased stoping activities made
possible by our focus on ensuring
development is well advanced. Open
pit mining activities will be focused on
Stage 4A of the north wall. This is the
predominant source of ore from the
open pit over the next five years. The
open pit is scheduled to move 70.5Mt
of material and mine 17.7Mt ore at an
overall grade of 0.70g/t including
dump leach and stockpile material,
with open pit feed grade in line with
open pit reserve grade.
Underground exploration and
development remains the key catalyst
in near term organic production
growth. Sukari exploration spend of
over US$20 million is anticipated for
2018, with four rigs allocated to focus
on underground reserve replacement
and resource expansion drilling as the
orebody remains open in multiple
directions. The focus of our
development will include the
exploration decline at Cleopatra to
access the high‑grade western contact
of the porphyry as well as expanding
decline development at Amun and
Ptah, to access the Horus, Bast and
Osiris zones, which should drive our
medium term growth strategy.
Finally, I would like to thank my
colleagues for their hard work and
contribution towards delivering
another solid performance. Operating
within a cyclical sector, in a fast
changing world, Centamin has
established an impressive track record
of adapting, mitigating risks where
appropriate, and delivering strong
results. This resilience in our business
model is testament to the strength of
the core values your Company is built
upon and the experience and
expertise of the people within it.
I would also like to thank our board of
directors for their continued support
and guidance, in particular our
chairman, Josef El‑Raghy, who has
announced his intention to retire at the
end of 2018. As CEO and chairman
over the past 15 years, Josef has built
a remarkable gold company. Centamin
is in a very strong financial and
operational position and we respect
that this year is the right time for Josef
to hand over the reins to a successor
as we enter the next stage of growth
in 2018 and beyond.
Andrew Pardey
Chief executive officer
31 January 2018
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT 18
19
BUSINESS MODEL
We believe good corporate governance provides
the foundation of our business model.
RESOURCES
RELATIONSHIPS
Strategic focus areas
We have identified four
core pillars paramount
to the success of our
business model:
Sukari and
West Africa
See pages 65 to 69
Engagement with
stakeholders
Find more on page 44
1
Long term
sustainability
Investment in
exploration to
expand and replenish
underground reserves
and to identify, assess
and advance longer term
growth opportunities,
beyond the existing
established large‑scale, bulk
tonnage 20‑year open pit mine
at Sukari.
3
Optimal growth
Maximising the return on investment
through operational excellence. Ensuring
the optimal blend of high‑grade underground
tonnes and open pit tonnes to the plant at
Sukari and resource development in West Africa.
Sustainability
Stakeholder
returns
Growth
Responsibility
2
Prioritising
stakeholder returns
To maintain a strong balance
sheet with a stringent focus on
free cash flow generation,
supporting a disciplined
value‑driven growth approach
towards future investment and a
sustainable dividend stream.
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. From
exploration to extraction, construction to closure,
sustainability is a vital consideration at all stages
of the mine cycle and in preserving our social
licence to operate.
Delivering sustainable returns
Value chain
Strategic enablers – key relationships
Our value chain continues from early stage explorer
through to gold production and is driven by our
investment, employees and business culture.
Fundamental to our business are relationships with
employees, governments, suppliers, local communities and
other stakeholders.
SHAREHOLDERS
EMPLOYEES
• Investor roadshows and analyst site visits
• Capital markets day and investor meetings
• Annual general meeting held with key
directors in attendance
• Meetings with proxy advisory groups and
major shareholder stewardship teams
• Daily pre-start and toolbox meetings
• Training programmes and professional
development
• Site safety, welfare and facilities
• Performance reviews and appraisals
• Information sharing
GOVERNMENTS
NGOs
• Formal meetings (including general assembly) and
regular correspondence
• EMRA representatives onsite and engagement
through audits and routine inspections
• Materiality assessment to ensure objectives are aligned
• Profit sharing and royalty payments
• Direct job creation and indirectly through the
supply chain
• Formal meetings and correspondence
• Materiality assessment
• Dedicated engagement officers
LOCAL COMMUNITIES
• Regular communication between head
of security, public relations department,
group head of sustainability
• Materiality assessment
• Grievance procedures report through the
head of security
WORKERS’ REPRESENTATIVES
• Materiality assessment
• Unions participate in mine management
meetings
• Union staff based onsite
CONTRACTORS
SUPPLIERS
• Induction and ongoing training
• Contractor management protocols
• Materiality assessment
• Tendering and procurement procedures
• Local suppliers, government suppliers,
contracts and imports
• Tendering and procurement procedures
• Materiality assessments
• Code of conduct, improvement in
standards, welfare and human rights
MEDIA
REFINERS
• Press releases and market statements
• Interviews and site visits
• Conferences and dedicated PR personnel
• Refining and grade of commodities
• Exports and shipments
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT 20
21
BUSINESS MODEL
continued
Our strategy is set against the key risks,
performance indicators and targets for 2018.
STRATEGIC FOCUS AREAS
SUSTAINABILITY
PRINCIPAL RISKS
OBJECTIVES
KPIs REPORTED IN 2017
KPIs SET FOR 2018
1
Long term
sustainability
2
Prioritising
stakeholder
returns
3
Optimal
growth
4
Social
responsibility
Single project dependency
Joint venture
Gold price and currency exposure
Political risk – Egypt
Reserve and resource estimates
Exploration development
Production estimates
Litigation
Single project dependency
Joint venture
Gold price and currency exposure
Jurisdictional tax exposure
Political risk – Egypt
Reserve and resource estimates
Exploration development
Production estimates
Litigation
Single project dependency
Gold price and currency exposure
Political risk – Egypt
Political risk – West Africa
Reserve and resource estimates
Exploration development
Litigation
Political risk – Egypt
Political risk – West Africa
Exploration development
Litigation
Ability to invest in community
development projects.
Capacity to quickly and
appropriately respond to social
or environmental incidents.
Ensure legacy and closure
obligations can be met.
Protection against long term risk
– such as climate change.
Increased returns through
operational eco‑efficiency.
Legal compliance – meeting all
permitting requirements.
Community development
– investments in infrastructure,
health and education.
Local and national employment
– developing strong and stable
workforce.
Transparent payments to
government.
Economic diversification
– building a modern mining industry
for Egypt. Building local and
national strong supply chains.
Local and national employment
– building a strong and stable
workforce.
Community development
– investments in infrastructure,
education and health.
Represent the areas of risk closely related to the strategic focus area.
• Stable production with
• Cash cost of production of US$554 per
• Targeted US$555 cash cost of
opportunities for further increases
through optimisation.
ounce, an improvement below guidance of
US$580 per ounce.
production per ounce.
• Targeted US$770 per ounce all‑in
• Maintaining a low cost operation.
• All‑in sustaining cost of US$790 per ounce in
sustaining cost.
line with guidance.
• Targeted production of 580,000
• 544,658 ounces produced above guidance of
ounces of gold.
540,000.
• Dividend returns, with free cash
flow to fund the next stage of
growth.
• Dividends take first priority on use
of free cash flow.
• Share price performance relative
to peers.
• Free cash flow at 31 December 2017
US$142 million.
• Total dividend in 2017 of 12.5 US cents per
share, equating to approximately
US$144 million and representing 100% of free
cash flow after sustaining capital and profit
share and before exploration expenditure
outside of Sukari.
• Annual dividend of at least 30%
free cash flow after sustaining
capital and profit share and before
exploration expenditure outside
of Sukari.
•
•
Identify high‑grade underground
production from Sukari.
Improve plant throughput rates
and open‑pit mining rates at
Sukari.
• Resource definition in West Africa.
• M&A activity for greenfield or
early exploration.
• Resource/reserve replacement and expansion
at Sukari.
• Process plant throughput of 12.0Mtpa, a 4%
increase on the prior year. Exploration
programme over licence areas in Burkina
Faso.
• Exploration programme over licence areas in
Côte d’Ivoire.
• High‑grade underground production
growth potential from Cleopatra
decline development access and
ongoing resource definition drilling
as the orebody remains open at
depth and along strike.
• Forecasted ramp up in plant
throughput with the installation of
the fourth secondary crusher.
• Explore to develop highly
prospective district scale West
African land package.
• Engaging with key stakeholders to
understand internal and external
sustainability priorities.
• Maintaining a safe environment to
work, with opportunities for our
employees to train and develop
skills.
• LTIFR of 0.26 per 200,000 man hours, above
• Zero‑harm safety record
our zero‑harm target – global rate of 0.22 per
200,000 man hours.
• Reporting greenhouse gas emissions and
water data to the international environmental
body CDP.
• Sustainability reporting developed to
international Global Reporting Initiative
(“GRI”) standards.
throughout the group’s operations.
• Feasibility study to install a 15MW
solar power plant onsite at Sukari.
Identify any improvements as we
develop standards of reporting in
line with GRI requirements.
• Review of site policies and HR
•
procedures.
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT STRATEGIC FOCUS
1
Long term
sustainability
MAXIMISING PRODUCTIVITY
AND MAINTAINING ONE
OF THE INDUSTRY’S
LOWEST COST PROFILES
• Large-scale, bulk tonnage, long-life mine
• High margin producer
• Excellent high-grade underground
reserve replacement potential
• No debt or hedging
obligations
23
How we deliver
sustainable returns
PROJECT DELIVERY
• Track record: investment
and construction phase at
Sukari complete.
• Production: 2018 guidance
of 580,000 ounces.
FOCUS ON COST CONTROL
• Capex: Sukari staged
construction delivered on
budget.
• Low cash cost of production:
target of US$555/oz in 2018.
• Low all‑in sustaining cost:
target of US$770/oz in 2018.
OPTIMISING PRODUCTION
• Upside: potential for production
growth and cost reduction
through processing optimisation.
• Reserve growth: grew
underground reserves in excess
of mine depletion.
• Capex: no requirement for
further significant capital
expansion.
STABLE FINANCES AND
SHAREHOLDER RETURNS
• Cash: maintaining appropriate
cash reserves.
• Dividend: sector leading
dividend policy with substantial
payout.
• 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.
• Near term: high‑grade
underground reserve growth
potential at Sukari.
• New project generation:
exploration projects in Côte
d’Ivoire and Burkina Faso.
• Acquisitions: financial flexibility
to acquire value accretive
projects.
• Large-scale, bulk tonnage, long-life mine
We look forward to delivering solid
growth in 2018 with gold production
guidance of 580,000 ounces.
• Excellent high grade underground reserve replacement potential
• High margin producer
• No debt or hedging obligations
During 2017, the Sukari operation continued to deliver substantial free cash flow
of US$142 million. The mine performed as expected, by producing 544,658
ounces, slightly outperforming guidance of 540,000. Operations achieved a
record year for material moved and ore processed.
Sukari’s sustainability remains anchored by the 20‑year life of mine, bulk
tonnage, open pit operation, with growth driven from the expanding high‑grade
underground operation. The updated mineral reserve and resource statement
further supports the expectation for ongoing replacement of underground
reserves over the coming years as development continues to extend along strike
and at depth, as Centamin remains focused on unlocking Sukari’s true potential.
Centamin has no debt or hedging and has US$418 million of cash and liquid
assets at the year end 2017(1). 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 organically across its asset base and through
potential strategic acquisitions.
KPIs reported during the year:
• production of 544,658 ounces;
• cash cost of production of US$554 per ounce;
• all‑in sustaining cost of US$790 per ounce;
• revenues of US$675.5 million were down 2% year‑on‑year with a 0.4%
increase in realised gold prices and a 1% decrease in gold sales. The
movement is also net of a US$6.1 million reallocation from revenue against
capitalised costs related to Cleopatra;
• 0.8Moz Au at 4.5g/t of underground proven and probable reserves, including
0.6Mt of development ore at a grade of 0.9g/t (reserves excluding
development ore total 0.8Moz Au at 5.1g/t), a 51% increase in ounces; and
• 4.7Mt of underground reserve tonnes, a 74% increase.
Our KPIs reported for 2017 are set out below:
Q4 2017
Q4 2016
2017
2016
Production
ounces
154,298
136,787
544,658
551,036
Cash cost of
production
All‑in sustaining
cost of sales
US$ per ounce
453
US$ per ounce
744
536
720
554
790
513
694
Revenue
US$’000
190,413
158,307
675,510
687,387
KPIs set for 2018:
• forecast production of 580,000 ounces;
• targeted US$555 cash cost of production per ounce; and
• targeted US$770 all‑in sustaining cost per ounce.
(1) 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.
PAGE TITLEcontinuedCentamin plc Annual report 2017STRATEGIC REPORT
STRATEGIC FOCUS
2
Prioritising
stakeholder returns
FOCUS ON CASH GENERATION
• Robust balance sheet, committed
to maintaining fiscal discipline
• Dividend policy to pay
at least 30% of free cash flow(1)
• Ongoing value-driven
approach towards
future investment
25
Full year dividend of 12.5 US cents per
share representing a payment of
100% of free cash flow for 2017(1).
Centamin’s board of directors is pleased to propose a final dividend for 2017 of
10 US cents per share, which will be paid on 6 April 2018 to shareholders on the
register at the record date of 23 March 2018 following approval at the AGM on
26 March 2018.
In 2017, free cash flow generation, after the first full year of profit share
payments of US$112 million to EMRA, our Egyptian government stakeholders,
was US$142 million.
KPIs reported during the year:
• direct payments to the governments including:
• an entitlement of US$112 million profit share for 2017; and
• royalty payments totalling US$20 million for 2017.
• total dividend 12.5 US cents per share for 2017 (totalling approximately
US$144 million); and
• total payout of 100% of free net cash flow(1), significantly above the dividend
policy of at least 30%.
Market data
100% free float with strong liquidity (circa 14 million shares traded per day).
KPIs set for 2018:
• annual dividend of at least 30% of the Company’s free cash flow(1);
• maintaining government relations; and
• stakeholder engagement through active communication of corporate
strategy.
(1) After sustaining capital and profit share to EMRA and before exploration expenditure outside of
Sukari.
Centamin is committed to
prioritising stakeholder returns
Total dividend for 2016
15.5 US cents
per share
Total dividend for 2017
12.5 US cents
per share
subject to approval at the AGM
US$112
million
profit share for 2017
Royalty payments totalling
US$20
million
for 2017
FREE CASH FLOW BRIDGE 2016 TO 2017
250
242
12
10
13
4
19
19
93
200
150
n
o
i
l
l
i
m
$
S
U
100
50
0
142
Free cash
flow
FY2016
Decrease
in
revenue
Increase
in group
operating
costs
Relative
working
capital
movements
Decrease
in tax,
finance
and other
changes
Increase
in capital
expenditure
Decrease
in
exploration
spend
Increase
in profit
share
payments
Free cash
flow
FY2017
Free cash flow in a non-GAAP measure defined as net cash generated by operating activities,
less net cash used in investing activities, less EMRA profit share paid (cash).
PAGE TITLEcontinuedCentamin plc Annual report 2017STRATEGIC REPORT
STRATEGIC FOCUS
3
Optimal
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
• Resource growth in
West Africa
• Exploration of
highly prospective
ABC Project
27
12.0Mtpa
Plant throughput
at Sukari Gold Mine
4%
increase on the prior year
70.9Mt
Total open pit material
movement at Sukari Gold Mine
14%
increase on the prior year
West Africa
Resource development across
Burkina Faso and Côte d’Ivoire
Exploration drill rig in Côte d’Ivoire
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)
• Optimise growth from existing operations by increasing high‑grade
underground mining rates and processing plant upgrades.
• Evaluate potential for additional sources of high‑grade underground
ore at Sukari.
• Continue to replace high‑grade underground reserve at Sukari.
• 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)
• Maximise sustainable production profile at Sukari by fully exploiting
underground potential.
• 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 low‑cost profile.
• Continue to evaluate selective M&A opportunities with the potential to
develop low‑cost projects.
KPIs reported during the year:
• resource/reserve replacement and expansion at Sukari;
• record processing plant throughput of 12.0Mtpa, a 4% increase on the
prior year;
• increased total material moved to 70.9Mt, a 14% increase on the prior year;
• exploration programme over licence areas in Burkina Faso; and
• exploration programme over licence areas in Côte d’Ivoire.
KPIs set for 2018:
• expand underground operation to 1.3Mt total underground ore scheduled to
be mined at a grade of 7.2g/t, comprising a 65:35 split respectively between
stoping and development ore;
• expand processing plant throughput to 12.3Mtpa, with the installation of the
fourth secondary crusher increasing capacity;
• ongoing decline development and exploration at Cleopatra, to access the
high‑grade western contact, a key near term growth catalyst;
• ongoing underground decline development at Amun and Ptah, to access the
Horus, Bast and Osiris zones, which are key drivers of medium term growth;
• four exploration rigs allocated to focus on underground reserve
replacement and resource expansion drilling as the orebody remains
open in multiple directions;
• further resource development in West Africa, with resource definition
continuing in Burkina Faso and across the border at the Doropo Project in
north‑east Côte d’Ivoire; and
• follow‑up exploration work continues after encouraging first pass drill results
from the ABC Project in western Côte d’Ivoire.
PAGE TITLEcontinuedCentamin plc Annual report 2017STRATEGIC 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
Solar power
Feasibility study underway to
assess the viability of a 15MW
solar plant at Sukari Gold Mine
c.2,500
total workforce
including contractors (less than
1% expatriate employees)
44%
Egyptian suppliers
to Sukari Gold Mine
0.22 LTIFR
Global LTIFR across Sukari,
Côte d’Ivoire and Burkina Faso
(per 200,000 working hours)
Centamin is committed to working with the highest level of respect for its
employees and the communities and environments in which it operates.
Key themes in the sustainability report are as follows:
• sustainability reporting developed to international Global Reporting Initiative
(“GRI”) standards;
• reporting greenhouse gas emissions and water data to international
environmental body CDP (formerly the Carbon Disclosure Project);
• strong commitment to managing and minimising health and safety risks;
• a commitment to developing a highly skilled workforce;
• preparation of a feasibility study to assess for the installation of a 15MW solar
power plant on site at Sukari as a lower cost alternative for diesel fuel; and
• commitment to human rights and ongoing work to further develop human
rights policies over time.
What Centamin does for Egypt, beyond the direct profit share and royalty
payments to government – contribution:
• approximately US$3 billion investment to date (including capital and
operational expenditure); and
• job creation – an average of circa 1,350 Egyptian employees (71 expatriates)
and over 320 Egyptian companies supplying Sukari.
What Centamin does for Burkina Faso – contribution:
• job creation – circa 40 permanent employees plus casual workers from
villages around the operations;
• purchases from local suppliers; and
• annual payments on customs duties and related taxes.
What Centamin does for Côte d’Ivoire – contribution:
• job creation – circa 65 permanent employees plus casual workers from the
neighbouring villages;
• purchases from local suppliers; and
• customs duties and related taxes.
Recreational activities at Sukari
Engineer at Sukari Gold Mine
PAGE TITLEcontinuedCentamin plc Annual report 2017STRATEGIC REPORT 30
31
RISK MANAGEMENT
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.
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 board reviews existing and
emerging risks in the context of both
opportunities and potential threats.
This is then applied when challenging
the strategic objectives of the
Company that underpin the business
model. The board met during the year
on a focused ‘strategy day’ to evaluate
and assess the overall business plan.
Although a longer time horizon is
considered for evaluation of risks
impacting the Company, the
assessment of viability is made during
the budget process which covers a five
year period and detailed assessment
of financial and operational forecasts.
The report covers the board’s
assessment of its risk appetite to key
strategic decisions, our viability
statement and details of our principal
risks. During 2017 the Company
implemented a risk management
framework (details of which are set out
in the audit and risk committee report
on page 137).
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
is clear that Centamin has a zero
tolerance to breaches in health and
safety and environmental protection.
The board invests heavily in a
programme of continuous
improvement in health and safety
practices and has an expectation to
meet the highest standards.
The group has a high 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.
The board is agreed that due to the
nature and inherent risks associated
with an operating mining company,
the board accepts a higher risk
appetite, however this needs to be
managed within acceptable limits
by having appropriate safeguards in
place. The principal risks identified by
the board and disclosed below,
evidence the extent of potential
consequences inherent in operating
a large‑scale mining operation.
The board assesses regularly the
measures to mitigate these risks and
limit the likelihood for incidents.
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
group’s existing risks and the
identification of any new and emerging
risks, including financial and
non‑financial matters. It also requires
the ongoing management of the
appropriateness of the risk mitigation
in place.
CASE STUDY:
RISK MANAGEMENT IN ACTION
At least quarterly, a management review team meets in an open forum to discuss emerging risks and consider the effectiveness of
controls in place. The meetings result in a formal report which is presented to the audit and risk committee and takes the form of a
‘report by exception’ on matters such as risk identification, policy changes and changes to practices resulting from either breaches to
policies or improvement in operating practices. Data is captured at an operational level, collated through daily, monthly and
quarterly reporting. The reports are assessed by management, and discussed in detail at quarterly meetings. Recommendations
from site, policy changes and other remedial actions, as well as category 4 and 5 level incident reports are reported to the audit and
risk committee and summarised to the board. Decisions of the board, committee, management and executive are communicated to
the heads of department. Daily toolbox discussions and ongoing site training are the forums for disseminating this information to the
wider workforce.
Other strategic matters such as the ‘acceptance or rejection’ of new business opportunities are regularly discussed, with geopolitical
risk representing the first hurdle for new project initiatives. The discussions around risk and ‘areas of concern’ provide the
management team with the means to escalate emerging issues to the audit and risk committee and equally develop enhanced
procedures to reduce or mitigate a particular issue.
PRINCIPAL RISKS
d
n
a
t
i
d
u
a
d
n
a
t
n
e
m
e
g
a
n
a
M
w
e
i
v
e
r
d
r
a
o
b
/
e
e
t
t
i
m
m
o
c
k
s
i
r
t
n
e
m
e
g
a
n
a
M
w
e
i
v
e
r
Principal risks
Corporate risk register
Operational risk assessment register
Business continuity planning
Open pit mining
Underground mining
Process plant
Supply and warehouse
Information technology
HSES environment
Exploration
Site security
Advanced exploration
Viability statement
In accordance with provision C.2.2 of
the UK Corporate Governance Code
(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
2017 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 stability,
prioritising stakeholder returns,
optimal growth and social
responsibility. The strategic focus
areas are set out on page 18. In
addition, the Company considered the
potential impact on its principal risks,
and also considered how its appetite
for risk might affect the assessment.
The review includes the Company’s
strategic objectives, business model
and its prospects over the coming five
years to December 2022.
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.
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
31 January 2018. 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.
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 which are developed in
consultation with external experts and
combine geological, metallurgical and
economic data. The latest R&R
statement was announced on
10 January 2018.
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT
32
33
RISK MANAGEMENT
continued
CENTAMIN PLC RISK MANAGEMENT PROCESS – INITIAL RISK IDENTIFICATION, DOCUMENTATION AND ASSESSMENT
d
r
a
o
B
Set corporate
objectives
Approve risk
policy and
strategy, and set
risk appetite
k
s
i
r
d
n
a
t
i
d
u
A
e
e
t
t
i
m
m
o
c
i
r
o
n
e
S
t
n
e
m
e
g
a
n
a
m
l
a
n
o
i
t
a
r
e
p
O
t
n
e
m
e
g
a
n
a
m
If unsatisfied with
management’s
view of risks
Review,
challenge and
approve risk
register
Identify key risks
to objectives
Assess and
analyse key risks
Consider risks in
relation to risk
appetite
Document
mitigating
actions and
sources of
assurance
Report to the
audit and risk
committee on
risks
Implement risk
management at
an operational
level
Risk
monitoring
Develop
operational
level risk
registers
The budget process, which pulls
heavily on the R&R data, includes 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 unhedged 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;
• production assumptions: Sukari
is a 24‑hours‑a‑day, seven‑days‑a‑
week operation with an estimated
plant throughput capacity of
11.75Mtpa (12Mtpa from 2018).
The process plant recovery rates
are estimated to average at 89%
in 2018. Maintaining and improving
productivity is fundamental to our
business and long term strategy;
and
• social licence to operate: relations
with our joint venture partner,
EMRA, remain strong and this
relationship continues to strengthen
with the onset of profit sharing.
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 2017
based on this time horizon. The five
year time horizon reflects the period of
the review which includes the
preparation of the budget document
which includes operational and
financial forecasts that have been
prepared over a five year period to
2022.
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 34 to 37, 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 review also considered the
cost in developing the prospects in
West Africa, noting that there are
sufficient cash resources to cover the
early stage development. The review
considered timing and possible future
capital expenditure whilst ensuring the
dividend policy and ongoing
commitments could be met.
The review undertaken to determine
the long term viability did not identify
any new or emerging risks that have
not already been disclosed under
‘principal risks’ nor have any additional
mitigation measures been
implemented, other than in the
ordinary course of business.
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.
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 current status of the principal risks
affecting Centamin and its operational
and exploration activities, together
with the measures to mitigate risk are
detailed on pages 34 to 37.
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 to 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.
The assessment of viability over a
period of five years to 2022 and the
material inputs and assumptions
remain consistent with the conclusions
set out in the viability statement in the
2016 annual report. However, notably,
the updated reserve and resource
statement at 30 June 2017 supports
the longevity of the open pit operation
and upside potential of the
underground operation at Sukari (see
R&R statements on pages 65 to 67).
The relationship with our JV partners,
EMRA, remains strong with both
parties enjoying profit sharing in line
with the Concession Agreement
throughout the year. The principal risks
are set out on pages 34 to 37 and all
principal risks have been concluded by
the board to be within acceptable
limits, taking account of the associated
mitigation that is in place.
Change to principal risks
Due to the nature of the business
as an operating mining company, the
headline principal risks, whilst
fundamental to the ongoing
operation, remain largely constant.
The committee regularly reviews the
principal risks as well as the wider
operational, corporate and general
business risks and has identified one
change to the principal risk register
as follows:
The risk relating to currency exposure
is no longer considered to be a
principal risk to the business and has
been removed from the principal risk
register.
The group operates predominantly
in Egypt with EGP representing
approximately 15% of total cost base.
The group receives all revenue from
gold sales in US dollars. In November
2016 the Egyptian government floated
the Egyptian pound in an attempt to
stabilise its economy. This led to a
significant devaluation of the currency
and subsequently an increase in local
inflation. Whilst this still carries a
potential risk for the group, as it can
lead to increases in the prices of fuel,
raw materials as well as pressure to
increase staff wages, we have
observed a relatively stable profile
against the US dollar and whilst this
will be closely monitored, this risk has
been removed from Centamin’s
principal risk register.
The directors confirm that a robust
assessment of the principal risks
impacting the Company has been
undertaken which identified strategic
and operational risks at a corporate
level and principal risks impacting our
operations in Egypt and West Africa.
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT
34
RISK MANAGEMENT
continued
PRINCIPAL RISK
STRATEGIC RISK
Loss of revenue due to
single project dependency
TREND
NATURE OF RISK
MITIGATION
COMPANY OBJECTIVE/STRATEGY RISK APPETITE
Neutral
The Sukari Gold Mine currently constitutes Centamin’s main mineral resource and sole
mineral reserve and near term production and revenue. The resources in Burkina Faso and
Côte d’Ivoire are 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.
At Sukari, the process plant has been
designed with sufficient resilience and
redundancies within the operating
cycle, 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.
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.
35
OWNER
Executive:
CEO, COO
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 two years, 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: with the onset of profit
sharing with EMRA last year, managing timing
and quantum of payments, as well as applying
and interpreting certain provisions of the
Concession Agreement, is important in
maintaining 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.
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.
Risk appetite is at an
acceptable level, with
appropriate levels of
mitigation in place.
Executive:
Chairman,
CEO, CFO,
COO
Operational:
GM
The group is 100% exposed to the gold price;
however, the cash costs of the Sukari Gold Mine
remain low compared with the industry norm.
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.
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. The Company has developed
a global tax strategy to take account of the
required regulations relevant to Centamin.
The Company’s strategy is to ensure taxes are
paid at an operational level and tax leakage is
reduced through the holding structure.
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.
To minimise the complexity of the
corporate structures ensuring tax
neutrality within the holding group
entities.
Executive:
CEO, CFO
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 a constructive
relationship with government. The
Company undertakes to abide by the
spirit and letter of the Concession
Agreement as well as local laws and
regulations.
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.
Executive:
Chairman,
CEO
Operational:
GM
– Egyptian
operations
STRATEGIC RISK
Neutral
Sukari Gold Mine joint venture risk
and relationship with EMRA
Whilst Centamin retains control over the project, the holding company, SGM, is jointly
owned by the Company’s wholly owned subsidiary PGM and EMRA, with equal board
representation from both parties. The board of SGM operates by way of simple majority.
Should a dispute arise which cannot otherwise be amicably resolved, arbitration or other
proceedings may need to be employed.
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.
STRATEGIC RISK
Gold price
Neutral
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.
STRATEGIC RISK
Neutral
Jurisdictional taxation
exposure
The group’s corporate structure includes operational activity in Egypt and West Africa held
through holding companies in Australia and the United Kingdom. Exposure to changing
cross jurisdictional tax legislation could have an adverse effect on the Company’s ability to
repatriate revenues.
STRATEGIC RISK
Political risk – Sukari
Neutral
The Company’s operational activities are primarily in Egypt, a country that 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 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT 36
37
RISK MANAGEMENT
continued
TREND
NATURE OF RISK
MITIGATION
COMPANY OBJECTIVE/STRATEGY RISK APPETITE
OWNER
PRINCIPAL RISK
STRATEGIC RISK
Political risk – West Africa
Neutral
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.
OPERATIONAL RISK
Neutral
Exploration development
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.
OPERATIONAL RISK
Neutral
Reserve and resource estimate
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.
OPERATIONAL RISK
Improved
Failure to achieve production
estimates
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.
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.
The Company operates within
acceptable limits.
Executive:
CEO
Maintain relationships with all key
stakeholders, including regional
governments, landowners and local
chiefs. The Company meets its
environmental and operational
commitments set out in the permits/
grants and local laws/regulations.
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.
Ensure systematic exploration
programmes are carried out with
costs attributed to licence areas and
prospects so that they can be
assessed for impairment.
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 Company operates within
acceptable risk appetite
parameters.
Operational:
GM, group
exploration
manager
Executive:
CEO, CFO
Operational:
GM, group
exploration
manager
Executive:
CEO
Operational:
GM, group
exploration
manager
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 Company operates within
acceptable risk appetite
parameters.
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.
The Company is operating
within its risk appetite
parameters and the mitigation
in place is at an acceptable
level.
Executive:
Chairman,
CEO
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
policymakers to discuss all key legal and
regulatory developments.
The exploration for precious metal may not be
successful and is 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.
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. An updated reserve and resource
statement for Sukari was announced on 9
January 2018. Preliminary resource statements
have been provided for Konkera, Burkina Faso
and Doropo in Côte d’Ivoire.
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 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT 38
39
INTRODUCTION TO CORPORATE SOCIAL RESPONSIBILITY
Andrew Pardey
Chief executive officer
Improving standards,
modernising our industry.
Sustainability highlights
• Continued improvement on LTIFR
• A drop in MTIFR for second year running
• Each employee received an average of 3.8 days’ training
• Over 44% of our suppliers at Sukari are Egyptian
• 4% improvement in energy efficiency over two years
• Take5 pre‑start micro‑risk assessment (see case study below)
• 15% annual decrease in total water abstracted
• Over 50% of all water recycled
• 99% improvement in water recycling over two years
• Board approval to prepare a feasibility study for the installation
of a 15MW solar power plant at Sukari
• Over US$2 million invested in community development projects
in all host countries over two years
• CDP water and GHG questionnaires completed for the first time
• A new CT scanner (providing 3D x‑rays) donated to Marsa Alam
public hospital near the Sukari mine in Egypt
Sustainability has been, and continues
to be, critical to Centamin’s success.
From workplace safety to training and
development, it gives our business a
critical advantage if we can ensure
world‑class standards are upheld
relating to any issue affecting our
people, our host communities and
the natural environment.
Centamin has benefited from eight
successive years of production at
Sukari and as we evolve, so do our
efforts on sustainability. For example,
this year has been the first time we
reported greenhouse gas emissions
and water data to the international
environmental body CDP. This
sustainability report itself is part of our
evolving efforts – and is the first time
we’ve reported against the
international Global Reporting
Initiative (“GRI”) standards.
Modern, safe mining in Egypt
Much of this report focuses on our
flagship Sukari mine in Egypt, which
continued to deliver a strong safety
record this year, achieving a decrease
in both lost time and medical
treatment injuries, despite an increase
in hours worked. It also continues to
foster strong relations with the local
community, based on mutual respect,
and this year invested more than
“Our people are our most valuable asset. We are committed to
attracting, energising, developing and retaining a highly skilled
and experienced workforce, and to ensuring a safe workplace
where all workers return home safely at the end of each shift.“
Andrew Pardey, CEO
US$300,000 in local projects,
including procuring a new CT scanner
for one of the key public hospitals near
our operations in Egypt.
We are committed to helping
modernise and grow the wider mining
sector in Egypt. Egypt has a 6,000‑year
history of mining, which has stalled in
more recent times. Our hope is that
by employing a workforce that is
approximately 95% Egyptian, and
providing world‑class training and
skills development opportunities, it is
not only Centamin that benefits from
the upturn in skills and capacity, but
the country as a whole. In 2017 each
employee receiving an average of 3.8
days’ training.
Beyond our workforce, approximately
44% of all our suppliers at Sukari are
Egyptian, helping further develop the
capacity and quality of the Egyptian
mining sector as a whole.
Deposits in the desert
Centamin is committed to being a
responsible steward of the environment,
including minimising our water and
energy use wherever possible. This year
has seen us reduce environmental
incidents by 41% over two years
(although up 23% from the prior year).
Crucially, given Sukari’s location in
Egypt’s Eastern Desert, we have also
driven a 99% increase in water recycling
over two years and decreased our
overall abstraction.
Enormous challenges remain on all
sustainability fronts, both at our Sukari
mine and in our West African
exploration projects. We look forward
to meeting those challenges in the
years ahead.
Andrew Pardey
Chief executive officer
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT
40
41
CORPORATE SOCIAL RESPONSIBILITY
Fire drill
training
Trevor Schultz
Chairman of the HSES committee
Respect for the environment, worker safety
and strong stakeholder relations are the
foundation of Centamin’s success.
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.
From exploration to extraction,
construction to closure, sustainability
is a vital consideration at all stages of
the mine cycle. All our key governance
policies integrate sustainability
considerations, and we have
developed systems and processes to
ensure we identify and manage the
risks and opportunities from the
environmental and social factors that
arise in our business. We also work to
engage effectively with all our
stakeholders to ensure their views are
taken into account throughout our
business.
The board of directors is ultimately
responsibility for sustainability related
issues, and we have a dedicated
health, safety, environmental and
sustainability board level committee
(“HSES”). The committee is made up
of three board members: Edward
Haslam, Mark Bankes and me as
chairman. Effective from 5 February
2018, our newly appointed
non‑executive director, Alison Baker,
will join the committee.
The committee meets up to four times
per year, and its core responsibility is
to make recommendations to the
board regarding all matters of
environmental management, health
and safety and stakeholder
engagement – particularly with any
communities near our operations.
Other responsibilities include:
• Reviewing all monthly and quarterly
reports on issues related to
sustainability, including community
and environmental reports.
• Overseeing the development and
implementation of our HSE policies
for our exploration activities in
Burkina Faso and Côte d’Ivoire.
This year we also reinforced our
commitment to sustainability and
linked part of the CEO’s performance
bonus to the achievement of specific
HSES KPIs, including:
• zero fatalities;
• a year‑on‑year decrease in LTIFR;
• zero severe or major consequence
environmental incidents;
• a year‑on‑year increase in water
recycling;
• a year‑on‑year reduction in GHG
emissions per tonne milled; and
• an increase in total community
investment.
24 hour
operation
at the Sukari
Gold Mine
SUSTAINABILITY THROUGHOUT THE MINE LIFECYCLE
EXPLORATION
FEASIBILITY
CONSTRUCTION PRODUCTION
CLOSURE
• Aim for the smallest
possible social and
environmental impact
• Establish good
community relations and
community programmes
• Employ local people in
exploration teams to
ensure sufficient local
knowledge to assess
potential social and
environmental issues
• Establish a grievance
mechanism
• Conduct Environmental
and Social Impact
Assessments (“ESIAs”)
• Hold discussions with
host governments on
issues such as
infrastructure and
security
• Produce site-specific
community and
environmental plans,
which comply with all
host country legislation
and IFC performance
standards
• Draw up any necessary
resettlement action plans
• Public communication
programmes to ensure
local communities aware
of positive and negative
impacts of mine
• Develop closure plan
• Recruitment process
• Increase communication
with local communities
• Implement environmental
management systems
and programmes to
mitigate impacts
• Implement safety
strategies
• Prioritise workplace
• Remediate and restore
safety
land
• Post closure training for
alternative livelihoods
• Establish community
development
programmes
• Work to ensure efficient
use of natural resources
and monitor to ensure
compliance with
applicable host country
and international laws.
• Work to manage and
minimise grievances
• Ensure sufficient financial
resources set aside to
meet all closure
obligations and
development legacy plan
Scope and boundary of this report
This report focuses on the Sukari Gold Mine in Egypt, Centamin’s only current operational site. Data presented covers our performance for the 2017
calendar year, which corresponds to our financial year. Where noted, references may be made to historical results. All financial figures are quoted in
United States dollars unless otherwise noted. This is our first report produced in accordance with the Global Reporting Initiative (“GRI”) Standards
Core option guidelines, including the Mining and Metals Sector Supplement. Previously our approach to sustainability has been reported as part of
the corporate social responsibility chapter in our annual report. The most recent annual report was published in March 2016.
Boundary
Unless noted otherwise, this report covers sustainability matters related to the Sukari Gold Mine in Egypt, our only operational site. However,
reference is made to our exploration activities in Burkina Faso and Côte d’Ivoire, when they are material, provide context and to demonstrate how
sustainability issues are considered throughout all our activities.
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT 42
43
CORPORATE SOCIAL RESPONSIBILITY
continued
This year we reviewed the
requirements of the UK’s Modern
Slavery Act 2015 (“2015 Act”). As
noted in the directors’ report, the
committee agreed to review the 2015
Act further, with a view to enhancing
the Company’s existing human rights
policies during 2018, giving
consideration to the 2015 Act and
related UK guidance on adherence
with the Act’s principles.
Sustainability governance
Centamin’s governance of
sustainability is set out in a suite
of policies including our:
• code of conduct;
• health, safety and environment
(“HSE”) policy;
• corporate and social responsibility
policy;
• anti‑corruption and bribery policy;
and
• whistleblowers’ policy.
All key sustainability policies are
available on our website. These
policies commit Centamin to the
highest standards of ethical,
environmental and social practices.
Centamin strives to operate at the
highest international standards. In
doing so, we have appointed Digby
Wells to work with us to ensure the
mine is run in line with international
best practice. In 2018, the HSES
committee shall evaluate the
stakeholder engagement plan and
work with our consultants to identify
any improvements as we develop
standards of reporting in line with
GRI requirements.
In developing projects in West Africa
any feasibility and social and
environmental studies will be prepared
taking account of both local and
international requirements.
All employees and contractors receive
training on sustainability policies,
including our code of conduct, as part
of the onsite induction process, with
refresher courses run annually. We
expect all employees and contractors
to adhere to the highest standards of
personal and professional integrity. All
our policies and the code of conduct
are readily available on site and
provided in both English and Arabic
for workers at the Sukari Gold Mine in
Egypt, and in French for our
employees in West Africa. Failure to
comply with our code of conduct and
other policies can lead to disciplinary
action or termination of employment.
Bribery and corruption in all forms is
strictly prohibited. We do not get
involved in political processes nor do
we make any political contributions.
In line with Toronto Stock Exchange
requirements, all payments to
government are fully reported and
disclosed through our annual
Extractive Sector Transparency
Measures Act (“ESTMA”) declaration,
which is available online. The London
Stock Exchange disclosure and
transparency rules on the reports on
payments to governments regulations
(4.3A) also apply to the Company and
are available online.
This sustainability report provides
further details of all these policies
and how they are implemented.
Payments to government
Centamin strives to be a good
corporate citizen within all host
countries. Centamin recognises the
importance of paying a fair share of
taxes and royalties, and of reporting
these in a transparent and accountable
manner. The payments Centamin
makes often represent a significant
contribution to the ability of authorities
to foster local economic development.
The Egyptian government, for
example, owns 50% of the Sukari Gold
Mine and as part of the permitting
agreement receives a 3% royalty and
50% of the profits (after recoverable
expenses and payment of the royalty
are deducted).
As shown below, Centamin’s total
economic value distributed in Egypt in
2017 was US$133 million to the
Egyptian government via profit share,
corporate taxes, royalties and licence
fees. These figures are fully reported
in the annual report, as part of our
annual ESTMA declaration, and as an
annual requirement under the FCA’s
rules are independently audited.
2017
2016
Egypt Burkina Faso Côte d’Ivoire
(US$)
(US$)
(US$)
Australia
(US$)
Egypt Burkina Faso Côte d’Ivoire
(US$)
(US$)
(US$)
Australia
(US$)
Profit share paid
111,629,332
997,048
19,344,126
—
—
—
—
— 18,503,333
— 1,550,333
621,956
—
— 17,314,743
—
—
—
—
148,267
35,253
—
—
22,468
1,057,361
833,666
350,000
—
—
—
—
231,536
776,153
70,353
— 1,095,868
—
—
133,377,866
981,933
35,253 1,550,333 37,767,436
798,621
70,353 7,599,793
Corporate and
indirect taxes
Royalties
Exploration
licence fees
Mining and
other licence fees
Infrastructure
improvements
Total economic
value distributed
—
—
— 7,599,793
—
—
—
—
—
—
IT service desk based at Sukari
Explosives operative loading blast hole
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44
45
CORPORATE SOCIAL RESPONSIBILITY
continued
OUR STAKEHOLDERS
AND HOW WE ENGAGE
SHAREHOLDERS
EMPLOYEES
• Investor roadshows
other forums
• Private meetings and
calls, including with CEO
• Formal AGM – most recent
held 21 March 2017
• Site visits
• Materiality assessment
process
• Responding to CDP
questionnaire
• Responding to rating
agency questionnaires
• Information sharing
and input via unions
• Performance reviews
and appraisals
• Daily pre-start and
toolbox meetings
• Training programmes
GOVERNMENTS
NGOs
LOCAL COMMUNITIES
• Formal meetings and
correspondence
• Materiality assessment
• EMRA representatives
on site at Sukari
• Formal meetings
• Correspondence
• Materiality assessment
UNIONS
SUPPLIERS AND CONTRACTORS
MEDIA
• Materiality assessment
process
• Union office based on site
• Unions participate in mine
management meetings
• Procurement team account
management relationships
• Tender documents
• Supply contracts
• Materiality assessment
• Materiality assessment
• Grievance mechanism
• Regular and ad-hoc
meetings between
communities and head of
security, PR department
and group head of
sustainability and business
development manager
• Publications and online
information
• Press releases and
market statements
• Interviews
• Site visits
• Regular press conferences
Stakeholder engagement
Centamin’s stakeholders are a critical
part of its business. The Company
aims to build strong, mutually
beneficial relationships with all
stakeholders throughout every stage
of the mine lifecycle, from exploration
to closure. Centamin’s key
stakeholders are:
• employees and unions;
• communities local to or affected by
our operations;
• shareholders;
• contractors and suppliers;
• NGOs;
• central and local government; and
• media.
Formal discussions with local
stakeholders, including local
communities and authorities, occur at
all sites at the exploration stage, and
as part of the ESIA process. This is
backed up by a policy of regular and
open communication between
management, authorities and the
local community.
Centamin also seeks to employ people
from the local community early on in
the process to help strengthen local
community relationships and build
and maintain social licence to operate.
At Sukari, the only operational site,
the directors of security and public
relations (PR) are responsible for
ongoing regular and ad‑hoc
communications with local
stakeholders.
Grievance mechanism
Managing grievances is an important
part of Centamin’s interactions with
local stakeholders and governance of
sustainability. Currently at Sukari Gold
Mine, grievances are managed
through the security department.
Centamin’s security manager
maintains an open door policy, and
anyone is welcome to register a
grievance or discuss any issue that has
arisen. Most issues are quickly
resolved through open and
transparent discussion.
If an issue cannot be easily resolved
then it is escalated to operational
management level and the Sukari
general manager (“GM”) for
consideration. Centamin plc also has a
whistleblowing policy, which is
available on the Company’s corporate
website at www.centamin.com.
At the exploration sites in West Africa,
grievances are dealt with by project
community officers, and escalated to
the site manager for resolution if
necessary.
In developing projects in West
Africa, any feasibility and social and
environmental studies will be prepared
taking account of both local and
international requirements.
Recreational activities at Sukari
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT 46
47
CORPORATE SOCIAL RESPONSIBILITY
continued
CASE STUDY
Mosque at Sukari Gold Mine
OPERATING IN DYNAMIC POLITICAL ENVIRONMENTS
All three countries where Centamin has either operational or exploration activities have suffered some degree of civil unrest or
conflict over the last decade. Egypt was the scene of two high profile revolutions in 2011 and 2013. Côte d’Ivoire emerged from a civil
war in 2010‑2011 and still has pockets of unrest, and Burkina Faso has experienced two coup attempts since 2015.
Part of the way the Company manages this political and conflict risk is to ensure it meets obligations under national mining codes,
adheres to the expectations of international rules and conventions, and offers complete transparency for payments to government.
Centamin’s legally binding mining conventions or codes guarantee fiscal stability, govern taxes applicable and allow for international
arbitration in the event of force majeure or a dispute.
This, however, is just part of the story. Far more important are the strong relationships the Company builds with local communities
and host countries. Through this model, Centamin has found that should strife arise, common interests and shared values reassert
themselves. By delivering value to local communities and for host countries, Centamin has come to be regarded as an important
contributor to social, economic and industrial development.
Some of the ways this has been achieved include:
joint ownership structures;
• providing work and training opportunities to local and national people;
•
• payment of taxes, royalties and dividends;
• use of local and national‑based suppliers;
• contributions to the development of key local infrastructure, including roads;
• support for schools and hospitals, and participation in key community celebrations; and
• a philosophy of transparency, openness and approachability at ground level.
Through this model Centamin has found that its local communities and host governments become partners in our progress.
Sukari Gold Mine, for example, was built during the first revolution in Egypt and business continued unabated through the second.
High impact issues:
• safety;
• emergency preparedness;
• legal compliance;
• waste management; and
• environmental incidents.
Medium impact issues:
• cyanide management;
• skills transfer and training;
• energy efficiency;
• air pollution;
• local economic development; and
• land disturbance.
By identifying and comparing the
differing priorities between both
internal management and external
stakeholders, this exercise has also
proved a useful tool to help
Centamin’s executive management
team understand stakeholders’ needs.
For example, energy efficiency and air
pollution were ranked as top six
priorities by external stakeholders, but
they ranked 21st and 15th respectively
for internal stakeholders, thus
highlighting a need for internal
management to examine why this
disparity occurs.
Materiality assessment
During September and October 2017,
in line with the requirements of the
GRI, Centamin conducted a materiality
assessment survey to help prioritise
sustainability issues and understand
which topics are most important to
stakeholders. The survey asked
representatives from internal and
external stakeholder groups to
consider and prioritise a list of 41
economic, environmental and social
sustainability related issues.
As shown in the material issue matrix
below, the survey identified eleven
issues as sustainability priorities, and it
is Centamin’s performance against
these issues in 2017 that forms the
bulk of the content for this
sustainability report. Of the eleven
material issues identified, five were of
high impact (i.e. the issue appeared in
both internal and external
stakeholders’ top ten priorities) and
six of medium impact (i.e. the issue
appeared in both internal and external
stakeholders’ top 20 priorities).
Our most material issues
High impact issues
• Safety
• Emergency preparedness
• Legal compliance
• Waste management
• Environmental incidents
l
s
r
e
d
o
h
e
k
a
t
s
o
t
e
c
n
a
t
r
o
p
m
I
Medium impact issues
• Cyanide management
• Skills transfer and training
• Energy efficiency
• Air pollution
• Local economic development
• Land disturbance
Current or potential impact on the business
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT
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49
CORPORATE SOCIAL RESPONSIBILITY
continued
“Respect for the environment, worker safety and strong
stakeholder relations are the foundation of Centamin’s success.
Ensuring these issues are managed to world‑class standards
is critical to our continuing success and underpins every
decision we make.“
Trevor Schultz, chairman, HSES committee
Human resources
• 95% of employees at Sukari Gold Mine are Egyptian nationals, with 50% drawn from Upper Egypt.
• Contractors at Sukari Gold Mine employ an additional 623 Egyptian nationals, which is 87% of the
contractor workforce.
• Each employee received an average of 3.8 days’ training in 2017.
Centamin’s human resources policy
aims to attract, develop and retain
the highly skilled workforce needed
to operate a world‑class gold mine.
Under Egyptian law, the number of
non‑Egyptians employed is capped
at 10% of the workforce. As shown on
page 49, 71, or just over 5%, of
employees at the Sukari Gold Mine
are non‑Egyptian nationals.
Beyond this, approximately 50% of
Sukari Gold Mine employees are from
Upper Egypt – the region where Sukari
Gold Mine is situated. A number of
benefits for the business arise from
minimising the number of expats on
staff. First and foremost it helps to
reinforce social licence to operate, by
forming a deep partnership between
the Company, the local community
and the host government. Secondly, it
helps to maintain both a competitive
base in terms of costs and a high
employee retention rate. Over the last
three years, Sukari Gold Mine’s
employee turnover rates have been
exceptionally low at below 1%.
Accommodation at Sukari
Our workforce
Workforce statistics
Employees
Male
Female
Total
Contractors
Male
Female
Total
Head office
and admin
offices
Total
Egypt – Sukari
Burkina Faso
Côte d’Ivoire
Expat
National
Expat
National
Expat
National
1,636
34
1,670
823
10
833
32
7
39
0
0
0
71
0
71
90
0
90
1,274
0
1,274
623
0
623
6
1
7
7
0
7
36
5
41
49
10
59
3
0
3
32
0
32
35
214
21
235
22
0
22
257
Total combined workforce
2,503
39
161
1,897
14
100
Note to table:
Details of the Company’s diversity policy and explanation on cultural considerations at an operational level in Egypt are set out in the nomination
committee report.
Despite a mining history that dates back
thousands of years to the Pharaohs,
Egypt does not have a developed
mining industry and Sukari is the only
modern mine operating in Egypt.
This means despite high education
levels, the mining skills base of the
bulk of Centamin’s workforce tends to
be fairly low and technical skills must
be learned on site. An important wider
aim of our business is to help
modernise Egypt’s mining sector,
through the development of a highly
skilled and knowledgeable workforce.
This is an important part of Centamin’s
contribution to Egypt and is one of the
reasons the Company is so committed
to employing local people and
providing world‑class training and
skills development opportunities to
all employees.
All workers and contractors receive
essential safety training as part of the
induction process. Centamin also uses
a combination of onsite classroom
learning, on‑the‑job learning through
skills shadowing and mentors to help
employees learn the latest
technologies and build the specific
knowledge and skill set required for
their job. Training is provided at all
levels of the Company, from drivers to
department heads, and includes both
technical skills such as welding,
electrical engineering and
instrumentation and ‘soft’ skills such
as time and people management.
Centamin also works with the mining
departments at a number of Egyptian
universities (University of Alexandria
and the University of Cairo), to provide
short bursaries and the opportunity for
work experience at Sukari Gold Mine
for students.
In 2017, Centamin provided training
on 29 different topics from waste
management to working at heights,
and in total each employee received
an average of 3.8 days’ training.
Average training days per employee of Sukari Gold Mine
Average number of training days per employee
2017
3.8
2016
4.7
2015
2.7
Example of training courses provided at Sukari Gold Mine in 2017
Course
Chemical management
Hazard identification and risk assessment
Working at heights
Defensive driving
Isolation and lockout
Number of people trained
561
1,286
647
419
1,295
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51
CORPORATE SOCIAL RESPONSIBILITY
continued
CASE STUDY:
MOHAMMED FARGALLY
Centamin looks for motivated workers who show initiative, take responsibility and are willing to learn. The aim is to develop the raw
talent of Centamin’s workforce into highly skilled professionals with the technical knowledge modern mining requires.
Mohammed Fargally, our mining manager, is an Egyptian national from Alexandria, and has been at Sukari Gold Mine almost since
inception. He joined the Sukari exploration team as a junior geologist in 1998 after he had completed his military service.
He explains, “I started at Sukari Gold Mine as a junior geologist a very long time ago; they found me at the gates, and right from the
start I have had very good training. The expat geologists I worked with were great mentors and every day I learned something new.
The Company also sent me to Tanzania and Sudan to develop my experience.”
Once the mine became operational, Mohammed was given a role in production and developed further skills, until he became an
expat himself for a while. He explains, “The skills and knowledge I built here meant that I was able to spend some time working on
projects in Yemen, Sudan and Ghana. This was great experience for me and not something I dreamed would happen. The
Government of Yemen has even asked me to give lectures on Sukari Gold Mine and the Egyptian mining industry.”
After completing a stint outside Egypt, Mohammed returned to Centamin and Sukari Gold Mine: “After a few years, I decided it was
time to come back to Egypt and I am pleased to rejoin my Centamin family,” says Mohammed. “Sukari Gold Mine is a flagship
project in this region and exciting to be part of. I am a mining manager now, and part of my role is to mentor others and help them
grow as I did. Sometimes people leave to become expats. We are always sad to lose good staff, but we are also proud because it
means we have done our job well, and it is good for Egypt’s mining industry.”
Developing a safety culture
The health and safety of the workforce
is essential for Centamin, and the
Company is committed to creating a
zero‑harm working environment. It is
critical to the Company’s success that
all employees come to work every day
knowing they are in a safe
environment, and that they take
responsibility both for their own safety
and the safety of their colleagues.
Centamin’s health, safety and
environment policies and procedures
are based on a principle of shared
responsibility and are designed to
ensure everyone shares and
contributes to the creation of a safe
working environment.
Centamin’s HSE policies are
underpinned by a rigorous set of safety
systems and procedures that comply
with all relevant host country laws.
Centamin’s safety procedures utilise a
‘hierarchy of control’ approach. This
approach first seeks to eliminate or
remove any known hazards. Where
hazards cannot be removed or
eliminated, Centamin looks to use
alternative and safer methods or to
utilise technology and engineering to
minimise exposure to risk. Finally,
where risk exposure cannot be
removed, risks are managed through
careful administration and monitoring
– including the compulsory use of
personal protective equipment (“PPE”).
Centamin’s HSE standards are taught
to and refreshed for all staff and
contractors on an annual basis, and all
visitors to site are taught safety
procedures and issued with
appropriate PPE on arrival. Centamin
provides additional special training
where needed and has a dedicated
emergency response team. Each
department also has team members
who are trained in first aid and
emergency response to act as first
responders until the emergency
response team arrives. There is also a
specially trained underground rescue
team for the underground mine, and
underground operations include a
number of refuge chambers where
workers can seek shelter in the unlikely
event of rock fall or cave in.
All employees and contractors are
required to report all hazards, near
misses and incidents for investigation
by the HSE department. The HSE
team investigate the cause of all
incidents and identify corrective and
remedial actions to reduce the chance
of recurrence. This helps us to identify
areas for improvement.
Where events are deemed to occur
due to employee disregard for safety
standards or negligence, remedial
action may include additional training
or disciplinary action such as
suspension or dismissal, depending on
the severity of the incident. To help
incentivise continual improvement in
safety standards and performance, in
2017, Centamin added achievement of
key safety KPIs including hazard
reporting targets to the bonus
structure, and staff can earn up to 2.5
additional days’ salary each quarter for
achievement of safety targets
(including Take5 completion,
no outstanding investigation
recommendations and having all
staff training up to date).
Trevor Schultz reviewing operations at the Sukari processing plant
Maintenance engineer at Sukari Gold Mine
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53
CORPORATE SOCIAL RESPONSIBILITY
continued
ZERO TOLERANCE
FOR DRUGS AND ALCOHOL
TAKE5 HELPS
IMPROVE SAFETY PERFORMANCE
Centamin takes a zero tolerance
approach to drugs and alcohol, and
random drug and alcohol tests are
frequently conducted on site. All
employees who fail drug or alcohol
tests are subject to disciplinary action or
dismissal. Any employee taking
medication is expected to notify and
register the medication with the onsite
doctor, to ensure it will not impact their
performance or affect a drug test.
The Company also has an alcohol
self‑detection facility so any employee
can test themselves before their shift.
In 2016, to help entrench safe practices and deepen risk assessment understanding,
the ‘Take5’ programme was introduced. This is an additional tool, which compels and
helps all employees to conduct final pre‑task safety checks to identify and control
potential hazards before starting work.
Take5 is not designed to replace formal risk assessments, but to complement them
and entrench safety thinking throughout all activities. All employees are issued a Take5
booklet for use. The booklet includes daily forms for completion. Take5 forms require
employees to:
• describe the task;
•
•
list the hazards; and
identify the actions to be taken to control the risk.
During 2017 more than 41,400 Take5 forms were completed and Centamin believes
this approach of regular self‑directed micro risk assessments has helped drive a
decrease in lost time and medical treatment injuries in 2017, despite an increase in
hours worked.
The Take5 process
1: THINK
Think through the task you’re about to do,
consider all steps required from start to finish
and ensure you are fit, trained, competent
and authorised to complete the task.
2: IDENTIFY
Have I identified any potential
hazards?
3: CONTROL
What control measures are required
to complete the task safely or
minimise risk or harm to myself,
others or property?
4: EQUIPMENT
Do I have the correct PPE
and tools to complete the
task safely?
5: CONDITIONS
Are conditions safe to complete
the task – what else is happening
in the area?
As illustrated in the table below, in
2017 Centamin’s LTIFR decreased by
4% on 2016, MTIFR also decreased by
13%. The total number of hazards
reported increased by 17% and more
than 41,400 Take5 reports were
submitted. The improvement in safety
performance is largely attributable to
an increased focus on hazard
awareness, safety training and
implementation. This year we also
linked part of employee quarterly
bonuses to the achievement of
safety KPIs.
Centamin’s ultimate safety goal is zero
harm – that means no fatalities, no lost
time injuries and no medical treatment
injuries, and we target year‑on‑year
reductions across all these key indicators.
Health and safety performance at Sukari
To achieve this, Centamin continues to
work daily to build a safety risk and
hazard awareness culture into all
elements of Sukari Gold Mine, and
continues to invest in training for all
employees and onsite contractors.
Total hours worked
LTIs
LTIFR(1)
MTIs
MTIFR(1)
AIFR(1)
Hazard reports
Fatalities
(1) Per 200,000 hours worked.
2017
5,464,321
2016
5,187,635
2015
5,032,828
7
0.26
11
0.40
4.98
310
0
7
0.27
12
0.46
5.86
266
0
3
0.12
15
0.60
4.01
348
1
CASE STUDY
Underground operation at Sukari Gold Mine
DEVELOPING
A SAFETY CULTURE
In the remote part of Egypt where the Sukari Gold Mine operates, awareness of basic safety standards and risks has historically been
very limited or almost non‑existent. The wearing of seat belts in cars, for example, is rare and not publicly enforced, nor is protective
equipment readily available or used. Centamin works hard at the Sukari Gold Mine to develop and maintain a robust safety culture
with the highest standards.
For this reason, safety is one of Centamin’s top priorities. Safety awareness and training is a core part of every employee induction,
and the Company uses a variety of methods to strengthen safety awareness and culture on site.
The cornerstone of Centamin’s approach to safety is communication. Centamin aims to maintain a constant flow of safety information
throughout the Company. Every shift begins with a pre‑start meeting, which includes a safety item and a reminder to complete
Take5 forms. One of the key messages used to drive home the importance of following safety procedures is to relate safe work
practices and risk assessment to family. Centamin reminds staff they are responsible not just for themselves but also their workmates
and that everyone wants to return home unharmed at the end of each shift or rotation.
Centamin also uses hard‑hitting graphic information posters throughout site to remind staff of the importance of following safety
rules. The posters cover both onsite issues such as appropriate control procedures, and in‑camp and leisure time behaviour – such as
the fire risk from smoking in bed.
Centamin’s efforts to promote the importance of safe behaviour extend beyond the mine gates too. Regular toolbox meetings
remind staff that safety measures such as wearing a seat belt are as important off site as on.
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55
However, four women are employed in
the Alexandria office. In West Africa,
women make up a higher proportion
of the employees and contractors.
Women are also represented at senior
management level, for example
Centamin’s group sustainability and
business development manager is
female. Across the group a total of
34 women are employed. Centamin
works to ensure women have pay
parity with men in similar positions.
CORPORATE SOCIAL RESPONSIBILITY
continued
Developing strong and stable
industrial relations
Centamin’s employees are a critical
part of the Company, and this view
sets the tone for Centamin’s approach
to industrial relations. All employees
are free to join trade unions and, at
Sukari Gold Mine, Centamin helped
employees to establish a union
following the first revolution in 2011.
Approximately 40% of the workforce
at the Sukari Gold Mine are members
of the union. Union representatives
meet regularly with the Sukari Gold
Mine general manager to discuss any
requests or issues should they arise.
Stable industrial relations have
prevailed for much of the mine life to
date, with zero days lost to strike
action or industrial unrest since 2011.
Centamin attributes the stable
industrial relations to the mutual
respect it tries to build with the
workforce, and the generous
remuneration and bonus packages
available. For example, onsite cleaners
receive approximately five times more
than the average base salary in Egypt.
The Company’s bonus schemes offer
up to 200 days’ salary for achievement
of all production and safety KPIs.
Developing a diverse workforce
Centamin is an equal opportunity
employer and the Company’s code
of conduct prohibits any form of
discrimination. However, no women
are employed at the Sukari Gold Mine.
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.
Local regulations include a number of
provisions to restrict the working hours
(between 7.00pm and 7.00am) and
type of work women can undertake on
an operational mine site; these include
restrictions on working underground,
working with explosives and operating
mobile equipment.
Food preparation area at the Sukari bakery
Building mutually beneficial
relationships with local communities
• US$500,000+ community investment in 2017, more than threefold 2016 levels.
• US$2 million+ invested in community projects since 2015, including new equipment for
Marsa Alam public hospital, upgraded roads in Côte d’Ivoire, and construction of
classrooms in Côte d’Ivoire and Burkina Faso.
• Nearly US$50 million of goods and services procured from local communities in 2017.
Strong and mutually beneficial
community relations are critical to
Centamin’s ongoing success. That is
why Centamin seeks to build and
maintain strong and open relationships
with local communities in a number of
different ways. Firstly, by recruiting
from local communities, secondly by
utilising local suppliers to multiply the
economic impact of operations, and
finally through direct contributions to
help communities develop the
schools, hospitals and other
infrastructure they need to blossom.
This is particularly important for the
Sukari Gold Mine given the long term
nature of the exploitation lease, which
allows for 30 years of mining and
includes the possibility for an
extension of an additional 30 years.
Centamin’s community development
contributions are decided in
consultation with local communities,
local and national government and
Centamin representatives. Community
leaders such as the mayor or
community elders can formally request
specific items or contributions to
projects, and sometimes mine
management and government
representatives may suggest specific
projects. All community investment
and development decisions are
discussed and signed off at
operational management level, or at
board level for larger investments.
The approach to community project
funding focuses on addressing six key
themes:
• addressing infrastructure needs;
• assisting with income generating
initiatives;
• enhancing education and improving
educational opportunities for local
communities;
• improving access to healthcare;
• improving social welfare and
enhancing livelihood; and
• involvement in social activities.
Performance
As shown overleaf Centamin has spent
more than US$2 million on community
projects since 2015. In 2017, the
Company invested more than half a
million dollars on community projects,
a threefold increase on 2016.
The bulk of this has been spent on
projects near to Sukari Gold Mine –
the Company’s only operational site,
particularly at Marsa Alam, a town
25km from Sukari Gold Mine and the
site’s nearest community. Over
US$300,000 was spent on community
projects in Egypt, which includes the
purchase of a CT scanner for one of
the public hospitals in Marsa Alam (see
case study – ‘A scanner in the works’).
Centamin also increased its
contributions for the communities near
exploration projects in Burkina Faso
and Côte d’Ivoire, building classrooms
for nearby schools, and donating
medical supplies and anti‑venoms to
local medical centres.
Local market in Côte d’Ivoire
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57
CORPORATE SOCIAL RESPONSIBILITY
continued
Community spend 2015-2017
Community spend
Egypt
Burkina Faso
Côte d’Ivoire
Total
2017
US$
333,484
70,772
175,649
579,905
2016
US$
2015
US$
Total
US$
67,731
1,317,655
1,718,870
58,890
45,523
70,526
1,080
200,188
222,252
172,144
1,389,261
2,141,310
Note to table:
In 2016 generators donated to Marsa Alam power station to the value of US$1,095,868 are not shown in this table.
COMMUNITY
HEALTH
Emergency response unit at Sukari
Currently, the Sukari Gold Mine in
Egypt is Centamin’s only operational
site. Sukari Gold Mine has a large
reserve base and operating licence of
30 years with provision to extend for
another 30 years, so the project has a
long life. However, a proportion of
every annual budget is ring‑fenced for
the closure fund. A provision is made
for the ongoing and continual
rehabilitation and restoration of land
throughout the mine life.
Supply chain management
Centamin recognises that the supply
chain is a potentially enormous lever
for economic development for host
communities and countries. Using
local companies can create additional
employment opportunities in host
communities and help to increase
in‑country skill levels and expertise.
Therefore, the Company’s approach is
to utilise local skills and products
wherever practicably possible and
economically viable.
All suppliers are subject to Centamin’s
code of conduct and sustainability
policies, and supplier contracts include
clauses to ensure respect for the
human rights and commitments to
anti‑bribery and corruption standards.
In 2017, 324 (or 44%) of all Centamin’s
suppliers at Sukari Gold Mine were
Egyptian, and US$50 million, or more
than 21% of Centamin’s total
procurement spend, was with Egypt‑
based suppliers. Over the past three
years Centamin has paid nearly
US$200 million to Egyptian suppliers.
Closure planning
The successful closure of a mine is as
important as the successful operation
of a mine. Centamin’s closure planning
is guided by the legislative
requirements of host countries and
relevant international best practice
guidelines. The aim at closure is to
restore all sites and the surrounding
environment to a stable and
sustainable condition with as much
original biodiversity as possible
restored, and to ensure all health
and safety requirements are met.
A SCANNER IN THE WORKS:
IMPROVING ACCESS TO HEALTHCARE IN UPPER EGYPT
Marsa Alam, the town closest to Sukari Gold Mine, is located in a remote area of Upper Egypt, and access to essential healthcare
services is limited. Marsa Alam has two public hospitals, however they are small regional hospitals and do not have a full suite of
modern medical equipment. This means that when serious illness or injury occurs,people have to travel to larger hospitals in either
Hurghada or Edfu for diagnosis or treatment. Both Hurghada and Edfu are more than 200km, or a three‑hour drive on sometimes
poorly maintained roads, from Marsa Alam.
As part of the focus on improving access to healthcare for local communities, in 2017 Centamin approached Marsa Alam hospital
and consulted with government to identify any facilities or equipment it could contribute to improve health services for the
community. The hospital and government requested a CT scanner, and ensuring the hospital had space and appropriately trained
staff to use it. Centamin agreed to provide a scanner and the associated equipment to Marsa Alam hospital.
The scanner will arrive and be ready for use in 2018. This will help to improve healthcare for the local community and it may also
create benefits for Centamin operations. If a serious accident occurs on site or a worker falls seriously ill, they can be fully checked
over quickly.
Geologist in the Cleopatra development drive at Sukari
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59
CORPORATE SOCIAL RESPONSIBILITY
continued
Responsible management
of natural capital
• Reduction in environmental incidents by 41% over two years (although up 23% from the prior year)
• 24% reduction in fresh water off take and a 99% increase in water recycling over two years.
• CDP water and carbon questionnaires completed for the first time.
Centamin’s approach to environmental
management is underpinned by a
belief that it must act as a responsible
steward of the environment.
Environmental management systems
also include robust documentation
and monitoring systems to ensure
registers and permits are up to date.
Centamin’s commitment to
environmental responsibility is formally
set out in the HSE policy, which
commits us to:
• ensure compliance with all relevant
local legislation, the conditions of
licences and permits, and
international best practice
standards;
• implement the necessary control
measures for the responsible
management of critical natural
resources such as water; and
• ensure negative impacts to the
environment are minimised as far
as practicably possible.
Centamin’s approach starts at the
feasibility stage of any project with
ESIAs undertaken. These assessments
help us to understand the specific
environmental risks linked to projects
and are used to inform a site‑specific
environmental management system,
which is in line with national regulations.
Sukari Gold Mine’s environmental
management system, for example,
includes a regular monitoring
programme to evaluate performance
against national environmental laws
and international industry best
practice. The monitoring programme
covers all aspects of onsite
environmental management, including
chemicals and hazardous substances,
energy and emissions, water use,
biodiversity and waste management.
Environmental incidents
One of the most important ways
Centamin monitors environmental
performance is by tracking
environmental incidents that occur on,
or near, site. A risk matrix is used to
assess environmental risks, and
determine the consequence of a
negative environmental incident that
may occur.
As illustrated below, a total of 27
environmental incidents occurred at
the Sukari Gold Mine in 2017, a 23%
increase on 2016, and a 41% reduction
over two years. The bulk of Centamin’s
environmental incidents tend to be
limited to localised spills of
hydrocarbons or process water.
All incidents are reported to the
relevant authorities and the
appropriate clean‑up action is quickly
taken. For any incident that involves
hazardous chemicals or materials, in
line with best practice, specially
trained staff members undertake the
clean‑up activities. Centamin’s target
is to reduce the number of Level 1 to 3
environmental incidents year‑on‑year,
and to have zero Level 4 or 5 incidents.
Centamin has no Level 5 environmental
incidents in its corporate history. The
only Level 4 incidents in the last three
years occurred in 2015; both involved
ruptures to the tailings line from the
process plant. As a result of these
incidents, the Company introduced
new administrative and engineering
controls and upgraded the tailings line.
Environmental incidents at Sukari Gold Mine
Level 5 – Catastrophic
Level 4 – Major
Level 3 – Moderate
Level 2 – Minor
Level 1 – Negligible
Total
2017
—
—
3
15
9
27
2016
—
—
4
10
8
22
2015
—
2
5
30
9
46
Energy and emission management
From the pit to the plant, Centamin’s
approach to energy is focused on
steady and secure supply of power to
operations. Sukari Gold Mine is
located in a remote area of Upper
Egypt where no connection to the
national grid is available. The nearby
city of Marsa Alam has its own power
plant, however its capacity would not
be enough to meet industrial needs.
Therefore, all of Sukari Gold Mine’s
power needs are met by a
combination of MAK and Wartsilla
diesel‑fired generators with a
combined 68MW onsite power station.
power sources to fuel operations, and
some solar energy is already used – for
example, in areas of the employee
camp at Sukari Gold Mine. During
2017, Centamin’s board approved the
preparation of a feasibility study for the
installation of a 15MW solar power
plant on site at Sukari as a lower cost,
clean energy alternative for diesel fuel.
It is hoped this will generate enough
power to allow one of the older, less
efficient diesel generators to be
switched off. This will reduce both
overall greenhouse gas (“GHG”)
emissions and diesel costs. (See case
study ‘Renewing power options’.)
This reliance on diesel generators for
power means the bulk of Centamin’s
greenhouse gases flow from the onsite
power station. Centamin constantly
reviews the viability of alternative
As shown below, in 2017 Sukari Gold
Mine consumed 388,931MWh of
power; this represents a 2% increase
on 2016 power consumption, and is in
line with an increase in production
throughput during 2017. Importantly,
Centamin’s energy efficiency per
tonne of ore milled decreased by
3%; this is due to increased use of
the newer and more efficient MAK
generators. Alongside this increase
in power consumption, as shown
below, fuel consumption at Sukari
Gold Mine increased 5% in 2017 to
148.3 million litres.
During 2017, Centamin completed the
CDP emissions investor response and
formally calculated GHG emissions for
Sukari Gold Mine for the first time.
In 2016 Centamin’s scope 1 and 2
emissions were 395,932.93 CO2e
and emissions intensity was 34.25 per
tonne of ore milled; these figures will
provide the baseline for future
emissions reporting and help to
set emission reduction targets.
FUEL CONSUMPTION
(million litres)
ELECTRICITY CONSUMED
(MWh)
ENERGY EFFICIENCY
(KWh/tonnes milled)
130.7
141.3
148.3
369,948
380,021
388,391
33.71
32.76
32.29
2015
2016
2017
2015
2016
2017
2015
2016
2017
CASE STUDY
Solar panels utilised at remote locations at Sukari
RENEWING POWER OPTIONS
The remote part of Upper Egypt where Sukari Gold Mine is situated has no direct access to Egypt’s national grid. The nearby city of
Marsa Alam has its own power station, however its capacity is only enough to meet the needs of Marsa Alam residents and not the
demanding loads of a large‑scale mine such as Sukari Gold Mine.
Currently Sukari Gold Mine’s power needs are met by two onsite diesel power stations generating combined power of 68MW. Using
diesel generators, however, adds to overall operating costs and generates the bulk of all Sukari Gold Mine’s greenhouse gas
emissions. Centamin has been monitoring and assessing the feasibility and economic viability of other forms of power generation,
including renewables, for Sukari Gold Mine.
Given Sukari Gold Mine’s location in Egypt’s Eastern Desert, where there is a year‑round supply of sunlight, solar power is an obvious
option. Sukari Gold Mine already has some solar photovoltaics on site to help meet the needs of part of the employee camp, and this
year decided that the falling costs of photovoltaic technology make solar a cost‑effective option to install on a larger scale.
Centamin’s board has approved the preparation of a feasibility study for the installation of a 15MW solar power plant on site at Sukari
as a lower cost, clean energy alternative for diesel fuel. It is hoped that this will allow the Sukari Gold Mine to reduce the use of, or
turn off completely, one of the older and less efficient MAK generators. If successful, further solar power may be added to the Sukari
Gold Mine’s energy mix in the future.
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT
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61
CORPORATE SOCIAL RESPONSIBILITY
continued
Managing water
Mining is a thirsty business, and many
activities and processes across the
gold mining cycle require a secure,
steady supply of significant amounts of
water to operate effectively. The
Sukari Gold Mine is situated in Egypt’s
Eastern Desert, an area that receives
on average 1mm of rainfall annually
and one of the driest parts of the
world. Therefore, responsible
management of water at Sukari Gold
Mine is critically important.
Sukari Gold Mine’s desert location
means ground water supplies are
limited, therefore seawater from the
Red Sea, which is 25km away from the
mine site, is Sukari Gold Mine’s
primary water source. Ease of access
to the Red Sea was a critical
consideration when deciding where to
position the mine. More than 99% of
the water used on site is seawater, and
the process plant was built to use salt
water. There is a reverse osmosis
desalination plant on site, which treats
seawater to provide potable water for
use in the camp and administration
blocks, and during the final stages of
the extraction process.
Strict permits under Egyptian national
regulations govern all water abstracted
and to ensure permit limits are not
exceeded, the pipeline from the Red
Sea has been designed to be no more
than 60mm in diameter, which means
it is physically impossible to exceed
permitted abstraction limits.
Recognising water is a precious
resource, Centamin aims to use all
water as efficiently as possible. There
are a number of closed loop cycles
throughout the process plant and the
onsite sewage treatment plant, and
Centamin thickens tailings to maximise
water recycling.
Centamin does not discharge any
water back into the environment. Any
remnant water stored at the tailings
storage facility (TSF) is pumped back
to the process plant for reuse as
required, or is lost through
evaporation. The average evaporation
rate at Sukari Gold Mine is about four
metres per year. Recycling water also
makes business sense; it takes a
significant amount of energy to pump
water the 25km from the Red Sea and
to run the desalination plant.
During 2017, Centamin abstracted
a total of 7,404 million litres of water.
This is 1,312 million litres less than
in 2016, a 15% improvement on 2016.
At the same time, water use efficiency
has improved 34% since 2015 and
water recycling rates have improved
from 26.5% in the same time period to
52.8%, an improvement of 99% over
the last two years. Reusing and
recycling water throughout our
operations reduces the amount of
water we need to abstract from the
Red Sea and it also helps to reduce
our costs – as it reduces the need for
pumping along the pipeline, saving
power and the associated fuel costs
and reducing emissions.
TOTAL WATER OFFTAKE
(million litres)
WATER USE EFFICIENCY
(KL/tonne milled)
TOTAL WATER RECYCLED
(million litres)
WATER RECYCLED
(%)
9,723.77
8,716.94
0.92
7,404.60
0.75
0.61
2,582.57
3,913.28
3,936.64
56.27
44.76
26.51
2015
2016
2017
2015
2016
2017
2015
2016
2017
2015
2016
2017
Tailings storage facility at Sukari
Managing biodiversity
The size, scale and location of mining
operations often mean they can have a
negative impact on nearby flora and
fauna. Centamin takes due care to
minimise the negative effects its
mining activities may have on the local
environment, and to restore sites and
repair any damage done as much as
practicably possible. Centamin
operations do not impact the habitats
of any endangered species.
To align with industry best practice,
Centamin makes detailed records of
the full range of biodiversity present
on a site as part of the ESIA. The
Company also ring‑fences a portion in
every annual budget for ongoing site
and closure restoration to ensure all
sites are restored to emulate their
original state or better when
operations cease.
At Sukari Gold Mine, the local area is
barren desert, with minimal flora and
fauna. Therefore, there is limited need
to restore habitat, and the focus is to
ensure the site is stable with limited
scope for erosion.
The most significant biodiversity
challenge arises from the pipeline to
the Red Sea, which is a popular diving
spot and noted for its spectacular
coral reefs and range of fish. When
planning the pipeline, great care was
taken to ensure the pipeline was
positioned in an area without coral
reef and the pipeline is fitted with a
series of micro‑grills to ensure no fish
or other life enter the pipes. (See case
study ‘Pipeline positioning helps
protect Red Sea biodiversity’.)
Centamin expects to encounter
significantly different biodiversity
challenges at the West African
exploration sites, and will undertake
ESIAs and baseline biodiversity
surveys to assist in developing
detailed biodiversity action plans for
each project, should they proceed into
feasibility stage.
Depicting naturally occurring coral reefs along the red sea coastline
PIPELINE POSITIONING
HELPS PROTECT RED SEA BIODIVERSITY
Almost all of Sukari Gold Mine’s operational water needs are met via a pipeline connecting the site to the Red Sea. The Red Sea is a
popular tourist spot and known globally for its coral reefs, beautiful beaches and diving. With an estimated 16,000km2 of coral reef
coverage, the Red Sea is also home to many different species of fish and other sea life and is regarded as a biodiversity hotspot.
Therefore, ensuring Sukari Gold Mine has zero or minimal impact on the sea’s biodiversity and tourism is of critical importance to
Centamin. This was a central consideration for the design, positioning and construction of the pipeline.
Prior to construction, an ESIA was completed and a number of supporting studies, including an independent bathymetric survey to
ensure the pipeline’s path position avoided coral reefs. Pipes enter the Red Sea at the beach area at Marsa Umm Tundubah – where
the land isn’t occupied or grazed – and the sea doesn’t have any back reef. The pipeline extends 200 metres into the sea and is
buried in a specially built trench to minimise disturbance to sea life or divers. The construction methods for the pipe and trench
were carefully considered and chosen to minimise sediment movement from trenching.
The pipeline opening is covered by a mesh screen to prevent fish or small organisms entering it. It is also fitted with an internal
travelling screen, as a back‑up measure should the first screen fail. The pipeline is also subject to regular inspections and
maintenance.
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT 62
63
CORPORATE SOCIAL RESPONSIBILITY
continued
Waste management
Centamin takes great care to ensure all
waste is managed in a responsible
way, particularly hazardous waste such
as cyanide. The Company has waste
management plans and control
systems that apply to all types of
discard and these plans have at their
core the need to reduce, reuse and
recycle waste wherever possible.
Centamin’s most significant waste
generated by volume is waste rock
and tailings, or ‘overburden’, which
is placed in specially designated
waste rock dumps throughout the site.
The waste rock dumps are carefully
controlled by geotechnical
engineers and slopes are shaped
to ensure stability.
Tailings are sent to the TSF for disposal
and low‑grade ore which does not
meet the minimum grade benchmark
for processing is deposited on the
dump leach site, where cyanide is
applied and gold is recovered in a
cost‑effective manner. Both the dump
leach site and the TSF are specially
lined to prevent any seepage into
groundwater, and nearby groundwater
is regularly monitored to ensure no
seepage has occurred. The TSF is also
inspected on a regular basis.
All hazardous waste, including cyanide,
has specific procedures to ensure safe
and responsible disposal. Centamin’s
use of cyanide is governed both by the
principles of the International Cyanide
Management Code, and the
requirements of Egyptian regulations.
All employees and contractors
working with cyanide receive special
training in safe handling techniques
and Centamin has cyanide‑specific
emergency response plans in place
should any accident occur. The
Company’s strict processes and
procedures governing cyanide use
and management are also applied
throughout the supply chain, including
in the procurement, transport, storage
and application of cyanide.
Tailing and waste rock
Dry tailings
Waste rock
Waste to landfill
Managing air quality
Managing and minimising dust on site
is a critical part of worker health and
safety. Excess dust reduces visibility on
site and can hamper working
conditions. It can also lead to breathing
difficulties or eye irritation for workers
or for community members.
2017
tonnes
12,031,915
54,780,595
363,242
2016
tonnes
11,554,077
49,944,828
304,345
2015
tonnes
10,570,272
49,019,483
340,896
Centamin follows international best
practice guidelines to monitor and
manage air quality on site. There are
several monitoring stations to measure
dust on site and these are checked
weekly to assess airborne particulate
counts. The Company aims to ensure
airborne particulate levels are less than
500mg/m2 per day. To help suppress
dust, water sprayers are fitted to
crushers, and onsite and haul roads
are regularly sprayed with raw salt
water or treated effluent.
OPERATIONAL REVIEW
In this section we feature our operational performance
and exploration review for 2017.
In 2018, total material mined is
forecast at 70.5Mt, with total ore
mined of 17.7Mt at a grade of 0.7g/t.
Total waste planned is 52.8Mt. The
strip ratio is planned at 3.0. Mining
activities will be focused in the mining
area of Stage 4A with 70Mt of material
planned, with the remaining 0.5Mt
mined from Stage 3B during Q1 2018.
Stage 4A will be the primary source
of ore for the year providing 17.3Mt
at 0.68g/t of the ore mined for the
year. Stage 3B will provide the balance
of approximately 0.44Mt at 1.3g/t.
Stage 4A will continue to be the
predominant source of open pit ore
until June 2021.
Underground mine
The underground mine produced
1.14Mt of ore, a 13% increase on the
prior year (1.02Mt in 2016). Ore from
stoping accounted for 60% (0.68Mt) of
the total, with the balance of ore
(0.46Mt) from development. The
average mined head grade was 8.3g/t,
above our 7.3g/t forecast. The average
grade from stoping was 8.9g/t (9.1g/t
in 2016) and the average grade from
development was 7.4g/t (9.0g/t in
2016), a 2% and 18% decrease,
respectively, on the prior year.
Health and safety – Sukari
The Lost Time Injury Frequency Rate
(“LTIFR”) for 2017 was 0.26 per
200,000 man hours (2016: 0.27 per
200,000 man hours), with a total of
5,464,321 man hours worked during
2017 (2016: 5,187,635). 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 2018 towards our zero‑harm
target. Further details of the safety
initiatives, employee welfare and
relevant government relations are set
out in the CSR report on page 38.
Open pit
The open pit delivered total material
movement of 70.9Mt, a 14% increase
on the prior year (62.2Mt in 2016). This
increase was related to improved
mining productivity and equipment
utilisation. The strip ratio was 3.4, a
reduction from 4.68 in 2016, as ore
mining focused on the Stage 3B areas.
Ore production from the open pit was
16.1Mt at 0.66g/t, with an average
head grade to the plant of 0.89g/t.
The ROM ore stockpile balance
increased by 1,607kt to 2,178kt by the
end of the year. Ore mining was
primarily from the Stage 3B area,
which provided access to higher‑grade
sulphide portions of the orebody
during 2017.
During the second, third and fourth
quarters, production was increased to
be closely aligned with a 1.3Mtpa run
rate. Tonnage and lower‑grade
stockwork stopes on the western
contact and in the central zone were
produced predominantly together
with stoping of a high‑grade lode in
the Ptah. Stoping was shared between
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 and
the North/South dipping high‑grade
quartz vein sitting amid haematite
altered porphyry and meta‑sediments
at Ptah.
Underground development advanced
6,981 metres, including progression of
the Horus and Ptah declines. This
development comprised 4,257 metres
in Amun and 2,724 metres in Ptah.
The exhaust circuit for the Ptah
and Horus declines was progressed,
ensuring sufficient ventilation as both
declines extend deeper into the
orebody.
A total of 10,672 metres of grade
control drilling were completed, aimed
at short term mine planning and
resource development. A further
33,800 metres of underground
diamond drilling continued to test for
reserve extensions below the current
Amun and Ptah zones, with extensive
drilling also being undertaken at the
Cleopatra zone of Sukari Hill. Further
details and underground drilling
results are discussed in the exploration
section of this report.
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OPERATIONAL REVIEW
continued
Processing
The Sukari plant processed a record
12.03Mt of ore in 2017, a 4.1% increase
on the prior year (11.56Mt in 2016) and
2.4% above our 11.75Mt forecast.
Productivity continued to increase
throughout the year, with a record
3.1Mt processed during the fourth
quarter, reflecting the ongoing
improvement on availability and
productivity of the circuit.
Metallurgical recovery averaged
88.1%, a 1.5% decrease on the prior
year (89.4% in 2016). Work is
continuing to optimise the operational
controls and stability for flotation, the
ultra‑fine grinding and pyrite leach
circuits to ensure recoveries are
improved with a target rate of 89.5%
at the increased rate of throughput.
The dump leach operation produced
8,597 ounces during the year.
The 2018 production guidance is
based on a forecast production rate of
12.3Mt, with an annual average gold
recovery of 89.6%. Grades are
expected to remain steady throughout
the year, averaging 1.60g/t.
Sukari Gold Mine production summary
2017 Q4 2017 Q3 2017 Q2 2017
Q1 2017
2016 Q4 2016
Year
ended
31 Dec
Year
ended
31 Dec
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
16,090
5,726
4,825
3,060
2,478
10,949
2,183
0.66
0.89
0.62
0.92
0.76
1.11
0.76
0.81
0.47
0.72
0.93
0.95
0.85
0.85
70,870
17,647
18,602
17,493
17,129
62,238
15,810
3.40
2.08
2.86
4.72
5.91
4.68
6.24
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 (%)
461
684
8.28
130
168
8.80
113
189
7.98
119
174
8.79
99
153
7.44
454
565
9.04
12,032
3,072
2,996
3,056
2,908
11,559
1.57
88.1
1.70
88.5
1.82
88.3
1.44
86.7
1.29
88.8
1.65
89.4
103
125
10.43
2,948
1.62
89.9
Gold produced – dump leach (oz)
8,597
3,119
1,692
1,738
2,048
9,872
2,550
Gold produced – total(2) (oz)
544,658 154,298 156,533 124,641
109,187 551,036 136,787
Cash cost of production(3,4)
Open pit mining (US$/oz)
Underground mining (US$/oz)
Processing (US$/oz)
G&A (US$/oz)
AISC(3,4)
Gold sold (oz)
554
210
40
269
35
790
453
160
34
224
35
744
483
180
33
244
26
732
609
234
41
296
38
829
734
286
55
347
46
887
513
179
43
253
38
694
536
198
46
254
38
720
539,726 153,490 150,273 120,912 115,052 546,630 130,959
Average realised sales price (US$/oz)
1,261
1,278
1,283
1,249
1,220
1,256
1,207
(1) Ore mined includes 2,064kt @ 0.32g/t delivered to the dump leach in Q4 2017 (117kt @ 0.21g/t in Q4 2016).
(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.
Mineral reserve
and resource statements
During the year, Centamin updated its
mineral resource and mineral reserve
estimates for the Sukari Gold Mine,
as at 30 June 2017.
The total measured and indicated
mineral resource estimate of 11.7Moz
Au is reported as an open pit resource
at a 0.3g/t cut‑off grade. This total is
inclusive of the 1.6Moz underground
mineral resource. The open pit and
surface stockpile mineral reserve
estimate is 7.2Moz and the
underground mineral reserve estimate
is 5.4Mt containing 0.8Moz gold. The
total combined open pit and
underground mineral reserve estimate
of 8.0Moz represents an increase in
underground reserves offsetting total
depleted ounces from the production
of 1.0Moz between 30 June 2015 and
30 June 2017.
Total mineral resource for the Sukari Gold Mine
As at 30 June 2017
Resource and reserve definition
drilling continues to target
higher‑grade areas of the Sukari
deposit, in parallel with expanding
underground infrastructure. Positive
results from the ongoing drilling
programmes are discussed in the
following section.
Measured
Indicated
Total measured and indicated
Inferred
Cut‑off
(g/t)
Tonnes
(Mt)
Grade
(g/t)
Tonnes
(Mt)
Grade
(g/t)
Tonnes
(Mt)
Grade
(g/t)
0.3
0.4
0.5
0.7
1.0
240
199
167
121
80
1.02
1.15
1.29
1.55
1.92
145
114
92
62
36
0.84
0.97
1.10
1.34
1.70
385
313
259
183
116
0.95
1.09
1.22
1.48
1.85
Gold
(Moz)
11.75
10.95
10.17
8.72
6.90
Tonnes
(Mt)
25
19
15
10
6
Grade
(g/t)
0.80
0.90
1.1
1.3
1.7
Gold
(Moz)
0.64
0.58
0.52
0.43
0.31
As at 30 June 2015
Measured
Indicated
Total measured and indicated
Inferred
Cut‑off
(g/t)
0.3
Tonnes
(Mt)
198
Grade
(g/t)
1.05
Tonnes
(Mt)
188
Grade
(g/t)
1.02
Tonnes
(Mt)
386
Grade
(g/t)
1.03
Gold
(Moz)
12.9
Tonnes
(Mt)
33
Grade
(g/t)
1.0
Gold
(Moz)
1.1
Notes to tables:
• The effective date of the reserve and resource statement is 30 June 2017 or 30 June 2015 as relevant.
• Totals may not equal the sum of the components due to rounding adjustments.
• The mineral resource estimate is based on the open pit mined surface as at 30 June 2017 and adjusted for underground mine workings as at
30 June 2017.
• All available assays as at 30 June 2017.
• Resource dataset comprises 311,419 two‑metre down hole composites and surface rock chip samples.
• Mineral resources are reported inclusive of those resources converted to proven and probable mineral reserves.
• The resources are estimates of recoverable tonnes and grades using multiple indicator kriging with block support correction.
• Measured resources lie in areas where drilling is available at a nominal 25 x 25 metre spacing, indicated resources occur in areas drilled at
approximately 25 x 50 metre spacing and inferred resources exist in areas of broader spaced drilling.
• The resource model extends from 9700mN to 12200mN and to a maximum depth of 0mRL (a maximum depth of approximately 1,000 metres below
wadi level).
Main access to Cleopatra underground development at Sukari
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT
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67
OPERATIONAL REVIEW
continued
Underground mineral resource for the Sukari Gold Mine (included within the total resource above)
Underground mineral reserve by classification
Measured
Indicated
Total M&I
Inferred
As at 30 June 2017
As at 30 June 2015
Tonnes
(‘000t)
1,947
5,492
7,439
6,711
Grade
(g/t)
8.9
6.0
6.8
4.5
Gold
(‘000oz)
554
1,065
1,619
976
Tonnes
(‘000t)
1,850
2,820
4,670
6,970
Grade
(g/t)
6.5
7.0
6.8
5.6
Gold
(‘000oz)
390
630
1,020
1,240
Notes to table:
• The effective date of the reserve and resource statement is 30 June 2017 or 30 June 2015 as relevant.
• Totals may not equal the sum of the components due to rounding adjustments.
• The mineral resource is reported above 2g/t within interpreted mineralised domains.
• The mineral resource estimate is depleted by underground mine workings as at 30 June 2017.
• All available information has been used, including mapping from underground mining and assays as at 30 June 2017.
• Available resource data resulted in 41,277 one‑metre down hole composites used for grade estimation.
• The mineral resources were estimated utilising a single indicator weighted kriging method (“IK”) to estimate gold for each of the mineralisation domains.
• Measured mineral resources are defined by a drill spacing of at least 20m x 20m and confined to the interpreted mineralisation defined by
underground mine development. Indicated mineral resources are defined as areas outside the measured mineral resource and defined by
approximately 20m x 20m drill spacing. Inferred mineral resources include all remaining estimated mineralisation defined by a drill spacing of
approximately 50m x 50m.
• Mineral resources are reported inclusive of those resources converted to proven and probable mineral reserves.
• The underground resource is located within the boundaries of the total resource, and is included within that total.
• For previous resource notes, please refer to Centamin press release dated 10 September 2015.
Total combined (open pit and underground) mineral reserve for the Sukari Gold Mine
Proven
Tonnes
(Mt)
As at 30 June 2017(1‑4) 170
As at 30 June 2015(5)
152
Probable
Mineral reserve
Grade
(g/t)
1.02
1.03
Tonnes
(Mt)
74
101
Grade
(g/t)
1.01
1.15
Tonnes
(Mt)
244
253
Grade
(g/t)
1.00
1.09
Gold
(Moz)
8.0
8.8
Notes to table:
• The effective date of the reserve and resource statement is 30 June 2017 or 30 June 2015 as relevant.
• Totals may not equal the sum of the components due to rounding adjustments.
(1) Total includes:
•
•
•
Open pit mineral reserve = 229Mt @ 1.0g/t for 7.0Moz.
Underground mineral reserve = 5.4Mt @ 4.60g/t for 0.8Moz.
Stockpiles = 10Mt @ 0.50g/t for 0.2Moz.
(2) Based on open pit mined surface as at 30 June 2017, underground mine workings as at 30 June 2017, and a gold price of US$1,300 per ounce.
(3) Ultimate open pit design has a waste to ore ratio of 5.3:1.
(4) See additional notes in tables below for the underground and open pit mineral reserves.
(5) As at 30 June 2015 at US$1,300 per ounce, please refer to Centamin press release dated 10 September 2015.
Open pit mineral reserve by classification
The component of the combined reserve, as outlined above, that relates to the open pit operation is summarised below.
Proven
Probable
Stockpile – proven
Total
As at 30 June 2017
Tonnes
(Mt)
Grade
(g/t Au)
159
70
10
239
1.02
0.80
0.52
0.93
Gold
(Moz)
5.2
1.8
0.2
7.2
As at 30 June 2015
Tonnes
(Mt)
Grade
(g/t Au)
130
99
21
250
1.11
1.07
0.42
1.03
Gold
(Moz)
4.6
3.4
0.3
8.3
Notes to table:
• The effective date of the reserve and resource statement is 30 June 2017 or 30 June 2015 as relevant.
• Totals may not equal the sum of the components due to rounding adjustments.
• Based on mined surface as at 30 June 2017 and a gold price of US$1,300 per ounce.
• Cut‑off grades (gold): CIL oxide 0.35g/t, CIL transitional 0.35g/t, CIL sulphide 0.35g/t, dump leach oxide 0.2g/t.
• Designed underground reserves detailed below do not form part of the open pit reserve.
• For previous reserve notes, please refer to Centamin press release dated 10 September 2015.
The component of the combined reserve, as outlined above, that relates to the underground operation is
summarised below.
Proven
Probable
Sub‑total
Development (probable)
Total
As at 30 June 2017
As at 30 June 2015
Tonnes
(Mt)
Grade
(g/t Au)
Gold
(‘000oz)
Tonnes
(Mt)
Grade
(g/t Au)
Gold
(‘000oz)
0.7
4.0
4.7
0.6
5.4
8.5
4.4
5.1
0.9
4.5
200
569
769
18
787
1.0
1.7
2.7
—
2.7
6.1
5.9
6.0
—
6.0
200
320
520
—
520
Notes to table:
• The effective date of the reserve and resource statement is 30 June 2017 or 30 June 2015 as relevant.
• Totals may not equal the sum of the components due to rounding adjustments.
• Based on underground mine workings as at 30 June 2017.
• Long hole stopes for reserves estimation are designed using a 3.0g/t elevated cut‑off and mining dilution applied at 15% @ 0.4g/t as all stopes are
located in mineralised porphyry and 10% mining loss is then assumed to allow for stope bridges and material left in stopes after mining. For shallow
dipping long hole stopes a 50% mining loss has been assumed.
• Room and pillar stopes for reserves estimation are designed using a 3.0g/t elevated cut‑off and mining dilution applied at 10% @ 0.8g/t as all stopes
are located in mineralised porphyry and 40% mining loss is then assumed to allow for non‑recovered pillars and material left in stopes after mining.
• Mineral resources are reported inclusive of those resources converted to proven and probable mineral reserves.
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 orebody remains open to the north, south and at depth and
further underground drilling of the Sukari deposit will take place during 2018, from across the existing and planned areas
of development.
Amun
Hole number
UGRSD0804
UGRSD0805
UGRSD0806
UGRSD0808
UGRSD0810
UGD3524
UGD3510
Bast
Hole number
UGRSD0827
UGRSD0830
UGRSD0831
UGRSD0832
UGRSD0832
Interval
(m)
Au
(g/t)
2.55 151.6
1.0 337.2
Ptah
Hole number
UGRSD0123
UGRSD0135
3.4 21.3
3.2 79.5
1.1
41.1
1.0 55.3
2.2 49.2
59.9
5.8
4.0
31.9
4.0 70.1
4.1 71.8
UGRSD0139
UGRSD0577
UGRSD0593_W1
UGRSD0829
UGRSD0902
UGRSD0139
UGRSD0832
Interval
(m)
Au
(g/t)
UGRSD0833
0.4 180.4
UGRSD0834
11.0
8.8
UGRSD0906
1.0 45.8
9.0
0.4
6.1
141
UGRSD0908A
UGRSD0909
Interval
(m)
Au
(g/t)
Cleopatra
Hole number
1.8 86.8
CRSD004
CRSD007
CRSD011
CRSD029
CRSD031
CUD061
CUD062
CUD086
CRSD073
CRSD074
CRSD077
CRSD078
419
1.9
3.3
71.5
2.0 163.2
2.0 163.7
5.0
11.8
11.0
8
2.0 20.2
4.0 82.1
2.6 24.3
1.0
11.8
0.4 141.0
5.8
2.6
0.6 85.5
2.8 19.3
2.9
5.0
23.0
15.0
2.1
1.0
5.4
8.4
4.5
5.3
5.3
21.1
Interval
(m)
2.65
3.35
Au
(g/t)
8.5
13
0.8 569.5
40.1
1.0
2.0
11.8
3.0
2.05
3.55
16.6
3.35
5.0
2.0
3.0
1.6
3.0
14.1
9.5
8.2
4.4
6.9
3.7
5.2
3.6
7.7
4.7
Selected underground drilling results
received during the year (including
from the fourth quarter), are set out
above.
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT
68
69
OPERATIONAL REVIEW
continued
Exploration continued
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, where the porphyry is
approximately 500 metres wide and
access for surface drill rigs is limited.
High grades have been observed
along the north‑eastern flank of Sukari,
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, whereas
Julius and Antoine do not outcrop.
The zones are interpreted as
commencing on the eastern porphyry
contact, dipping broadly to the west.
Exploration development drives are
exploring along the strike of the upper
Cleopatra zone, and four drill sites
have now been established in the
centre of the porphyry for exploration
drilling of the north. The drives will
provide a large quantity of geological
data in addition to that gained from
the drilling.
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 initial project development was
structured in two phases. Phase 1 was
started in Q3 2016 and was completed
in Q1 2017 with 1,370 metres of
development and 96,422 tonnes of
mined material. This development
produced 21,078 tonnes of low‑grade
mineralised material. The first drill
cuddy was established and exploration
drilling commenced during December
2016. The drilling targeted westerly
dipping dilation of stockwork porphyry
which is located on the eastern
contact.
Phase 2 is currently underway and has
completed 1,008.9 metres of decline
development and 100,671 tonnes of
material mined. Drilling focused on
exploring along the western and
northern contacts in the north‑western
portion of the main porphyry.
Exploration drill rig in Côte d’Ivoire
A total of 22,149 metres of exploration
drilling has been completed for the
Cleopatra decline by two LM90 drill
rigs drilling from three of the
established drill sites. In addition,
2,311.9 metres of shorter exploration
drill holes have been completed
utilising the Mobile Carrier Drill Rig
to assist with defining the geometry
of the higher‑grade shoots.
The Cleopatra decline has been
engineered 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.
Other prospects
Whilst exploration remains focused
on Sukari, there are seven other
prospects that have been identified
within the 160km2 Sukari tenement
area which are close enough such that
ore could be trucked to the existing
processing plant. No exploration
drilling was completed on these
prospects this year, however a
thorough in‑house prospectivity
review has commenced with the
objective of outlining new exploration
plans for 2018.
Côte d’Ivoire
Centamin has ten permits covering
circa 3,231km2 and a further nine
permits covering 3,187km2 under
application. The Côte d’Ivoire
exploration team has been organised
into three crews, one focused on
development of the Doropo Project
within the resource area, one focused
on regional exploration around the
Doropo Project and the third group is
focused on regional exploration that
commenced during the year on the
west side of the country, resulting in
the highly prospective discovery of the
ABC Project.
Doropo Project
The Doropo resources span an area
of 25km2. In 2017, the exploration
programme commenced by drilling
the identified new targets from the
2016 exploration programme. This
successfully resulted in the discovery
of Chegue South, Chegue Main and
Enioda prospects.
Continued systematic drill testing and
in‑fill drilling of the prospects has
extended the existing resource and
identified new potential drill targets on
Chegue. The Doropo resource has
expanded rapidly and now stands at
1.35Moz at 1.3g/t in the indicated
category and 0.90Moz at 1.2g/t in
inferred, a significant increase in
The new resource at Doropo is summarised in the tables below.
Mineral resource for Côte d’Ivoire
contained ounces from the maiden
resource announced early in 2017.
A total of 62,716 RC metres, 4,880
diamond drill metres, including 1,069
diamond metres for metallurgical
testing, were completed.
Souwa
Nokpa
Chegue North
Chegue Main
Chegue South
Kekeda
Han
Enioda
Total
Indicated
Inferred
0.5g/t cut‑off
Mt
15.36
5.06
1.21
1.13
4.6
2.04
3.16
—
32.55
Au (g/t)
Au (Moz)
1.4
1.4
0.9
1.2
1.4
1.2
1.3
—
1.3
0.65
0.22
0.04
0.04
0.2
0.07
0.13
—
1.35
Mt
7.20
4.92
1.1
1.19
3.55
2.01
1.53
3.24
24.91
Au (g/t)
Au (Moz)
1.3
1.3
0.9
0.9
1.1
1.2
1.2
0.9
1.2
0.29
0.2
0.03
0.03
0.12
0.07
0.06
0.1
0.90
• The table shows a summary of the resource estimate using a cut‑off of 0.5g/t Au at December 2017.
• Totals may not equal the sum of the components due to rounding adjustments.
Souwa
Nokpa
Chegue North
Chegue Main
Chegue South
Kekeda
Han
Enioda
Total
Indicated
Inferred
0.8g/t cut‑off
Mt
8.77
3.12
0.54
0.66
2.56
1.07
1.86
—
18.58
Au (g/t)
Au (Moz)
1.9
1.9
1.3
1.5
2.0
1.7
1.8
—
1.9
0.52
0.18
0.02
0.03
0.16
0.06
0.1
—
1.07
Mt
3.60
2.93
0.48
0.45
1.5
1.01
0.8
1.32
12.21
Au (g/t)
Au (Moz)
2.0
1.8
1.3
1.3
1.7
1.7
1.8
1.4
1.7
0.22
0.16
0.02
0.02
0.08
0.05
0.04
0.06
0.65
• The table shows a summary of the resource estimate using a cut‑off of 0.5g/t Au at December 2017.
• Totals may not equal the sum of the components due to rounding adjustments.
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT
70
71
OPERATIONAL REVIEW
continued
Exploration continued
Nokpa significant mineralised
RC and DD drill intersections
Hole ID
DPDD1422
DPDD1423
DPRC0691
DPRC1300
DPRD1070
DPRD1070
DPRD1377
DPRD1379
DPRD1380
DPRD1380
DPRD1388
DPRD1389
DPRD1389
DPRD1390
DPRD1390
DPRD1391
DPRD1392
DPRD1409
DPRD1411
DPRD1412
From (m)
Interval (m)
Au (g/t)
212.5
256
57
125
126.8
159
146
112
231
246
185.2
103
167
160
184
9.5
10.8
3
8
3.4
13
16
27
3
8
7.9
2.5
34.3
20
6.3
185.39
10.61
166.2
298
251.8
268.5
8.8
15
21.2
10.35
2.0
2.5
18.5
4.7
6.3
2.3
3.0
1.2
8.3
13.2
4.9
24.5
3.5
2.2
5.7
2.2
2.1
3.2
3.0
2.1
The Souwa deposit is by far the biggest one in the resource
area (from all the drilling completed thus far). Drilling
delineated a 2.1km strike mineralisation which remains
open in all directions. There are two main ore shoots
defined along the structure, extending between 120 metres
and 200 metres in vertical depths.
Souwa significant mineralised
RC and DD drill intersections
Chegue significant mineralised
RC drill intersections
Other prospects with significant mineralised
RC and DD drill intersections
Hole ID
DPDD1381
DPDD1382
DPDD1384
DPDD1385
DPDD1386
DPRC0816
DPRC0818
DPRC0819
DPRC0824
DPRC0827
DPRC0842
DPRC0844
DPRC0845
DPRC0854
DPRC0856
DPRC0889
DPRC1177
DPRC1275
DPRC1284
DPRC1285
DPRC1286
DPRC1289
DPRC1294
DPRC1295
DPRC1336
DPRC1396
DPRC1398
DPRC1413
DPRC1414
DPRD1075
DPRD1102
DPRD1102
DPRD1151
From (m)
Interval (m)
Au (g/t)
116
80
187
84
91
108
48
79
49
44
83
49
79
119
2
138
165
42
11
12
25
19
29
50
20
181
177
126
153
89
128
137
138
26
19
6
12
24
13
11
10
9
6
10
3
3
7
17
12
6
3
17
12
5
14
8
6
6
4
11
16
19
10.2
3
8.85
12
2.0
5.7
2.8
6.0
4.3
1.4
3.2
1.7
2.1
3.0
2.6
7.3
9.6
8.0
1.1
1.7
2.7
15.3
3.0
2.5
4.0
1.6
4.4
3.0
4.1
29.6
7.2
4.5
1.1
2.1
5.9
2.1
2.2
The Chegue structure consists of three structures: North,
Main and South. North and Main are independent, shallow,
coherent ore shoots. These ore shoots are open at depth
but the main structure is still open and the surface mapping
shows potential for other ore shoots to be intersected that
are required to be tested with drilling in 2018.
Despite the limited surface signature, the Chegue South
deposit was a new discovery in 2017. The structure has
been tested along a strike length of 700 metres and a
vertical depth of 180 metres and remains open on the
southern side.
Hole ID
DPRC0677
DPRC0736
DPRC0740
DPRC0741
DPRC0742
DPRC0743
DPRC0744
DPRC0750
DPRC0754
DPRC0757
DPRC0758
DPRC0760
DPRC0764
DPRC0770
DPRC0773
DPRC0774
DPRC0776
DPRC0786
DPRC0789
DPRC0800
DPRC0801
DPRC0801
DPRC0860
DPRC0864
DPRC0871
DPRC0875
DPRC0877
DPRC0879
DPRC0879
DPRC1217
DPRC1218
DPRC1317
DPRC1335
From (m)
Interval (m)
Au (g/t)
Prospect
Hole ID
From (m)
Interval (m)
Au (g/t)
1.9
5.2
Tchouahinin DPRC0665
Tchouahinin DPRC0723
32.7
Tchouahinin DPRC1187
Han
DPRD0470
Kekeda
DPRC0632
13
118
37
87
36
8
4
2
19
12
10.5
12.7
10.2
1.1
2.4
144
78
141
44
79
115
139
69
125
100
101
126
107
79
78
120
12
42
71
135
143
169
151
162
64
122
220
170
183
69
90
82
48
11
13
2
8
10
12
12
7
13
2
12
14
2
10
12
8
12
12
4
10
19
11
5
2
3
22
7
7
7
5
4
13
7
2.9
1.9
1.9
5.6
6.5
1.3
12.8
3.0
1.2
9.7
2.1
2.9
2.9
1.6
1.3
6.8
2.8
3.2
23.4
3.2
7.9
23.0
0.9
2.3
2.5
9.3
3.5
6.6
2.9
34.5
ABC Project
ABC stands for ‘Archaean‑Birimian Contact’. Centamin has
two permits, Kona and FarakoNafana, covering circa
751km2 along the under‑explored contact zone between
the Archaean and Birimian cratons. The licence holding
includes 80km strike on the Archaean margins, in addition
to several shear zones and faults interpreted to be
potentially significant targets.
Kona permit
Greenfield exploration work commenced in 2017.
Reconnaissance mapping of the permit area and
geochemical sampling identified Lolosso, an outcropping
12km gold mineralised structure.
The Lolosso structure cuts the Kona permit on a
north‑south orientation. It corresponds to a split from the
major Sassandra fault which bounds the Archaean Craton.
Even if technically located in the Archaean domain, a
narrow corridor of Birimian volcano sediments is pinched in
between granites, and forms the host of the mineralisation
along Lolosso.
More detailed fieldwork was carried out, including a GAIP
survey over the entire 25km mineralised corridor. During
2017 there were 5,884 metres of RC drilled along 14 drill
sections. Most of the drill holes returned low‑grade gold
mineralisation, showing a mineralised corridor varying from
100 metres to over 200 metres width. Higher‑grade zones,
often of over 15 metres width, have been intersected and
will be followed up by further drilling in 2018. One of the
most significant drill sections, intercepts including
KNRC006, KNRC008 and KNRC009, the vertical depth has
been tested to 130 metres and remains open. Preliminary
metallurgical test work, including bottle roll and fire assay
on the tail, has shown no apparent metallurgical issues.
The ABC Project has potential to host a significant gold
deposit. The Lolosso mineralised system discovered thus
far is extensive and requires additional exploration work
throughout 2018 to better understand the geological
potential. At the FarakoNafana permit, mapping and soil
geochemical work has commenced.
There are currently four additional permits under
application, covering circa 1,538km2.
Several other prospects have returned significant
mineralised intercepts during the year; they will be the base
of further exploration work in 2018.
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT
72
73
OPERATIONAL REVIEW
continued
Exploration continued
Lolosso significant mineralised
RC drill intersections
Hole ID
KNRC0001
KNRC0002
KNRC0002
KNRC0003
KNRC0004
KNRC0006
KNRC0008
KNRC0008
KNRC0009
KNRC0009
KNRC0009
KNRC0010
KNRC0011
KNRC0011
KNRC0012
KNRC0012
KNRC0013
KNRC0014
KNRC0015
KNRC0024
KNRC0025
KNRC0026
KNRC0027
KNRC0028
KNRC0029
KNRC0035
KNRC0043
DPRC0750
From (m)
Interval (m)
Au (g/t)
0
11
54
31
51
1
16
68
54
78
119
0
26
69
61
131
6
70
46
54
101
168
0
58
87
14
83
69
18
17
20
22
33
24
39
14
19
21
18
35
10
26
16
27
31
25
35
10
9
12
11
20
27
16
11
7
1.1
1.2
1.3
1
1.2
1.6
2.3
1.7
1.1
1.5
1.9
1.8
2.2
1.5
1.4
1.5
1.5
1.4
1.2
1.6
4
1.4
2.4
1.2
1.1
1.1
2.2
6.5
Summary details in relation to the HSES aspects of
exploring in Côte d’Ivoire are set out in the CSR report.
The costs capitalised on exploration licences that have
subsequently expired or relinquished have been written off
during the year. Refer to note 14 in the financial statements.
Burkina Faso
Centamin holds a 1,258km² licence package. The 2017
exploration strategy was to target potential reserve growth
within a 25km radius of the processing plant at Konkera
North. Two extensive GAIP surveys were completed
covering Konkera and Gangal‑Tonior SE. Systematic auger
drilling identified a number of gold anomalies/intersected
significant gold‑bearing structures within the target blocks.
Soil geochemistry, auger drilling and air core drilling is
underway throughout 2018, with the aim to deliver a
resource update.
Work completed included 12,926 metres of AC, 1,583.1km
GAIP lines measured, 39,995 metres of auger and 225 metres
of trenching during the year.
The costs capitalised on exploration licences that have
subsequently expired or relinquished have been written off
during the year. Refer to note 14 in the financial statements.
The table below summarises the 2017 exploration activities of Batie West.
2017 exploration activities, Batie West Project, Burkina Faso
Burkina Faso 2017 (metres)
Jan
Feb Mar
Apr May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Total
Samples
Orientation geochimie sol
— — — — — — — — — — — — —
Regional soils
(termite, stream samples)
Infill soils
Auger
Rocks
Trenching
420
2
13
6 —
25
18
3 — — — — 487
— — — — — — — — — —
51
577 628
2,753
866 —
533
891
751
866
664
841
879
411 — 9,455
78
143
34
23
12
33 —
10
10 — —
2 345
151 — — — — — — — — — — — 151
Aircore drilling
198 — — — — — — — — 1,137 4,452 1,049 6,836
2017 exploration activities
Total
Meterage
Auger
Aircore drilling
RC drilling
3,600 1,011
47 562 903 809 884 677 851 2,016 4,914 1,628 17,902
6,439 2,235 — 3,023 4,548 4,127 4,422 3,796 4,058 5,324 2,023 — 39,995
764 — — — — — — — — 2,253 7,859 2,050 12,926
— — — — — — — — — — — — —
Diamond drilling
— — — — — — — — — — — — —
Trenching
Total
IP/DD
225 — — — — — — — — — — — 225
7,428 2,235
0 3,023 4,548 4,127 4,422 3,796 4,058 7,577 9,882 2,050 53,146
Line km surveyed IP
187
374 — —
125
234
285 —
138
146
94 — 1,583
Line km surveyed DDIP
— — — — — — — — — — — — —
Line clearing
— — —
Drill collars cementing
517 — —
85
79
374
138
264
84
228
353
159
21 1,706
123
151
9
107 — — — — 986
Exploration in Burkina Faso
Exploration at Napelapera
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT
74
75
FINANCIAL REVIEW
Ross Jerrard
Chief financial officer
Centamin has a strong and flexible financial
position with no debt, no hedging
and ability for significant cash generation.
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.
Now in its eighth 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 2017:
• strong cash flow generation with
US$142 million of free cash flow(1)
generated in 2017, down 41% on
the prior year (2016: US$242 million)
almost entirely due to the impact of
increased profit share payments;
• 2017 revenues of US$676 million
were down 2% on the prior year
(2016: US$687 million) with a 0.4%
increase in realised gold prices
offset by a decrease in gold sales;
• cash costs of production(1) increased
to US$554 per ounce produced on
the prior year (2016: US$513), driven
predominantly by an increase in
mined and processed tonnes and an
increase in fuel and reagent costs;
• AISC(1) of US$790 per ounce sold
matched our forecast, but was an
increase on the prior year
(2016: US$694), mainly due to
increased production costs and
higher sustaining capital costs
resulting from planned fleet
rebuilds;
• EBITDA(1) decreased by 13% to
US$326 million, as a result of
increased production and
operating costs and the slight
decrease in revenues;
• profit before tax decreased by 16%
to US$224.1 million, due to the
factors outlined above;
• earnings per share after profit share
of 9.51 US cents were down 49% on
the prior year due to lower revenue,
higher costs and, most significantly,
the impact of the first full year of
profit share (2016: 18.71 US cents);
• operational cash flow of US$359
million was 2% lower than 2016, due
to the lower gold production base
with higher gold prices offset by a
higher cost base; and
• the Egyptian state has benefited
directly from profit share
payments to EMRA of
US$111.6 million during the year
ended 31 December 2017, in
addition to US$20.4 million in
royalty payments for the same
period.
(1) Please refer to the non‑GAAP measures.
With the strong performance of our
flagship asset and solid cash flows
carrying through into the second half,
a final dividend for 2017 of 10.0 US
cents per share has been proposed for
approval at the AGM on 26 March 2018.
Together with the interim dividend of
2.5 US cents paid during the year, this
represents a paid and proposed full
year dividend of 12.5 US cents per
share (2016: 15.5 US cents per share).
Payment of the proposed final
dividend would result in a full
year payout of approximately
US$144 million, which is equivalent to
100% of our free cash flow for 2017, in
line with the Company’s policy of
returning to shareholders capital not
required for future investment.
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 during the
year. Cash and cash equivalents
stood at US$360 million as at
31 December 2017.
Revenue
Revenue from gold and silver sales
has decreased by 2% to US$675.5
million (2016: US$687.4 million), with
a 0.4% increase in the average
realised gold price to US$1,261 per
ounce (2016: US$1,256 per ounce)
and a 1% decrease in gold sold to
539,726 ounces (2016: 546,630
ounces). The movement is also net
of a US$6.2 million reallocation from
revenue against capitalised
exploration costs related to Cleopatra.
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$41.9 million
categorised as fuel prepayments
(refer to note 12 to the financial
statements for further information) and
has increased by 6% to US$414 million,
mainly as a result of a:
• 7% increase in total mine
production costs from
US$288.3 million to US$307.6
million, due to a 14% increase in
mined tonnes combined with a 4%
increase in processed tonnes and
an increase in unit costs mainly due
to increased fuel and reagent
costs; and
• 2% decrease in depreciation and
amortisation charges from US$106.9
million to US$104.3 million as a
reclassification of exploration and
evaluation expenditure to mine
development and a change in
estimate of the reserve base which
decreased the associated
amortisation charges.
Other operating costs
Other operating costs comprise
expenditure incurred for
communications, consultants,
directors’ fees, stock exchange listing
fees, share registry fees, employee
entitlements, general office
administration expenses, the
unwinding of the restoration and
rehabilitation provision, foreign
exchange movements and the 3%
production royalty payable to the
Egyptian government. Other
operating costs increased by
US$4.8 million, or 15% on the prior
year, to US$36.9 million, mainly as a
result of a:
• US$3.6 million decrease in net
foreign exchange gains (+ve);
• US$0.2 million decrease in royalty
paid to the government of the ARE
in line with the decrease in gold
sales revenue (‑ve);
• US$1.3 million increase in corporate
and other costs (+ve); and
• US$0.1 million increase in stock
obsolescence provision (+ve).
Finance income
Finance income 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.
Profit before tax
As a result of the factors outlined
above, the group recorded a profit
before tax for the year ended
31 December 2017 of US$224.1 million
(2016: US$266.8 million).
Tax
The group operates in several
countries and, accordingly, it is subject
to the various tax regimes in the
countries in which it operates. The tax
charge of US$2.1 million for the year
was associated with an internal group
restructuring.
EMRA profit share
During the year ended 31 December
2017, US$111.6 million was paid as
profit share payments to the Egyptian
Mineral Resources Authority (“EMRA”).
Profit share payments made to EMRA,
pursuant to the provisions of the
Concession Agreement, are
recognised as a variable charge in the
income statement (below profit after
tax) of Centamin, resulting in a
reduction in earnings per share.
The profit share payments during the
year will be reconciled against SGM’s
audited June 2017 and 2018 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. SGM’s June 2017
financial statements are currently
being audited.
Earnings per share
Earnings per share (after profit share)
of 9.51 US cents in 2017 decreased
when compared with the prior year
(2016: 18.71 US cents). The decrease
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.
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT
76
77
FINANCIAL REVIEW
continued
Financial position
Centamin has a strong and flexible financial position with no debt, no hedging and cash, bullion on hand, gold sales
receivables and available‑for‑sale financial assets of US$417.9 million at 31 December 2017, down from US$428.0 million
at 31 December 2016 following dividend payments of US$184.4 million during the period.
Cash and cash equivalents (note 27)
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
The majority of funds have been
invested in international rolling short
term interest money market deposits.
Non‑current assets have decreased by
US$3.2 million, or 0.3%, to US$1,020
million, as a result of a:
Current assets have decreased by
US$51.7 million, or 9%, to
US$509.3 million, as a result of a:
• US$23.4 million decrease (‑ve) in
inventory driven by a US$18.2
million decrease (‑ve) in collective
stores inventory value to US$78.6
million (due to significant cost
reduction and minimisation
initiatives), a US$2.5 million
decrease (‑ve) in overall mining
stockpiles and gold in circuit levels
to US$31.7 million and a US$2.6
million increase (+ve) in the
provision for obsolete stores
inventory to US$5.1 million;
• US$9.6 million increase in trade and
other receivables (including gold
sale receivables) (+ve);
• US$2.3 million increase in
prepayments (+ve); and
• US$40.2 million decrease in net
cash (net of foreign exchange
movements) (‑ve) driven by a
US$155.4 million final dividend
payment to registered shareholders
for 2016, a US$29.0 million interim
dividend payment to registered
shareholders for 2017 and a
US$111.6 million payment to EMRA
as profit share during the year.
• US$86.7 million increase in the cost
of property, plant and equipment
(+ve);
• US$104.6 million charge for
depreciation and amortisation (‑ve);
• US$14.9 million increase in
exploration and evaluation assets
(net of a US$3.6 million impairment),
as a result of the drilling
programmes in Sukari Hill, Burkina
Faso and Côte d’Ivoire (‑ve); and
• US$0.3 million decrease in
prepayments and other receivables
(‑ve).
Current liabilities have increased by
US$14.4 million, or 28%, to US$66.4
million, as a result of a:
• US$8.8 million increase in trade
payables offset by a US$0.2 million
decrease in accruals (+ve);
• US$0.5 million increase in tax
liabilities accrued during the year
(+ve); and
• US$5.3 million increase in current
provisions primarily driven by
withholding tax, customs and
rebate provisions held at year end
(+ve).
Non‑current liabilities have increased
by US$3.3 million to US$10.9 million
as a result of an increase in the
rehabilitation provision.
Year ended
31 December
2017
US$’000
Year ended
31 December
2016
US$’000
359,680
399,873
27,123
31,007
125
4,998
23,009
130
Cash flow
Net cash flows generated by operating
activities comprise receipts from gold
and silver sales and interest income,
offset by operating and corporate
administration costs. Cash flows from
operating activities decreased by
US$7.5 million to US$358.8 million,
primarily attributable to a slight
decrease in revenue, due to a higher
average realised price offset by a 1%
decrease in gold sold ounces as well as
an increase in costs as explained above.
Net cash flows used in investing
activities comprise exploration
expenditure and capital development
expenditures including the acquisition
of financial and mineral assets. Cash
outflows have decreased by
US$1.0 million to US$104.7 million.
The primary use of the funds in the
year was for purchases of property,
plant and equipment, investment in
underground development at the
Sukari site in Egypt and exploration
expenditures incurred in West Africa.
Net cash flows used in financing
activities increased by US$231.4 million
to US$296 million, which comprises a
US$111.6 million payment to EMRA as
profit share and dividends paid of
US$184.4 million during the year.
Effects of exchange rate changes have
decreased by US$2.6 million as a result
of movements of the currencies used
across the operations in the year.
417,935
428,010
Capital expenditure
The following table provides a breakdown of the total capital expenditure of the group:
The value of share capital has
increased by US$1.3 million to
US$668.7 million, which can be
attributed to the value of awards
granted under the employee share
plans for the period. There has been
no change in the number issued
shares over the same period.
Share option reserves reported have
increased by US$1.3 million to
US$4.3 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 payment expenses for
the year.
Accumulated profits decreased by
US$75.1 million to US$778.9 million as
a result of a:
• US$222.0 million profit for the year
after tax (+ve); offset by
• US$112.6 million profit share charge
to EMRA in the year (‑ve); and
• US$184.4 million in dividend
payments to external shareholders,
comprising a US$155.4 million final
dividend payment for 2016 and a
US$29.0 million interim dividend
payment for 2017 (‑ve).
Underground exploration
Underground mine development
Other sustaining capital expenditure
Total sustaining capital expenditure
Non‑sustaining exploration capitalised(1)
31 December
2017
US$ million
31 December
2016
US$ million
6.0
32.7
43.9
82.6
24.9
7.5
32.4
23.7
63.6
42.0
(1) Includes expenditure in West Africa (US$6.4 million Burkina Faso and US$13.9 million Côte d’Ivoire) and US$4.6 million of the Sukari expenditure
relating to Cleopatra in non‑sustaining capital expenditure.
Cumulative exploration expenditure capitalised for Cleopatra at Sukari is US$7.6 million project to date offset by
pre‑production net revenues of US$4.8 million (refer to notes 5 and 6 to the financial statements for further details)
resulting in US$2.8 million remaining on the statement of financial position at 31 December 2017.
Exploration expenditure
The following table provides a breakdown of the total exploration expenditure of the group:
31 December
2017
US$ million
31 December
2016
US$ million
6.4
13.9
6.0
4.6
30.9
26.3
12.7
7.5
3.0
49.5
Exchange rates
Foreign exchange gains have decreased
from US$5 million to US$1.5 million,
resulting in a US$3.5 million decrease
on the prior year.
Ross Jerrard
Chief financial officer
31 January 2018
Burkina Faso
Côte d’Ivoire
Sukari Tenement
Cleopatra
Total exploration expenditure
Exploration and evaluation assets
– impairment considerations
As discussed in note 14 to the financial
statements, in consideration of the
requirements of IFRS 6, management
is not aware of any information that
would otherwise suggest that an
impairment trigger has occurred which
would require a full impairment test to
be carried out at 31 December 2017.
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT
78
79
FINANCIAL REVIEW
continued
Non‑GAAP financial measures
Four 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 cost of production and income of
financing activities and taxes, and therefore is not necessarily indicative of operating profit or cash flow from operations as
determined under IFRS. Other companies may calculate EBITDA differently. The following table provides a reconciliation
of EBITDA to profit for the 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
Year ended
31 December
2017(1)
US$’000
2016(1)
US$’000
224,094
266,829
(2,729)
104,562
325,927
(917)
106,973
372,885
Reconciliation of cash cost of production per ounce produced:
Mine production costs (note 6)
Add: pre‑production costs of gold sales related to Cleopatra
Less: refinery and transport
Movement of inventory(2)
Cash cost of production – gold produced
Gold produced – total
Cash cost of production per ounce produced
Year ended
31 December
2017(1)
Year ended
31 December
2016(1)
307,563
288,317
1,329
(1,554)
(5,632)
301,706
544,658
554
—
(1,564)
(3,876)
282,877
551,036
513
US$’000
US$’000
US$’000
US$’000
US$’000
oz
US$/oz
A reconciliation has been included below to show the cash cost of production metric should gold sold ounces be used as
a denominator.
Reconciliation of cash cost of production per ounce sold:
Mine production costs (note 6)
Add: pre‑production costs of gold sales related to Cleopatra
Movement in inventory(2)
Cash cost of production – gold sold
Gold sold – total
Cash cost of production per ounce sold
Year ended
31 December
2017(1)
Year ended
31 December
2016(1)
307,563
288,317
1,329
2,490
311,382
539,726
577
—
(5,910)
282,407
546,630
517
US$’000
US$’000
US$’000
US$’000
oz
US$/oz
(1) Cash cost of production includes a charge to reflect the removal of fuel subsidies (refer to note 12 to the financial statements for further details).
(2) The movement in inventory on ounces produced is only the movement on mining stockpiles and ore in circuit while the movement on ounces sold is
the net movement on mining stockpiles, ore in circuit and gold in safe inventory.
(1) Profit before tax, depreciation and amortisation and EBITDA includes a charge to reflect the removal of fuel subsidies (refer to note 12 to the financial
statements for further details).
Reconciliation of AISC per ounce sold:
2) Cash cost of production per ounce produced and sold and all-in sustaining costs per ounce sold calculation
Cash cost of production and AISC are non‑GAAP financial measures. Cash cost of production per ounce is a measure of
the average cost of producing an ounce of gold, calculated by dividing the operating costs in a period by the total gold
production over the same period. Operating costs represent total operating costs less administrative expenses, royalties,
depreciation and amortisation. Management uses this measure internally to better assess performance trends for the
Company as a whole. The Company believes that, in addition to conventional measures prepared in accordance with
GAAP, certain investors use such non‑GAAP information to evaluate the Company’s performance and ability to generate
cash flow. The Company believes that these measures provide an alternative reflection of the group’s performance for the
current period and are an alternative indication of its expected performance in future periods. Cash cost of production is
intended to provide additional information, does not have any standardised meaning prescribed by GAAP and should not
be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
This measure is not necessarily indicative of operating profit or cash flow from operations as determined under GAAP.
Other companies may calculate these measures differently.
During June 2013 the World Gold Council, an industry body, published a Guidance Note on ‘all‑in sustaining costs’
metric, which gold mining companies can use to supplement their overall non‑GAAP disclosure. AISC is an extension of
the existing ‘cash cost’ metric and incorporates all costs related to sustaining production and in particular recognising the
sustaining capital expenditure associated with developing and maintaining gold mines. In addition, this metric includes
the cost associated with developing and maintaining gold mines and the cost associated with corporate office structures
that support these operations, the community and rehabilitation costs attendant with responsible mining and any
exploration and evaluation costs associated with sustaining current operations. AISC US$/oz is arrived at by dividing the
dollar value of the sum of these cost metrics by the ounces of gold sold (as compared to using ounces produced which is
used in the cash cost of production calculation).
Mine production costs (note 6)
Add: pre‑production costs of gold sales related to Cleopatra
Movement in inventory
Royalties
Corporate administration costs
Rehabilitation costs
Sustaining underground development and exploration
Other sustaining capital expenditure
By‑product credit
All‑in sustaining costs(2)
Gold sold – total
AISC per ounce sold
Year ended
31 December
2017(1)
Year ended
31 December
2016(1)
307,563
288,317
1,329
2,490
20,404
12,679
629
38,649
43,890
(1,167)
426,466
539,726
790
—
(5,910)
20,575
13,521
581
39,864
23,762
(1,080)
379,630
546,630
694
US$’000
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 cost of production, cash cost of production per ounce, AISC and AISC per ounce sold includes prepayments recorded
since Q4 2012 to reflect the removal of fuel subsidies (refer to note 12 to the financial statements for further details).
(2) Includes refinery and transport.
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT
80
81
FINANCIAL REVIEW
continued
Non‑GAAP financial measures continued
3) Cash and cash equivalents, bullion on hand, gold sales receivables and available-for-sale financial assets
Cash and cash equivalents, bullion on hand, gold sales receivables and available‑for‑sale financial assets is a non‑GAAP
financial measure. Cash and cash equivalents, bullion on hand, gold sales receivables and available‑for‑sale financial
assets is a measure of the available cash and liquid assets at a point in time. Management uses this measure internally to
better assess performance trends for the Company as a whole. The Company believes that, in addition to conventional
measures prepared in accordance with GAAP, certain investors use such non‑GAAP information to evaluate the
Company’s performance and ability to generate cash flow. The Company believes that these measures provide an
alternative reflection of the group’s performance for the current period and are an alternative indication of its expected
performance in future periods. Cash and cash equivalents, bullion on hand, gold sales receivables and available‑for‑sale
financial assets is intended to provide additional information, does not have any standardised meaning prescribed by
GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance
with GAAP. This measure is not necessarily indicative of cash and cash equivalents as determined under GAAP. This is a
non‑GAAP financial measure and 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 27)
Bullion on hand (valued at the year‑end spot price)
Gold sales receivables (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
2017
US$’000
Year ended
31 December
2016
US$’000
359,680
399,873
27,123
31,007
125
4,998
23,009
130
417,935
428,010
Net cash generated from operating activities
Less:
Net cash used in investing activities
EMRA profit share payments
Free cash flow
4) Free cash flow
Free cash flow is a non‑GAAP financial measure. Free cash flow is a measure of the available cash after EMRA profit share
payments that the group has at its disposal to use for capital reinvestment and to distribute to shareholders as dividends in
accordance with the Company’s dividend policy. Management uses this measure internally to better assess performance
trends for the Company as a whole. The Company believes that, in addition to conventional measures prepared in
accordance with GAAP, certain investors use such non‑GAAP information to evaluate the Company’s performance and
ability to generate cash flow. The Company believes that these measures provide an alternative reflection of the group’s
performance for the current period and are an alternative indication of its expected performance in future periods. Free
cash flow is intended to provide additional information, does not have any standardised meaning prescribed by GAAP and
should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
This measure is not necessarily indicative of operating profit or cash flow from operations as determined under GAAP.
This is a non‑GAAP financial measure and other companies may calculate these measures differently.
Year ended
31 December
2017
US$’000
Year ended
31 December
2016
US$’000
358,811
366,295
(104,743)
(105,774)
(111,629)
142,439
(18,503)
242,018
Centamin plc Annual report 2017STRATEGIC REPORTCentamin plc Annual report 2017STRATEGIC REPORT
82
Centamin plc Annual report 2017
DIRECTORS’ REPORT
INTRODUCTION
Process plant
at Sukari
Josef El‑Raghy
Chairman
Our board is committed to achieving
the highest standards of corporate governance.
Board rotation
Following these appointments, we will
continue to look for opportunities to
refresh the board to ensure we have
the right range of backgrounds and
experience to see Centamin through
to the next stage of growth.
Committee composition
The composition of all mandated
committees are fully compliant within
the meaning of the Code. Following
the AGM, the composition of the
remuneration committee was altered,
with Trevor Schultz stepping down
from the committee immediately and
subsequently replaced by Mark
Bankes (please see a note below on
the board’s decision to re‑appoint
Trevor Schultz to the board after the
2017 AGM). Alison Baker, the newly
appointed independent non‑executive
director will join the nomination
committee and the HSES committee
on appointment in February 2018.
Dear shareholders
Centamin delivered another excellent
year for shareholders, delivering on
production and keeping control over
costs and thereby generating significant
free cash flow, which allowed the
board to declare dividend payments
of over US$144 million for 2017.
As set out in our guidance for 2018,
we look forward to a record year of
production in 2018 with the promise of
more growth to come. Sukari’s long
term sustainability was reconfirmed by
the reserve and resource update which
demonstrated our ability to replace
high‑grade underground reserves and
the 20‑year life of the open pit. Longer
term, exploration projects in West
Africa continue to be promising, with
further progress at our project in
Burkina Faso and the discovery of new
resources in Côte d’Ivoire.
Regarding the Company’s corporate
governance and in light of the
exceptional year we achieved in 2016,
the result of the AGM this year was
disappointing, with shareholders
electing to vote against the
re‑appointment of our non‑executive
director, Trevor Schultz, for reasons of
code compliance which were fully
explained in the 2016 annual report.
However, we recognise the concerns
of our shareholders and proxy advisory
groups and the board is committed to
achieving the highest standards of
corporate governance. In particular,
board composition and committee
membership has been a key agenda
item at both board and nomination
committee meetings. As a result of
these meetings and discussions with
shareholders, I am pleased to confirm
the following:
Independent chairman
As announced in January of this year,
I will be retiring at the end of 2018 and
will ensure that due process is carried
out by our nomination committee to
identify a successor to fill the role of
independent chairman to the board.
This process will aim to identify a new
chairman by June 2018.
Board composition
and succession planning
We welcome Alison Baker and
Ross Jerrard, who will join the board
on 5 February 2018. These new
members bring a wealth of experience
within their fields and, in the case of
Ross, also from within the Company.
Andrew Pardey will shortly complete
his third year as CEO and will be
supported in 2018 by the newly
appointed member of the senior
management team, Mark Morcombe
as chief operating officer.
83
Centamin plc Annual report 2017
DIRECTORS’ 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).
2017 has been another excellent year,
with further improvements in
operational efficiency and a strong
financial performance. We enter 2018
with a knowledgeable board, a strong
management team and a clear
strategy to deliver sustained returns to
shareholders. The appointment of new
board members in 2018 and the
prospect of a new chairman later in the
year provides shareholders with
assurance of continuity as well as
staged and progressive refreshment
of the board.
Josef El‑Raghy
Chairman
31 January 2018
Decision to re‑appoint
Trevor Schultz to the board
The board considered in detail the
reasons for the votes against the
re‑appointment of Trevor Schultz
(Resolution 4.4) at the 2017 AGM and
believed at the time and since, having
met with proxy advisers and major
shareholders, that the primary reason
for votes against his re‑appointment
related to the decision to appoint
Trevor Schultz to the remuneration
committee in September 2016. This
appointment followed the resignation
of Kevin Tomlinson, an independent
non‑executive director and member of
that committee. An explanation for the
reasons Trevor was appointed to the
committee, notwithstanding that
Trevor was not independent within the
meaning of the Code, was provided in
the 2016 annual report. The board
understands the requirement for the
remuneration committee to have three
independent members and Trevor was
considered to be a valued member of
the remuneration committee due to
his wealth of experience operating in
Egypt and his understanding of the
challenging environment for
executives and senior management.
A detailed explanation was given in
the 2016 annual report, applying the
principle of ‘comply or explain’ for any
non‑compliance with the Code;
however, we now recognise that this
explanation was not considered
sufficient by many of our shareholders.
The nomination committee,
in the absence of Trevor Schultz,
recommended the re‑appointment
of Trevor Schultz to the board. In turn,
the board unanimously resolved to
appoint Trevor to the board as a
non‑executive director, immediately
following the AGM in 2017. Trevor
was re‑appointed to his existing roles
as chairman of the HSES committee
and member of the nomination
committee but did not re‑join the
remuneration committee.
The board took this decision in light
of the vital role that Trevor plays for the
Company, bringing his deep technical
knowledge to assist the board’s
oversight of the Company’s operations
and chairing the HSES committee,
which is responsible for making critical
recommendations to the board on all
matters in connection with issues of
the environment, workplace health and
safety and the sustainable engagement
with communities and stakeholders.
Trevor made an invaluable contribution
to the establishment of Sukari as a
globally significant gold mining
operation. Such a major construction
project, which was completed with
minimal cost and time overruns, is
testament to Trevor’s strong leadership
and experience.
In 2018, Trevor Schultz, as chairman
of the HSES committee, will provide
board level oversight of the proposed
solar project. This ambitious project
will aim to reduce diesel fuel
consumption at Sukari, reduce
emissions and fuel costs over the
longer term.
Our board composition and approach
to leadership are set out in detail on
page 85 to 86. Within the directors’
report and, where applicable, the
strategic report, the directors provide
the required governance and
regulatory assurances.
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 in the strategic report), as well as
the principal risks, risk appetite and
resulting business objectives.
The key areas of Code compliance can
be found in the following areas of the
2017 annual report and accounts:
• C.1.1. Fair, balanced and
understandable (applied across the
strategic, directors’ and financial
report with the confirmation
statement in the directors’
responsibilities statement and
assumptions in the audit and risk
report);
84
85
INTRODUCTION
continued
Governance and Code compliance at a glance
Board overview
LEADERSHIP
EFFECTIVENESS
ACCOUNTABILITY
REMUNERATION
SHAREHOLDERS
Set out below is the board, committee and management structure of Centamin plc.
Separate roles
undertaken by the
chairman and CEO.
At least half the board
are independent
non‑executive directors.
External auditor changed
in 2014 – audit partner
rotation in 2018.
Simple but effective
remuneration structure.
Senior independent
non‑executive director
and deputy chairman –
Edward Haslam.
Regular meetings of the
board and committee
and exemplary
attendance record.
Non‑executive director
meetings held during the
year without executives
present.
Staged refreshment of
the board.
Increased role and scope
of the internal auditor
since the appointment
in 2015.
Shareholder approved
restricted share plan
(approved in 2015).
Ensuring a diverse board
in all respects.
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.
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.
Engagement with key
shareholders and proxy
advisory bodies.
AGMs held with key
directors in attendance.
Compliance statement
The Company is incorporated in
Jersey, Channel Islands. The
Company is, by virtue of the Listing
Rules, subject to the 2016 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 2017, 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 as he was
previously an executive of the
Company. 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
withdrawal of Trevor Schultz from
the remuneration committee after
the 2017 AGM, the committee had
two members (both of whom were
independent non‑executive
directors) until the appointment of
Mark Bankes on 1 August 2017,
when the committee became fully
compliant within the meaning of the
Code. During the period where
only two members were on the
committee, only one written
resolution was passed by the
committee to facilitate grants and
vesting under the Company’s share
plans, which were administrative in
nature and applied the scheme
rules and remuneration policy as
disclosed in full in the 2016 annual
report and accounts.
It is noted that the disclosures
contained in the directors’
remuneration report exceed the
obligations of a non‑UK company.
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 (see
table above), with further details in this
section of the annual report enabling
shareholders to evaluate how the
principles have been applied.
The Company’s diversity policy is set
out in the nomination committee
report, noting that the Company’s
policy considers the composition of
the board and the pipeline of talent
within the organisation, having regard
to gender, ethnicity, age and
educational and professional
backgrounds.
EXECUTIVE DIRECTORS
NON‑EXECUTIVE DIRECTORS
CENTAMIN PLC
BOARD COMMITTEES
Corporate
management
Operational
management
Audit and risk
Remuneration
and
nomination
Health, safety,
environmental
and
sustainability
Compliance
and corporate
governance
OPERATIONAL HEADS OF DEPARTMENT
Continuous
disclosure
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
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.
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 92 and 93
which include the appointments of
two new directors which take effect on
5 February 2018.
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
Board
(C.) 4
5
5
5
5
5
Health, safety,
environmental
and risk and sustainability
Audit
Compliance
and corporate
governance
Remuneration
Nomination
6
(C.) 6
6
3
(C.) 3
3
3
3
(C.) 3
(C.) 2
(C.) 2
2
2
2
2
(C.) Chairing the meeting and/or chairperson of the board or committee. Josef El‑Raghy was absent from one meeting due to medical reasons.
The table excludes meetings held by written resolutions or sub‑committees and reflects membership during 2017. The
board met nine times during the year, with four meetings held by way of written resolution. The business conducted is set
out overleaf.
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT
86
87
INTRODUCTION
continued
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.
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 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 aware and actively involved
in 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;
• 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 chief executive officer:
• develops and implements short,
medium and long term corporate
strategies;
• is responsible for day‑to‑day
management of the business and
the implementation of the board’s
strategic aims; and
• promotes the highest standards of
safety, corporate compliance and
adherence to codes of conduct.
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 94 and 95.
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 executives
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 terms of reference
for each board committee are
available on the Company’s website
www.centamin.com.
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 CSR report
– strategic report pages 40 to 62.
– see the HSES committee report on page 40.
Audit and risk committee
– directors’ report page 130.
Remuneration committee
– directors’ report pages 102 and 103.
Nomination committee
– directors’ report page 98.
Risk and control environment
– see audit and risk committee report on page 130.
Directors’ remuneration report
– see pages 102 to 129.
Succession planning
– see the nomination committee report on page 99.
Compliance and corporate governance
– directors’ report pages 96 and 97.
Compliance statement with the corporate governance code
– see page 84.
Board independence
When determining whether a director is independent, the board has established a directors’ Test of Independence Policy,
which is based on the Code and the definitions of independence in the Canadian Securities Administrators’ National
Instrument 52‑110 – Audit Committees. The Company remains compliant with the provisions of the Code, whereby at
least half the board comprises non‑executive directors who are determined by the board to be independent.
Key activities of the board in 2017
STRATEGIC
SUKARI
ACTIVITIES
ACTION
Sustainability – production
guidance and cost estimates
Setting budgets, production and cost guidance for
the year.
Approval and announcement of guidance in
January 2017.
Sustainability
– operational efficiency
Review proposals for contract tendering and systems
improvements.
Prioritising stakeholder returns
– dividend policy
Review of budgets and forecasts and capital
expenditure proposals.
Tendering of significant contracts.
Cost control measures, system improvements in
inventory handling.
Declaration of half‑yearly and final dividends.
Optimal growth – exploration
Review of cost recovery model and profit share
arrangements.
Review data and results from updated reserve and
resource statement.
Review proposals for underground development and
capital expenditure.
Approval of capital expenditure budgets.
Social responsibility – health
and safety
Sukari operational review, health and safety statistics
and monthly reporting.
Review of existing projects and maintenance
programmes.
Develop policies towards GRI compliance.
Risk review and response to incident reporting.
Project implementation in Egypt, Marsa Alam
including the purchase of a CT scanner.
Review existing human rights policies and develop
projects to reduce emissions.
WEST AFRICA EXPLORATION ACTIVITIES
ACTION
Growth strategy
– exploration
Approval of capital expenditure and exploration
drilling programmes.
Drilling programmes and acquisition of land
packages 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.
Social responsibility
– health and safety
Review of updated resource statement.
Integrated reporting of HSES statistics.
Additional detail provided in monthly reporting to
the board.
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT 88
89
INTRODUCTION
continued
Key activities of the board in 2017 continued
CORPORATE, LITIGATION
AND RISK
ACTIVITIES
Optimal growth
Corporate
Risk and internal controls
Strategic review of business development
opportunities including potential M&A and
JV acquisitions.
Review Code and policy requirements, diversity
policy, governance trends and reforms.
Compliance with local laws and regulations.
Litigation updates on the Company’s ongoing
court hearings (details of which can be found in
notes 4 and 22).
Review of the Company’s principal risks, risk appetite
and linkages to long term viability.
Review of the internal control environment and
internal and external reporting.
ACTION
Strategy day and ad‑hoc meetings to review
opportunities.
Board and committee appointments.
Approve scope of external legal advisers, and
in‑house personnel.
Confirm litigation strategy and approve court
submissions.
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.
Approve the scope and plan of the internal and
external auditors and monitor progress.
PERSONNEL
ACTIVITIES
ACTION
Appointments – nomination
committee recommendations
Personnel requirements at board and senior
management levels.
Approval of appointment of Alison Baker and
committee appointments.
Approval of appointment of Ross Jerrard (CFO) to
the board.
Succession – nomination
committee recommendations
Review of succession planning, diversity and board
performance and evaluation.
Appointment of the new COO, providing
additional depth to the management team.
Agreement on timing/priorities for succession
planning for key roles and improving board
effectiveness.
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.
It is noted that throughout the year the board of directors had access to independent professional advice, at the
Company’s expense, and the services and advice of the company secretary.
CASE STUDY:
GOVERNANCE IN ACTION ‘STRATEGY DAY’
The board met during the year with a specific focus on reviewing the Company’s strategy, its strategic aims over the medium to long
term and evaluating potential growth opportunities.
The agenda for the day covered a number of key areas, which included:
investor perspective on the Company and growth opportunities;
• key deliverables to shareholders;
•
• peer review and comparisons;
• M&A criteria including financial parameters, stage of development, scale and location; and
• risk factors including country and political risk, business and mining environment and fiscal regimes.
The strategy day was interactive, involving presentations and Q&A from senior members of the management team, including the
group’s exploration manager and chief development officer. The board agreed the meeting provided value to both reinforce the
existing strategic aims of the group and develop them further in order to identify opportunities. Annual strategy days will be held
going forward with full board attendance and involvement of the senior management team. The board, through the CEO,
communicated the business strategy and objectives to the business through the heads of department and senior personnel.
Areas of focus for the board in 2018
Strategic planning – the board
regularly reviews and approves
strategic plans and initiatives put
forward by management and the
executives, including growth proposals
and efficiency initiatives. Details of the
strategic objectives to ensure stability
and continuity of the business,
maintaining shareholder returns,
growth prospects and opportunities
and ensuring we maintain our social
licence to operate can be found in the
strategic report. Areas of focus will
relate to the exploration programmes
in Burkina Faso and Côte d’Ivoire and
the next stages towards pre‑feasibility
studies.
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. A continued priority in
2018 will be to communicate the
Company’s strategic goals and
develop a safety‑conscious culture
throughout 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 in 2018 to identify the next
scoping phase. Now in their third year
to help bring about efficiencies and
improve controls within the business,
BDO LLP have helped develop our
procurement and contract
management, key financial processes,
inventory management and IT security.
Reporting and audit – the board,
through the audit and risk committee,
has reviewed and implemented
upgrades to the accounting systems.
System upgrades and newly
developed software will be considered
as part of a programme to further
streamline processes and support
the growth of the business.
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.
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT 90
91
INTRODUCTION
continued
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 2018
for the year ended 31 December 2017.
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 next
scheduled review of the board’s
effectiveness by an external facilitator
is due to take place in 2019. The
recommendations following the 2016
review have been implemented, which
covered proposals for formalising the
succession planning process (with
consideration to diversity), formalising
the induction process and definition of
roles, particularly between the CEO
and chairman.
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
evaluation process, the board agreed
that all independent non‑executive
directors continued to demonstrate
their independence and objectivity
in all respects and provided
continued value on the committees
in which they served.
The nomination committee and the
board discussed during the year the
need for any new appointments to
the board, either through the process
of succession planning or external
appointments. These discussions
culminated in the appointment of
Alison Baker as an independent
non‑executive director and promotion
to board level for Ross Jerrard (CFO).
The recommendation for the
appointment of a new independent
non‑executive director was
implemented by the chairman of the
nomination committee, Edward Haslam.
With these new appointments, staged
rotation and refreshment of the board
has begun. A thorough review has been
carried out of the skills and expertise of
our existing board members to ensure
we have the right range of backgrounds
and experience to see Centamin
through to the next stage of growth.
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 controls.
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 pages 30 to 37.
The board is pleased to confirm that
the Company remains in compliance
with best practice guidelines, with the
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,
taking into account the work of both
the internal and external auditors.
The key headings for this review can
be summarised as follows:
It was noted that the review and
subsequent recommendations to
improve the internal control
environment were not seen as
significant failings or weaknesses, but
were reflective of the detailed review
that was undertaken.
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 pages 49 and 54.
• corporate governance framework;
• management reporting framework;
• material contracts and contract
management;
• procedures for forecasting and
budgeting;
• external reporting obligations and
procedures;
• information technology
environment; and
• corporate and operational principal
risk assessment.
At the recommendation of the
committees, the board evaluated the
existing control environment and
approved recommendations for
further systems development, the
scope of the internal auditor, allocation
of roles and responsibilities across the
management team and the scope and
engagement of external legal,
compliance and commercial advisers.
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. The group
engaged environmental consultants
Digby Wells to develop the group’s
reporting standards to international
Global Reporting Initiative (“GRI”)
standards. In addition, the group will
be reviewing existing human rights
policies to ensure these are aligned
with best practice.
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.
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT 92
93
BOARD OF DIRECTORS
Josef El‑Raghy
Chairman (and CEO until January 2015)
Josef has been responsible for overseeing the
transition of the Company from small explorer,
through construction and into production.
Andrew Pardey
Chief executive officer (since February 2015)
Andrew 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.
Ross Jerrard
Chief financial officer (since 18 April 2016)
Board appointment effective 5 February 2018
Ross was appointed chief financial officer of
Centamin in April 2016. Since then, Ross has
assembled and led an excellent finance team
between Jersey, Sukari and West Africa. Ross has
been responsible for leading efficiency objectives
such as the successful implementation of improved
cost control and monitoring measures,
improvements to reporting systems and the delivery
of accelerated reporting timetables of accounts.
Director since 26 August 2002
Board meetings attended 4/5
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. Josef is also Chairman of AIC
Resources Limited effective 1 December 2017.
CEO since 1 February 2015
Board meetings attended 5/5
Experience
Andrew was a major driving force in bringing Sukari
into production 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 with
Guinor Gold Corporation, AngloGold Ashanti and
Kalgoorlie Consolidated Gold Mines.
Experience
Before joining Centamin, Ross was lead audit partner
with Deloitte Touche Tohmatsu Perth, Australia. Prior
to moving to Australia 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.
Edward Haslam
Deputy chairman and senior independent
non‑executive director
Director since 23 March 2011
Board meetings attended 5/5
In addition to his role as senior independent director,
Edward has carried out additional corporate
governance functions over the past few years for
Centamin, while the roles of CEO and chairman
were combined.
Committee membership
Remuneration committee (chair)
Nomination committee (chair)
Audit and risk committee
Compliance and corporate governance committee
HSES committee
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).
Board resignations
As announced on 11 January 2018, Josef El‑Raghy informed the board that he intends to retire as executive chairman by the end of 2018,
and has served notice under the terms of his contract of employment. The nomination committee will guide the completion of an orderly
non‑executive chairman succession process, which will commence immediately, with the intention of announcing a successor by the end of
June 2018. An independent recruitment consultant will evaluate all candidates and report directly to the nomination committee.
Trevor Schultz
Non‑executive director (since 1 May 2014)
Trevor 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 to April 2014.
Committee membership
HSES committee (chair)
Remuneration committee (for part of the year)
Nomination committee
Alison Baker
Independent non‑executive director
Board appointment effective 5 February 2018
Alison spent much of her time at PwC working with
the natural resources team, advising FTSE 350 and
AIM companies on transactions, M&A and
corporate reporting. An advocate of building trust
through integrated reporting and having worked
with a wide range of clients, including those in the
emerging markets, Alison has developed a strong
cultural sensitivity and awareness of wider
stakeholder requirements including governments
and local communities.
Mark Bankes
Independent non‑executive director
Mark 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.
Committee membership
Compliance and corporate governance committee
(chair)
HSES committee
Audit and risk committee
Remuneration committee
(appointed on 1 August 2017)
Mark Arnesen
Independent non‑executive director
Mark 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.
Committee membership
Audit and risk committee (chair)
Compliance and corporate governance committee
Remuneration committee
Nomination committee
Director since 20 May 2008
Board meetings attended 5/5
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 University of the Witwatersrand and has
completed the Advanced Management Program at
Harvard University.
Experience
Alison is a former audit partner at
PricewaterhouseCoopers LLP (“PwC”) and
Ernst & Young LLP, with nearly 25 years’
experience, providing audit, capital markets and
advisory services. Alison is also a non‑executive
director at KAZ Minerals plc.
Committee membership
HSES committee (effective 5 February 2018)
Nomination committee (effective 5 February 2018)
Director since 24 February 2011
Board meetings attended 5/5
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.
Director since 24 February 2011
Board meetings attended 5/5
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.
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT 94
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SENIOR MANAGEMENT
Operations
Youssef El‑Raghy
General manager – Egyptian operations
Mark Morcombe
Chief operating officer
An officer graduate of the Egyptian Police
Academy, Youssef held senior
management roles within the Egyptian
police force for more than 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.
Mark was most recently COO at Acacia
Mining plc and prior to that Senior Vice
President at AngloGold Ashanti. He has
more than 25 years of mining industry
experience of which ten years have been in
various countries in Africa. As a mining
engineer, Mark has spent much of his
career to date specialising in gold projects
across Africa and Australia, successfully
operating open pit and underground
mines, from development and expansion
projects to mine turnarounds. Mark holds
a Bachelor of Engineering (Mining
Engineering) and a Masters of Engineering
Science (Mining Geomechanics) from
Curtin University in Australia.
Chris Boreham
General manager – Sukari
(since 1 March 2017)
Chris 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.
Chris was promoted to general manager
at Sukari in March 2017, previously holding
the position of underground mine manager
at Sukari.
Finance and corporate
Mark Smith
Group financial controller
Riaan Nel
Group accountant
Mark joined Centamin as group FC in
August 2015 and brings to the role a
wealth of experience in site‑based
commercial and corporate finance across
exploration, feasibility, construction and
operations in both open pit and
underground mining environments. Mark
has worked previously for a variety of other
publicly listed companies including BHP,
Red Back Mining Inc, African Minerals Ltd
and Endeavour Mining Corporation.
Before joining Centamin, Riaan held
previous appointments at a hedge fund
and at PricewaterhouseCoopers, both in
Jersey. Riaan holds a B.Com Accounting
Sciences and a B.Com Honours Accounting
Sciences degree from the University of
Pretoria and completed his training at
Grant Thornton South Africa where he
specialised in the manufacturing and
mining industries. Riaan is a member of the
South African Institute of Chartered
Accountants and the Institute of Chartered
Accountants in England and Wales.
Heidi Brown
Subsidiary director
and company secretary
Heidi is a Fellow Chartered Secretary
(FCIS, FGIA) and GAICD. Heidi holds a
Graduate Certificate of Applied Finance
and Investment and a Diploma of Financial
Advising from the Financial Services
Institute of Australasia. Heidi was the
company secretary of Centamin from 2004
until 2012, and continues to act as
company secretary and director of
Centamin’s Australian subsidiaries.
Since January 2010
Since 8 January 2018
Since 13 April 2006
Since 17 August 2015
Since 6 February 2017
Since 23 January 2003
Norman Bailie
Group exploration manager
Ibrahima Danso
Manager, West Africa
Norman 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.
Ibrahima joined Centamin in June 2016
and brings to the role over 20 years
professional experience, notably with
AngloGold Ashanti in Guinea and
Democratic Republic of Congo (DRC),
Alcoa in Ghana, Guinea and Jamaica, and
Newcrest Mining in Côte d’Ivoire. Areas of
expertise include leading small, medium
and large‑scale mining operations from
feasibility study stage to development and
operations. Ibrahima is highly
knowledgeable in dealing with African
governments to secure exploration and
mining permits, conceptualising and
executing strategic community investment
programs in the host country as well as
conflict resolution and dealing with key
stakeholders to maintain our social licence
to operate.
Doaa Abou Elailah
Group sustainability
and business development manager
Doaa has worked closely with Centamin
for ten years, initially as an adviser, before
joining the Company in 2013. Doaa has
more than 18 years of experience as a
consultant in health and safety,
environment and community affairs. Doaa
has provided technical support to
numerous industries and facilities in Egypt
and the Middle East across a broad range
of sectors including mining, oil and gas,
industrial production, infrastructure and
tourism. Doaa holds MSc and BSc honours
degrees in Chemical Engineering from the
University of Cairo.
Jonathan Stephens
Chief development officer
Alexandra Carse
Head of investor relations
Darren Le Masurier
Company secretary
Alexandra joined Centamin in
December 2017 from Petropavlovsk PLC,
where she was head of investor relations.
Prior to this, Alexandra has over 12 years’
experience as a sell‑side corporate
broker, specialising within the natural
resource sector. Alexandra holds a BA
degree in Economics and Statistics from
the University of Vermont.
Darren is a fellow of the Association of
Chartered Certified Accountants and has
over 18 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.
Jonathan joined Centamin on
27 February 2017 as chief development
officer. Jonathan brings 20 years’
investment banking experience at top tier
firms including Deutsche Bank, JP Morgan,
CIBC World Markets and RBC Capital
Markets, where he was a managing director
in the global mining team.
A mining sector specialist since 2003,
Jonathan has delivered financial and
strategic advice on merger and acquisition
transactions, capital raisings and regulatory
matters to a broad range of mining
companies including Centamin, AngloGold
Ashanti, Rio Tinto, Acacia Mining and First
Quantum. Jonathan has a first class M.A.
in Natural Sciences and an M.Phil in
Management Studies, both from
Cambridge University.
Since 26 January 2017
Since June 2016
Since 1 May 2013
Since 27 February 2017
Since 4 December 2017
Since 8 July 2013
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT 96
97
CORPORATE GOVERNANCE
Andrew Pardey
speaking
at Indaba
Key shareholder and investor relations activities held throughout this financial year:
Mark Bankes
Chairman of the compliance and corporate governance committee
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.
Dear shareholders
ACTIVITIES
COMMITTEE COMMENTARY
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 has three independent
non‑executive directors, Edward
Haslam, Mark Arnesen and me as
chairman.
The activities undertaken during the
year included the following:
Review of progress in respect to
the Concession Agreement
court appeal hearing (see note
22 to the financial statements)
Review of progress in respect to
the DFO litigation (see note 22
to the financial statements)
Monitoring of government
relations relating to the
Concession Agreement and
review of the mechanism of
profit share
Assisting with discussions on
public announcements through
the disclosure committee
Whilst the substantive merits of the case remain
strong, Law no. 32 of 2014 (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 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 State Commissioner’s report released in
September 2016, which was non‑binding, does not, in
the committee’s view, impact upon 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 placed the existing disclosure
committee on a more formal footing and is ready to
evaluate public announcements and matters which
may develop into inside information when needed to
do so.
Review of the reporting and
disclosure requirements required
by the LSE and TSX
The committee is active in the review of public
disclosures and continues to review and comment on
such disclosures to ensure messaging and information
is clear and understandable to the market.
Governance and board and
committee appointments
The committee monitored the recommendations of the
nomination committee in respect to matters affecting
the board composition and governance structure.
Cross jurisdictional legal and
regulatory compliance
Monitors both legal and regulatory obligations across
the group’s corporate structure and in‑country at an
operational level.
January and February 2017
Investor conference, London
Investor conference, South Africa
Investor conference, North America
May to September 2017
Analyst and investor conference calls
Roadshow, Scotland
Conference, Denver
March and April 2017
Investor marketing, North America
Investor marketing, London
Analyst site visit, Sukari
October and November 2017
Analyst and investor conference calls
Investor marketing, London
Modern Slavery Act
The UK Modern Slavery Act 2015
(the “2015 Act”) consolidated the law
relating to slavery, servitude, forced
and compulsory labour and human
trafficking, coming at a time of
increasing concern regarding slavery
and human trafficking affecting global
supply chains.
Whilst Centamin is not in scope
because it does not carry out business
in the UK, the committee considered,
as a matter of good corporate
governance, peer comparison and
shareholder expectation, that the 2015
Act should be evaluated.
The committee considered the
guiding principles of the 2015 Act
and considered the Company’s own
positive track record for employee
welfare and highest health and safety
standards. The committee noted that
the overriding goal would be to
identify any existing or potential
human rights impacts and remedies,
the use of leverage to remedy more
remote impacts to which businesses
are linked and prevent ones occurring
in the future. The methodology would
be based on working with potential
offending companies, mainly in supply,
chains to improve their human rights
record rather than terminate the
contracts. Termination is seen as the
last resort response.
The committee recommended and the
HSES committee agreed to review the
Act further with a view to enhancing
the Company’s existing human rights
policies during 2018, giving
consideration to the 2015 Act and
related UK guidance on adherence
with the Act’s principles.
Shareholder communication
All shareholders are encouraged to
attend our AGM on 26 March 2018,
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.
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. In addition, the
group recognises the need to maintain
communication with governance and
stewardship teams as well as proxy
advisory groups. A large proportion of
the Company’s shareholders are
guided by proxy advisers and their
voting recommendations, which can
significantly impact voting outcomes
at the Company’s AGM.
Details of the Company’s policies and
procedures, including a copy of the
Company’s whistleblowing policy, can
be found on the Company’s website.
Mark Bankes
Chairman of the compliance and
corporate governance committee
31 January 2018
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT
98
99
NOMINATION REPORT
Employee
accommodation
at Sukari
Edward Haslam
Chairman of the nomination committee
This has been an active year and I am pleased to see board
refreshment with two new appointments and a pipeline of
talent amongst our senior management team.
Dear shareholders
I am presenting this report as chairman
of the nomination committee, a
committee established by the board
of the Company.
The committee led the process
to identify a new independent
non‑executive director to the
board and is delighted to welcome
Alison Baker, who will join the board
in February 2018.
The committee also reviewed the
succession planning for board level
and further recommended the
appointment of Ross Jerrard, who will
become a member of the board in
February 2018 as chief financial officer,
duly appointed from within the
Company.
The committee also considers the
wider succession planning for senior
roles and is delighted to welcome
Mark Morcombe, chief operating
officer, who joined at the beginning of
January 2017. Mark will provide
support to our chief executive officer,
Andrew Pardey.
The committee met four times during
the year, with two meetings held by
way of written resolution, and
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);
• reviewed the Company’s diversity
policy at board, senior management
and at an operational level; and
• reviewed the policy on senior and
executive recruitment and
succession planning.
It has been an active year for the
committee, and as chairman I am
pleased with the progress the
committee has made during 2017.
The board has been refreshed with
two new appointments and there is
a pipeline of talent amongst the senior
management team, all of which will
ensure we not only meet the highest
possible governance standards, but
also have the right experience and
opportunity for succession as we
continue delivering for shareholders
into the future.
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
31 January 2018
In developing the Company’s policy
on diversity, the board has considered
the requirements of the Code and
National Instrument 58‑101 and the
FCA Listing Rules.
Board rotation and refreshment
The committee and board are mindful
that each of the independent
members of the committee, as at the
date of this report, had served on the
board for six years.
The Code notes that any term beyond
six years for a non‑executive director
should be subject to particularly
rigorous review, and should take into
account the need for progressive
refreshing of the board.
After carrying out the review and
giving due consideration to the
independence of the independent
non‑executive directors on the board,
the committee and the board were in
agreement that all independent
non‑executive directors remained fully
independent within the definition of
independence in the Canadian
Securities Administrators’ National
Instrument 52‑110 – Audit Committees
and the Code. It was noted that there
was no requirement for rotation,
however a staged rotation was in train
with the appointment of Alison Baker
to the board in February 2018.
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. The committee welcomes
Alison Baker to the board, who will join
the nomination committee on
appointment on 5 February 2018.
Board diversity
The committee believes that diversity
of opinion and experience are of vital
importance to board effectiveness and
diversity will continue to be a key
consideration when contemplating the
composition and refreshing of the
board as well as senior and wider
management.
During the year, the board, through
the recommendations of the
nomination committee, considered the
Company’s policy on diversity. In
reviewing the policy, the board
considered the Lord Davies report and
the Hampton‑Alexander Review on
board composition. Having regard to
these reports and the composition of
the board, the committee noted in
particular the lack of gender balance
on the board. Following year end,
Alison Baker and Ross Jerrard were
appointed to the board and the
chairman announced his intention to
retire during the course of 2018. In
assessing candidates for the position
of chair of the board and any other
new appointments, the nomination
committee will continue to consider
the composition of the board to
ensure diversity of gender, ethnicity,
age and educational and professional
backgrounds.
The board will update shareholders on
the appointment of a new chair as and
when appropriate. Details of the
current composition of the board and
the wider management team are set
out in the directors’ report.
Developing a diverse workforce
Centamin is an equal opportunity
employer and the Company’s code of
conduct prohibits any form of
discrimination. However, no women
are employed at Sukari Gold Mine.
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.
Local regulations include a number of
provisions, to restrict the working
hours (between 7.00pm and 7.00am)
and type of work women on an
operational mine site can undertake;
these include restrictions on working
underground, working with explosives
and operating mobile equipment.
A greater percentage of women are
employed throughout the group in the
administrative offices and at the
Company’s headquarters and on site
in Burkina Faso and Côte d’Ivoire. Of
our West African employees, over 10%
are women working in Ouagadougou
and as geologists based at camp.
Across the Company, a number of
women hold senior positions in the
areas of accountancy, investor
relations, HSES and subsidiary
directorships.
The Equality Act 2010 (Gender Pay
Gap Information) Regulations 2017
The committee considered these
regulations which stipulate a 250
employee threshold with reference to
relevant employees as meaning those
employees “working in Great Britain
and employees working outside Great
Britain if there is a sufficiently strong
connection with Great Britain”.
Centamin does not meet the
stipulation set out by these regulations
and therefore does not have a
reporting obligation. The majority of
employees are based in Egypt, at our
exploration sites in Burkina Faso and
Côte d’Ivoire and at our headquarters
in Jersey.
Centamin does, however, work to
ensure women have pay parity with
men in similar positions across its
operations and at our corporate head
office and administrative offices.
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT 100
101
possible five years as audit partner on
the Centamin account and signed the
audit opinion on the 2017 financial
statements on 31 January 2018. With
an appointment date for Alison of
5 February 2018, PwC have confirmed
that they are not aware of any ongoing
independence issues that impact the
2017 audit or any independence issues
arising from the appointment of Alison
Baker. Jonathan Lambert, PwC
partner, will replace Richard Spilsbury
following the 2017 audit.
Non-executive director independence
The committee and board determined
that Alison Baker is independent
within the meaning of the Code and
Centamin’s Directors’ Test of
Independence Policy. The committee
noted that although Alison is a former
PwC partner, Alison has not worked
directly or indirectly on Centamin’s
account whilst employed with PwC
and has not been involved with PwC in
providing any consultation or other
related activities since leaving the firm
in 2016. The board therefore
determined that Alison is considered
in all respects to be independent both
in character and judgment.
The committee considered Alison’s
skills and experience and the
committees which would benefit
from Alison’s membership. Having
considered the composition of all
existing committees and Alison’s
experience, the committee agreed
that Alison join the HSES committee
and the nomination committee
on appointment.
NOMINATION REPORT
continued
Recruitment process – independent
non‑executive director
The nomination committee was active
throughout 2017 in identifying a
suitable candidate to join the board as
an independent non‑executive
director. The committee considered
the skills, experience needed now and
in the future. The committee also
considered further the Company’s
policy on diversity, the current
composition of the board having
regard to gender, ethnicity, age, race
and educational and professional
backgrounds.
The committee considered a variety of
different recruitment agencies to help
the committee identify potential
candidates and also independently
evaluate candidates that had been put
forward by the board. In addition,
candidates and CVs had been
received through the Company’s
recruitment platform and online
presence which needed to be
evaluated.
The committee agreed to appoint
Clifton‑Hill (“CH”), an independent
recruitment consultant with no
previous connection to the Company
who, along with their own candidates,
assisted in evaluating all candidates
that were put forward by the board
and through the online platform.
Following consultation with CH a list
of five candidates were shortlisted
and interviewed. Following the
interview process, the nomination
committee met to consider each
of the shortlisted candidates.
The committee then recommended
three of the five interviewees to the
board for further discussion.
The board evaluated all three
candidates and following completion
of due diligence process, the
nomination committee finalised and
approved the appointment of Alison
Baker, with the full support of the
board. Alison Baker was announced as
the successful candidate in January
2018 and will become a member of
the board on 5 February 2018.
Induction and training
A detailed induction pack has been
prepared for Alison, covering all key
policy documents, relevant operational
and financial reports and key papers
covering the Company’s ongoing
litigation and regulatory compliance.
During the recruitment process and
prior to accepting the appointment,
Alison had the opportunity to meet
with all members of the board in an
open forum for discussion. A summary
induction was also arranged, providing
a high level introduction to the
Company and the ongoing role on
the appointed committees. The initial
induction process was conducted in
an open forum allowing Q&A
between Alison and the members
of the executive and senior
management team.
Training requirements have been
discussed with Alison and external
legal advisers will deliver bespoke
training and refresh on topics such as
directors’ duties (covering the legal
framework in Jersey), the LSE listing
rules and the rules governing the TSX.
Following her appointment, Alison will
visit the site in Egypt to see first‑hand
the modern mining operation at
Sukari. This visit will coincide with the
scheduled quarterly board meeting
based on site at Sukari.
Auditor independence
The committee notes that as a former
PwC partner, having left PwC in 2016,
PwC and Alison are required to assess
their independence given the
potential familiarity risk. The current
audit partner, Richard Spilsbury, and
Alison had worked together on other
clients (unrelated to Centamin) within
the last two years at PwC and
therefore Richard, for audit
independence purposes, is a ‘covered
person’ to Alison. Due to the
requirement of a mandatory
‘cooling‑off period’ of two years, the
current audit partner will be required
to step down from the audit before
Alison joins the board. Richard
Spilsbury has served four of his
• appointment of Alison Baker to the
nomination and HSES committees
(effective 5 February 2018).
Details of the appointment process for
the independent non‑executive
director are set out earlier in the report.
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.
Following the announcement in
January 2018, Josef El‑Raghy served
notice under the terms of his contract.
A successor will be identified with the
guidance and direction of the
nomination committee and
involvement of an independent third
party recruitment firm, during the first
half of 2018.
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.
Recruitment process
– chief financial officer to the board
the strategic aims and objectives
for the group.
The nomination committee considered
the role of the CFO and the progress
Ross Jerrard has made while serving as
CFO. In his short time at Centamin,
Ross has assembled an excellent
finance team between the head office
in Jersey, operations in Egypt and
across the exploration sites in West
Africa. Ross has also been responsible
for leading crucial efficiency objectives,
including the material improvement
to internal and external reporting
systems, successful implementation
and framework upgrades to cost
monitoring and cost control measures,
and delivery of an accelerated monthly,
quarterly and annual reporting
timetable of accounts.
The nomination committee, through
the process of succession planning,
ensured that adequate support,
development and, where required,
training was given to Ross to prepare
him for a role on the board of
directors. After a thorough assessment
of Ross’s experience and expertise,
and his performance as CFO since
2016, the nomination committee
approved the appointment of
Ross Jerrard to the board with the full
support of the board, effective from
5 February 2018.
Induction and training
Training requirements have been
discussed with Ross and external legal
advisers will deliver bespoke training
and a refresh on topics such as
directors’ duties to meet his
requirements.
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 board is assisted by the
nomination committee on its
evaluation of the non‑executive
directors.
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.
An evaluation of the board and its
committees was undertaken during
the year and concluded in January
2017. 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 2017.
The nomination committee had
recommended to the board the
following key appointments:
• appointment of Mark Bankes to
the remuneration committee;
• appointment of Ross Jerrard
(current CFO) to the board
(effective 5 February 2018);
• appointment of Alison Baker
as independent non‑executive
director (effective 5 February
2018); and
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT 102
103
REMUNERATION REPORT
Process plant
at Sukari
Edward Haslam
Chairman of the remuneration committee
The committee’s primary objective was achieved
this year, setting remuneration at appropriate levels to
motivate our executives and senior management.
1. Introduction and annual statement
As chairman of the remuneration
committee, I am pleased to present
the 2017 remuneration report.
The committee continued with a
simple yet effective remuneration
structure, the key elements being base
salary, pension, bonus and the long
term performance share plan (“PSP”).
The report sets out the key
performance targets for 2018, as well
as the achievements of the executives
against the metrics set by the
committee, which were published
in early 2017.
Changes to the committee
The committee welcomed Mark
Bankes (independent non‑executive
director) to the remuneration
committee during the year and
together with Mark Arnesen and
myself as chairman of the committee,
a full complement of independent
directors reside on the remuneration
committee.
Single figure remuneration 2017
The following chart summarises the
total remuneration to the executive
directors in 2017.
Full details are shown in the single
figure table.
Josef El-Raghy
£530k
£106k £20k
£631k
Andrew Pardey
£492k
£62k
£480k
£1,278k
Base salary
Pension
Benefits
Bonus
LTI(1)
(1) LTI is based on value of 2015 PSP award at full market value on 31 December 2017.
Josef El-Raghy
Andrew Pardey
10%
2
0
%
%
6
2
30 %
Maximum 100%
Achieved 68%
29%
30%
14
2
%
5
%
%
2
1
Maximum 100%
Achieved 78%
%
0
8
1
%
0
% 1 2 %
2
20%
1
0
%
1
0
10%
% 10%
%
2 5 %
15
Financial
Operational
Strategic
Corporate objectives
Individual KPIs
Maximum
Performance
As set out in the business model and
illustrated in the sustainability report,
Centamin creates value through the
process of gold exploration through to
production by maximising production
at the lowest possible 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. Performance metrics
are determined by the committee to
reflect the achievement of the
Company in meeting its strategic
objectives through the actions and
influences of the executive directors.
Some of the key metrics determined
by the committee to assess
performance of the executive directors
are as follows:
• safety improving the health and
safety environment and maintaining
a culture of safety in the workplace
assessed via long term injury
frequency rates (“LTIFR”);
• operational rewarding delivery of
guided production and
optimisation of the plant;
• cost control maintaining cash cost of
production and all‑in sustaining cost
within budget and forecast rates;
• social licence to operate
conducting our business in a
responsible manner and
contributing positively to the local
economy and environment through
co‑operative relations with
governments, resulting in
operational efficiency; and
• exploration carrying out a
systematic drilling programme
in a cost effective manner.
Additional metrics are used by the
remuneration committee to measure the
success of the executive directors and
these are set out further in the report.
Salary reviews
The committee undertook salary
reviews for the executive directors.
The independent salary review took
into consideration the directors’
personal performance, their roles and
responsibilities, as well as inflation and
cost of living changes. Industry
benchmarking data provided
additional guidance to the committee
in support of their decisions.
The committee agreed an
increase of 3% for the Company’s
CEO, Andrew Pardey, and the
chairman, Josef El‑Raghy, effective
from 1 January 2018 in line with the
average cost of living increase.
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.
Performance share plan (“PSP”)
Andrew Pardey (CEO) will continue to
participate in the PSP in 2018 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 0.91% interest in
the Company, he remains aligned with
the interests of shareholders.
Shareholder consultation
At the AGM a major shareholder raised
concern in the run‑up to the AGM
about the level of disclosure and
rationale for last year’s 7% salary
increase for the CEO. Although the
Company had enjoyed increased
production, in a low cost and stable
gold price environment during 2016,
the disclosures we made in the report
failed to link the success of the
business with the efforts of the CEO
which resulted in the decision for a
salary increase. We have engaged
further with shareholders and proxy
advisers this year to identify areas to
improve disclosures and meet
shareholder needs.
This year we reflect the actual
performance against the targets set
out by the committee and disclosed in
early 2017. The committee’s
remuneration policy decisions are fully
in line with the shareholder approved
remuneration policy(2), which remains
unchanged in all material respects
from 2016/17.
Bonus structure
The executive bonus opportunity and
structure for 2017 will remain the same
in 2018. For the executive directors,
the maximum bonus opportunity is
175% of salary, provided no PSP award
is made. Where an award under the
PSP is made, then this bonus
opportunity for executive directors is
reduced to a maximum opportunity of
125% of salary.
Summary
The executives delivered in 2017,
exceeding guided production and
operational metrics whilst ensuring
a tight control over costs.
The performance this year allowed the
Company to maintain a substantial
dividend to shareholders. Relations
with our JV partner EMRA remain
strong as we completed a full year of
profit sharing.
Operating Egypt’s first modern mine
still presents challenges for the
executive directors and it is essential
that the remuneration committee
continues to reward and incentivise
exceptional performance in this
challenging environment.
At a corporate and strategic level,
significant work has been undertaken
to assess the viability of a variety of
early stage and advanced projects to
add to Centamin’s project pipeline.
Centamin’s exploration programmes
are also delivering, with a new
resource in Côte d’Ivoire and further
development across the border in
Burkina Faso. The committee has
against the backdrop of another
successful year made the key
remuneration decisions for 2017
which are set out further in this report.
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
31 January 2018
(1) Includes the El‑Raghy family.
(2) 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
remuneration report annually for shareholder approval.
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT
104
105
REMUNERATION REPORT
continued
Executive directors’ remuneration at a glance
The following provides a summary of how the Company has applied the remuneration policy and the linkages to the
Company’s strategy and performance.
Base pay
Benefits
Pension
Motivate and retain executives with the right calibre and skills to support Centamin’s objectives.
Ensuring a competitive remuneration package.
Provision of appropriate income for executives in retirement (applied where appropriate).
Annual bonus
Driver and reward for delivering short term performance goals, normally over a financial year.
Performance share plan Incentive linked to the long term strategic aims of the Company whilst aligning the interests of
the executive with shareholders through meaningful share ownership.
Through the Company’s performance share plan (“PSP”) our longer term incentives support and reward our strategic and
operational business objectives, as follows:
Key measures
1 LONG TERM SUSTAINABILITY
BONUS AND AWARDS
Gold production
Cost control
Stable finances
• 30% of PSP based on production growth over the three year vesting period.
• Cash bonus based on achieving published guidance.
• Personal KPIs for formalising and implementing sound policy decisions.
2 PRIORITISING STAKEHOLDER RETURNS BONUS AND AWARDS
Consistent dividend policy
• Delivering shareholder returns in line with the dividend policy.
Shareholder return relative to peers
• 20% of PSP based on relative performance against peers
3 OPTIMAL GROWTH
Optimising production
(total shareholder return, TSR).
BONUS AND AWARDS
• Identifying high grade from the existing resource and optimising
throughput rates.
Self‑funded growth and exploration
• 30% of PSP based on reserve replacement and growth.
Exploration in West Africa
• Long term incentives to identify and deliver on projects outside of Egypt.
4 SOCIAL RESPONSIBILITY
BONUS AND AWARDS
Safety record and human resources
• LTIFR directly linked to bonus structure and HR metrics.
Government relations and community initiatives
• Maintaining key relationships and delivery of initiatives linked directly
to individual KPIs.
Key operational and financial metrics:
• 2017 production: 544,658 ounces produced;
• LTIFR maintained at low levels and further improvement on prior year;
• low cash cost of production at US$554 per ounce produced;
• low all‑in sustaining cost at US$790 per ounce sold and US$768 per ounce produced;
• earnings before interest, tax, depreciation and amortisation (“EBITDA”) of US$326 million;
• earnings per share (“EPS”): EPS (before profit share with the Egyptian government) of 19.3 US cents; and
• TSR performance: for the performance period from 1 January 2015 to 31 December 2017, Centamin was ranked in the
upper quartile against its peer group of international gold mining companies.
PSP
The Centamin performance share plan (“PSP”) (previously called the Centamin 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 based upon achievement of predetermined performance requirements to be achieved over a three year
period. Of the executive directors, only Andrew Pardey (CEO) has been granted awards under the PSP to date. The
performance conditions for the respective grants are as follows:
June 2015 grant – PSP
The performance conditions for the grants made in June 2015 covered the period from 31 December 2014 to
31 December 2017. The performance conditions have now been met and achieved the maximum percentage across
the vesting period (threshold at 25% to maximum at 100%):
PERFORMANCE CONDITIONS
RANGE
% ACHIEVED
• 20% of the award assessed by reference to
a comparative total shareholder return.
31 December 2014 to 31 December 2017: achieved upper
quartile(1)
100%
• 50% of the award shall be assessed by reference
12% CAGR (100% achieved) 8% CAGR (25% achieved)
100%
to absolute growth in earnings per share.
31 December 2014: EPS 7.21
31 December 2017: EPS 19.3 (before profit share)
CAGR of EPS achieved: 100%
• 30% of the award shall be assessed by reference
10% CAGR (100% achieved) 6% CAGR (25% achieved)
100%
to compound growth in gold production.
31 December 2014: gold production of 377,261 ounces
31 December 2017: gold production of 544,658 ounces
CAGR of gold production achieved: 100%
(1) TSR against the comparator group was independently verified by Meis remuneration consultants.
Grant date
3rd anniversary of grant date
Vesting of award (50% released)
5th anniversary of grant date
Release of 50% of award
THREE YEAR PERIOD – PERFORMANCE CRITERIA
TWO YEAR HOLDING PERIOD
FIVE YEAR PERIOD
June 2016, 2017 grants – PSP
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 EBITDA (adjusted for non‑cash impairments); and
• 30% of the award shall be assessed by reference to compound growth in gold production.
June 2018 grants – PSP
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;
• 10% of the award shall be assessed by reference to EBITDA (adjusted for non‑cash impairments and non‑recurring
items);
• 30% of the award shall be assessed by reference to compound growth in gold production; and
• 10% of the award shall be assessed by reference to maintain the Company’s dividend policy.
Details of the awards are set out in section 7 of this report.
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT 106
107
REMUNERATION REPORT
continued
2. Summary of executive
remuneration
Chairman
The base salary for Josef El‑Raghy,
which is paid in sterling, of
GBP530,450 for 2017 will rise by 3%
effective from 1 January 2018 to
GBP546,363 in line with inflation and
cost of living changes. An annual
pension contribution of 20% of base
salary is made to Josef El‑Raghy.
The bonus outcome for Josef El‑Raghy
for 2017 was 68% (2016: 75%) of the
maximum opportunity, which equates
to GBP631,235 and represents 119% of
base salary (2016: 131%). 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
118 and 119.
Chief executive officer
The base salary for Andrew Pardey,
which is paid in sterling, of GBP492,200
will rise by 3% effective 1 January 2018
to GBP506,966 in line with inflation and
cost of living changes.
The bonus outcome for Andrew
Pardey for 2017 was 78% (2016: 77%)
of the maximum opportunity, which
equates to GBP479,895 and represents
97.5% of base salary (2016: 96%). The
bonus calculation is made by reference
to a balanced scorecard which
comprises a combination of financial,
operational, strategic and individual
performance criteria. Full details are
on pages 120 and 121.
Andrew Pardey participates in the PSP
and is due to receive awards in June
2018 of up to 150% of base pay.
These awards remain subject to the
performance conditions set out in
the scheme.
3. The committee
The committee membership
The remuneration committee is
a committee of the Company
represented by three independent
non‑executive directors, namely
Edward Haslam (chairman of the
committee), Mark Arnesen and
Mark Bankes.
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
Mark Bankes
Trevor Schultz
JOINED
2011
2011
2017
ATTENDANCE IN 2017
2 of 2 meetings
2 of 2 meetings
2 of 2 meetings
2017 – withdrawal following the AGM 0 of 0 meetings
Mark Bankes joined the committee on 1 August 2017, following the withdrawal of Trevor Schultz from the committee to
address shareholder concerns in having a non‑independent director on the committee. As set out in the Code compliant
statement on page 84, the Code requires three independent non‑executives to be appointed to the remuneration
committee; however, following the withdrawal of Trevor Schultz from the remuneration committee following the 2017
AGM, the committee had two members (both of whom were independent non‑executive directors) until the appointment
of Mark Bankes on 1 August 2017 when the committee became fully compliant within the meaning of the Code.
The committee met three times during the year, including one meeting held by way of written resolution. The business
conducted is set out below.
COMMITTEE MEETING DATE
ACTIVITY
2 June 2017 (written resolution)
• Recommendations made to grant awards to Andrew Pardey under the PSP in line with the
6 October 2017
14 December 2017
PSP and remuneration policy.
• Recommended awards to senior management under the terms of the PSP and DBSP.
• Finalised awards under the PSP and DBSP and finalised the vesting of awards under the
DBSP.
• 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.
• Reviewed executive director salaries and benchmark data.
• Reviewed non‑executive director fees and benchmark data.
• 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.
• Reviewed of executive director remuneration.
• Evaluation of the committee and review of the charter.
• Prepared performance criteria recommendations for 2018 for the executive and senior
management team.
11 January 2018
• Reviewed DRR for the annual report and finalised the 2017/18 remuneration policy.
• Finalised performance conditions for the PSP.
• Finalised performance criteria recommendations for 2018 for the executive and senior
management team.
• Approved the remuneration package for the newly appointed CFO to the role of executive
director.
Advisers to the committee
During the year, the committee was supported by the company secretary. TBP2 Limited (“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.
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT
108
109
Executive director remuneration
The following graphs set out the
remuneration structure for
Josef El‑Raghy and illustrate the target
for the bonus at 75% of the maximum
opportunity of 175%. There are no
long term incentive elements.
For Andrew Pardey and Ross Jerrard
the graphs show the target for the
bonus at 75% of the maximum
opportunity of 125% of base. The
graph assumes that Andrew Pardey
and Ross Jerrard will be awarded
shares under the terms of the PSP of
150% of base salary with an estimated
value at vesting of 50% of the original
award value.
Please see the next section for details
of the performance targets and bonus
achievements.
REMUNERATION REPORT
continued
4. Our remuneration policy
Introduction
The remuneration report and the
remuneration policy were put to
shareholders on an advisory basis at
the AGM on 21 March 2017 and the
resolutions were passed by a majority
of 76.42% and 97.59%, 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
26 March 2018. The remuneration
policy will be effective following the
AGM until the next AGM in 2019.
Following the AGM, the Company
announced, in accordance with
E.2.2 of the Code the reasons for
the significant number of votes cast
against the approval of the
remuneration report (Resolution 3.1).
The Company understands that
shareholders had concerns over the
level of disclosure provided in respect
of incremental increases in base salary
for the CEO. Further discussions
have taken place with shareholders to
explain the rationale for the increase,
which the committee agreed on
appointment would be applied in
two phased increases between 2016
and 2017, subject to performance.
The second phased increase of 7%
on the CEO’s base salary was
approved by the committee following
a solid operational and financial
performance in 2016, which had been
achieved as a result of the strong
leadership of the CEO.
The committee has considered the
disclosures and in particular the
linkages between the success of the
Company, the individual performance
of the executive and how this may in
turn impact upon a change in salary.
The committee acknowledged that
the disclosures in 2016 failed to
adequately link this success with the
increase in salary for the CEO. The
committee notes, however, that the
discussions and approvals by the
committee adequately assessed the
CEO’s performance and the increase
was carefully considered based on the
CEO’s performance over the
preceding year.
The policy that was put to
shareholders on 21 March 2017 was
on an advisory basis and remains in
force until the conclusion of the AGM
in 2018. A copy of the policy is
available on the Company’s website
www.centamin.com.
There are no material changes
proposed to the policy in 2018.
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 based
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.
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.
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.
PERFORMANCE TARGETS FOR JOSEF EL‑RAGHY
£81,954
£81,954
£717,101
£956,135
11%
15%
63%
£81,954
£109,272
£109,272
£109,272
74%
5%
4%
5%
Base salary
Pension
Bonus
Benefits
56%
6%
£546,363
£546,363
£546,363
27%
32%
Min
Mid
Max
Min
Mid
Max
PERFORMANCE TARGETS FOR ANDREW PARDEY
£76,045
£633,708
13%
5%
4%
Base salary
33%
32%
Pension
Bonus
Benefits
£760,449
87%
26%
38%
£76,045
£475,281
£380,225
£76,045
£506,966
£506,966
£506,966
35%
26%
Min
Mid
Max
Min
Mid
Max
PERFORMANCE TARGETS FOR ROSS JERRARD
£60,375
£503,125
13%
5%
4%
Base salary
33%
32%
Pension
Bonus
Benefits
£603,750
87%
26%
38%
£60,375
£377,344
£301,875
£60,735
£402,500
£402,500
£402,500
35%
26%
Min
Mid
Max
Min
Mid
Max
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT 110
111
REMUNERATION REPORT
continued
REMUNERATION POLICY FOR EXECUTIVE DIRECTORS
ELEMENT
DETAILS
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.
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.
FOR 2018
There are no intended
changes in the policy
for 2018.
A 3% increase has been
awarded for Josef El‑Raghy
and a 3% increase for
Andrew Pardey effective
from 1 January 2018.
Josef El‑Raghy
Increase of 3%.
New base salary
GBP546,363.
Andrew Pardey
Increase of 3%.
New base salary
GBP506,966.
Benefits
Objective
Benefits may be provided where
necessary to ensure competitive
remuneration packages are
consistent with the market.
Pension
Objective
Positioned to ensure competitive
packages and provision of
appropriate income for
executives in retirement.
Annual bonus
Objective
To provide a driver and
reward for the delivery of
short term performance
goals, normally over the
course of the financial year.
The normal benefits that may be provided include items such as car or
car allowance, life assurance, private medical provision, subscriptions
and phones. Normal benefits will not currently exceed 5% of base pay.
Benefits to remain within
the policy.
There are no intended
changes to the pension
contribution for Josef
El‑Raghy.
Andrew Pardey is not
due to receive a pension
or a cash payment in lieu
of a pension in 2018.
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 PSP.
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).
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.
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 PSP.
The threshold is achieved at 25% of the maximum opportunity and the
target is 75% of the maximum opportunity. Full details of the criteria for
awarding bonuses are set out on pages 122 to 124.
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.
FOR 2018
There are no changes to the
policy.
Awards under the terms of
the PSP are to be made to
Andrew Pardey and Ross
Jerrard in June 2018 up to
150% of base salary.
The PSP is available to all
executives (and senior
management), however
there are no current plans
to make awards to Josef
El‑Raghy.
There are no proposed
changes to the policy.
REMUNERATION POLICY FOR EXECUTIVE DIRECTORS continued
ELEMENT
DETAILS
Share ownership
requirement
Objective
To encourage ownership of
shares, thereby creating a link of
interest between shareholders
and the executives.
Long term incentives
Objective
To align the interests of the
executives with those of
shareholders through a
meaningful ownership of shares.
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.
The PSP (previously called 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 summary of the performance share plan and the performance
conditions are set out below.
The aggregate market value (as at the respective award dates) of shares
in respect of which awards are made to an eligible employee in any year
shall not be greater than 150% of the amount of such eligible employee’s
salary at the award date, save in circumstances which are considered by
the committee to be exceptional, where an absolute limit of 250% of
salary may be applied.
Awards shall vest upon the vesting date, which shall be the third
anniversary of the award date, which in the case of awards in 2018 will be
June 2021. These will be subject to the satisfaction specified
performance conditions to be assessed over the three‑year period
running from 31 December 2017 until 31 December 2020.
As soon as practicable after the vesting date of a conditional award, the
Company shall issue, transfer or procure the transfer (as appropriate) of
one half of the total number of vested award shares (rounded down to
the nearest whole number) to the award holder.
Subject to cause, upon or as soon as practicable after second anniversary
of the vesting date, the Company shall issue, transfer or procure the
transfer (as appropriate) of the remaining vested award shares constituted
in the award to the award holder or, if appropriate, a trustee representing
the award holder who has been approved by the committee.
Details of the grants and performance conditions for each grant are set
out in section 7 of this report.
Executive director
contracts of employment
Consistent with current best practice, the executive directors have rolling
contracts with notice periods of twelve months or less.
There is no change to this
policy.
Share plan policy details
The performance conditions for
awards made in 2018 are as follows:
It is proposed that grants be made in
2018 under the terms of the PSP. The
suggested criteria is as follows
(supporting internal and consensus
data is attached):
The awards granted in June 2018 will
vest in June 2021 (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 ending 31 December 2020:
• 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) 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;
• mineral reserves: 30% of the award
shall be assessed by reference to
mineral reserve replacement and
growth over the vesting period.;
• EBITDA: 10% of the award shall be
assessed by reference to compound
growth in EBIDTA over the three‑year
period to December 2020. If a
compound annual growth rate of
3.5% of EBITDA is achieved by 2020,
all 10% of the award tranche shall
vest. If EBIDTA in 2020 is maintained
at the levels achieved in 2017, 25% of
the award tranche shall vest (i.e. 2.5%
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 2020 and adjusted for
any non‑cash impairments;
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT 112
113
REMUNERATION REPORT
continued
4. Our remuneration policy continued
Share plan policy details continued
• gold production: 30% of the award
shall be assessed by reference to
compound growth in gold
production over the three‑year
period to December 2020. If a
compound annual growth rate of
3.5% of gold production is achieved
by 2020, all 30% of the award
tranche shall vest. If gold
production in 2020 is maintained at
the levels achieved in 2017, 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; and
• dividend policy 10%: maintaining
the Company’s dividend policy as
announced in January 2017. A third
of the award will vest in each year in
which the dividend policy is
achieved for dividends declared for
the account periods ending
December 2018 to December 2021.
It is noted that as Sukari reaches
optimum production rates, the relative
year‑on‑year rate of growth slows.
Maintaining production rates at this
optimum level still represents an
award, with an appropriate incentive
to further improve production rates
through efficiency and optimisation.
Growth through Centamin led
exploration, development and
production shall be assessed by the
remuneration committee and is
contemplated in these metrics.
Policy if a new director is appointed
The Company has a track record of
succession planning and growing
and promoting talent internally.
This can be evidenced following the
appointment of Ross Jerrard, CFO,
as an executive director.
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 buyout 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 reviews
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 buyout of 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 buyout of
long term incentives as described
above to 150%.
The limits of 175% and 250% (as set
out above) are the limits that cover all
awards, be they standard or
recruitment awards. Specifically the
remuneration committee cannot make
standard awards plus these awards,
as the limits of 175% and 250% are
the absolute limits.
To facilitate the buyout awards outlined
above the committee may grant
awards to a new executive director
under Listing Rule 9.4.2. but still the
total package offered to a new recruit
will not exceed the overall limits set out
in the Company’s remuneration policy.
Remuneration package for the chief
financial officer on appointment as
executive director
The remuneration committee reviewed
the remuneration package for the
CFO, as an executive director effective
from 5 February 2018, when he will be
appointed to the board. The
committee considered the Company’s
policy on hiring or promoting a
director to the board. The committee
undertook salary reviews for the
position of CFO on the board. The
independent salary review took into
consideration the director’s personal
performance, the additional roles
and responsibilities serving on the
board as well as inflation and cost
of living changes. Industry
benchmarking data provided
additional guidance to the committee
in support of their decisions.
The committee also noted that Ross
Jerrard has been responsible for
leading crucial efficiency objectives,
including the material improvement to
internal and external reporting
systems, successful implementation
and framework upgrades to cost
monitoring and cost control measures,
and delivery of an accelerated
monthly, quarterly and annual
reporting timetable of accounts. These
factors, which contributed to the
decision to promote Ross to the
board, together with the additional
roles and responsibilities Ross will be
undertaking on the board, led the
committee to agree the overall
package including the salary increase
and increase in bonus opportunity.
Date of agreement
Effective 5 February 2018.
ROSS JERRARD (CFO APPOINTED TO THE BOARD)
Base salary
Bonus opportunity
£402,500 per annum (to be paid in sterling and represents a 15% increase on his current
salary as CFO not holding a position on the board).
Eligible to participate in an annual bonus arrangement as determined by the committee from
time to time.
The committee determined a rate of 125% of base salary (in line with the policy), representing
an increase from a rate of 100% from his current contract).
Long term incentives
Eligible to participate in the PSP. Awards under the terms of the PSP are to be made to
Ross Jerrard in June 2018 up to 150% of base salary (in line with the policy).
Notice period
Expiry date
Pension
Twelve months’ notice from either party.
No fixed expiry date as rolling contract.
Ross Jerrard will not receive a pension or a cash payment in lieu of a pension and this will
remain under review.
Benefits
Entitlement in accordance with the remuneration policy.
Termination payment
Entitled to be paid salary and pension in respect of the relevant notice period. In the case of
notice given in connection with and shortly following a change of control, Ross Jerrard 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.
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
months’ 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.
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. 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, subject to the
garden leave provisions, which may be
applied in certain circumstances.
Subject to the employee’s compliance
with the Company’s sickness absence
procedures (as amended from time to
time), the employee shall continue to
receive his full salary and contractual
benefits during any period of absence
due to incapacity for up to an
aggregate of 10 days in any 52 week
period. Such payment shall be inclusive
of any statutory sick pay due in
accordance with applicable legislation
in force at the time of absence.
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.
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.
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT 114
115
REMUNERATION REPORT
continued
4. Our remuneration policy continued
Policy on payment for loss of office
continued
Claw back provisions for executive
directors relate to bonus and holiday
taken in advance. Bonus payments to
executives are deferred until after the
completion of the audited accounts for
the year of assessment. The KPIs and
performance measures, including the
operational and financial metrics, are
determined in January following the
year of assessment. Due to the nature
of the mining operation the
relationship between the physical
statistics and financial outcomes,
performance can be analysed and
assessed soon after the year end,
which allows for the conclusions on the
bonus performance to be carried out
on a timely basis. Therefore there are
no longer term deferrals or staggered
release of bonus payments. However,
the remuneration 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 remuneration
committee’s decision to pay part or all
of any bonus.
PSP provisions
In relation to the PSP, 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 an award holder who is
serving notice under their contract,
then the individual will be expected to
work through the notice period and will
be entitled to all benefits under the
service agreement during that period.
Vested awards which remain subject to
the two year holding period would be
released to an award holder, subject to
the scheme rules and malus claw back
provisions set out below, at the end of
the notice period. Where an award
holder ceases to be an eligible
employee, the unvested award would
lapse. The remuneration committee
will, at their discretion, apply the
pro‑rated formula in accordance with
the scheme rules, for instances where a
good leaver (as determined by the
remuneration committee) is otherwise
absent or unfit for work during the
period prior to vesting.
A malus claw back provision is
included in the PSP 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.
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.
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 (“SID”) 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 2018
There are no changes to the fee structure in
2018. The fees for the other non‑executives
will next be reviewed in 2018. The fee
structure is:
• basic fee GBP65,000;
• chair of a committee GBP10,000; and
• member of a committee GBP5,000.
The fees payable to the SID reflect the
enhanced role undertaken by Edward
Haslam. The fee of GBP125,000 remained
unchanged in 2017 and no further
remuneration has been applied for additional
committee membership during the year.
The fees payable to the SID are subject to an
annual review and there are no proposed
changes to the fee structure in 2018.
Independent chairman
Incentives
Objective
No incentives.
Letters of appointment
for non‑executive
directors
Following the announcement in January 2018 that the
current executive chairman intends to retire by the end
of 2018, a process will be followed to identify an
independent non‑executive chairman.
Should an independent chairman be appointed in the
future, the level of annual fees payable to the chairman
will be dependent on the experience of the successful
candidate.
The intention is to appoint a new
independent non‑executive chairman in 2018.
An ordinary resolution will be included in the
next AGM increasing the total level of fees
that can be paid to non‑executive directors to
take account of the non‑executive fees
payable to the new chairman on
appointment.
The non‑executive directors do not participate in any
short or long term incentive plans.
There is no change to the policy for 2018.
There is no change to the policy for 2018.
Under the Articles of Association adopted by the
Company, all directors are 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.
Implementation of policy
The Company intends to implement the remuneration policy for 2018 as detailed in this remuneration report.
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT 116
117
REMUNERATION REPORT
continued
5. Annual remuneration report
Single figure table in US$ (audited)
Executives
Salary
2017
Salary
2016
Benefits
2017
Benefits
2016
Bonus
2017
Bonus
2016
LTI
2017
LTI
2016
Pension
2017
Pension
2016
Total
2017
Total
2016
Josef El‑Raghy
687,735
691,998
26,239
47,758 852,675
831,719
Nil
Nil 137,547
138,402 1,704,196 1,709,877
Andrew Pardey
638,143
607,475
84,076
62,511 648,244
535,906 1,726,328
Nil
Nil
Nil 3,096,791 1,205,892
Total
1,325,878 1,299,473 110,315
110,269 1,500,919 1,367,625 1,726,328
Nil 137,547
138,402 4,800,987 2,915,769
Non‑executives
Fees
2017
Fees
2016
Benefits
Benefits
Bonus
Bonus
2017
2016
2017
2016
LTI
2017
LTI
Pension
Pension
2016
2017
2016
Total
2017
Total
2016
Edward Haslam
163,185 165,661
Mark Bankes
113,773 112,649
Mark Arnesen
113,773 112,649
Trevor Schultz
104,438 100,934
Total
495,169
491,893
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
163,185 165,661
—
113,773 112,649
—
113,773 112,649
—
104,438 100,934
— 495,169
491,893
Notes to table:
• Josef El‑Raghy and Andrew Pardey are paid in sterling.
• There have been no vesting events in respect of the PSP during 2016 or 2017, however the performance conditions relating to the awards granted in
2015 have been met as at 31 December 2017 and the full market value (based on the average of the last three months of 2017) has been attributed to
the table above. The original market value of the award in June 2015 was US$861,660 and the increase in market value to US$1,726,328 is reflective of
the change in the value of Centamin shares over the three‑year period. Details of the grants made to Andrew Pardey under the terms of the PSP can
be found on page 125.
• The pension payable to Josef El‑Raghy represents a cash payment in lieu of contributions to a pension scheme.
• Benefits are within the limits of the policy and relate primarily to travel related costs to and from the original place of domicile.
• Directors’ remuneration paid in foreign currency was converted at an average rate during the year. The average GBP:US$ exchange rate for 2017 was
1.2965. Bonus accruals for 2017 applied an exchange rate of GBP:US$1.3508 to reflect the exchange rate at the end of the year.
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 2017
As at 31 December 2016
GBP65,000 (US$84,273)
GBP65,000 (US$79,980)
GBP10,000 (US$12,965)
GBP10,000 (US$12,305)
GBP5,000 (US$6,482)
GBP5,000 (US$6,152)
Deputy chairman and senior independent director
GBP125,000 (US$162,064)
GBP125,000 (US$153,808)
Notes to table:
• As the Company has an executive chairman, Edward Haslam undertakes an enhanced role as deputy chairman and senior non‑executive
director. These duties are reflected in this fee. The fee remains unchanged in 2017 and no further remuneration has been applied for additional
committee membership.
• The Company reviewed the non‑executive director fees during 2017 and no increases were proposed.
• The non‑executive directors do not participate in any of the Company’s share plans or incentive plans.
• The US$ figure in the table reflects the average exchange rate during the year, which may differ from the amount shown in the single figure table as
payments to non‑executive directors are made quarterly and reflect the exchange rate at the date of the transaction.
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, skills and
responsibilities 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.
Base pay – wider workforce
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. Since the government of Egypt
floated EGP in November 2016, the
Egyptian pound has been significantly
devalued and during 2017 there was
a notable increase in inflation rates. In
response, the Company has increased
salaries across the majority of the
workforce who receive salary in EGP.
The general workforce at Sukari
received a 20% increase in 2017. The
heads of department, who are paid in
EGP, received a 30% increase to
mitigate the inflation impact and also
recognising the level of responsibility
attributed to these senior positions.
Base salary for Josef El‑Raghy, which is
paid in sterling, at GBP530,450 for
2017 will rise by 3% effective from
1 January 2018, in line with the cost
of living increase to GBP546,363.
Base salary for Andrew Pardey, which is
paid in sterling, at GBP492,200 will rise
by 3% effective from 1 January 2018,
in line with the cost of living increase
to GBP506,966.
On appointment to the board, the
base salary for Ross Jerrard, which
is paid in sterling, will be GBP402,500,
effective 1 January 2018, to reflect
the director’s performance, the
additional roles and responsibility
serving on the board and inflation
and cost of living changes.
2017 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, financial, strategic and
corporate performance. The bonus
structure is linked to the Company’s
strategic priorities as follows:
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 assess
performance such as controls over
costs, production rates, targeted
drilling through exploration as well
as encouraging a safety culture and
sustainable operations.
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT
118
119
REMUNERATION REPORT
continued
5. Annual remuneration report continued
2017 annual bonus continued
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 (M&A opportunities, strategic management and formalisation of the business strategy);
• 10% corporate (maintaining sound corporate governance and structure, maintaining shareholder relations, board
leadership and effective management of the board).
• 30% – the individual tasks are based on executive development and succession planning, communications of business
strategy, and in‑country stakeholder management and shareholder relations.
2017 – bonus achieved for Josef El-Raghy (audited)
Performance
measure
Target
Maximum
Business targets
Financial (see breakdown below)
Operational (see breakdown below)
Individual targets
Strategic
Corporate
Individual KPIs
20%
20%
20%
10%
30%
Performance targets achieved for the financial and operational performance measures:
Total
100%
35%
35%
35%
17.5%
52.5%
175%
Category
Performance % of bonus
measure opportunity
Threshold
Maximum
Actual
Achieved of
the maximum
bonus
Awarded opportunity
50%
60%
65%
80%
87%
10%
12%
12%
8%
26%
68%
Achieved of
the maximum
bonus
Awarded opportunity
Financial (20%)
EBITDA (US$m)
10%
Operational (20%)
All‑in sustaining cost
(US per ounce)
Production
(‘000 ounces)
LTIFR
10%
15%
5%
297
790
486
0.27
363
330
60%
711
768
40%
594
0.01
545
0.22
67%
40%
6%
4%
10%
2%
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.
• A minor adjustment to EBITDA has been applied for non‑cash impairments during the period resulting in the actual performance measure above.
• AISC is based on ounces produced.
• Production is based on ounces produced.
• LTIFR is based on 200,000 working hours calculated for the group.
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 (AUDITED)
Strategic (sustainability, stakeholder returns, optimal growth and social responsibility)
• Maintaining the dividend payout in accordance with the policy.
Total achieved: 13%
• Accurate guidance maintained throughout the year.
• M&A opportunities reviewed and assessed.
Corporate
• Corporate governance improvements – engagement programme with shareholders.
• Maintain sound corporate governance and structure, board leadership and effective management of the board,
executive development and succession planning.
Individual KPIs
• Continued handover of roles and responsibilities to the CEO.
Total achieved: 8%
Total achieved: 26%
• Maintaining good relations with the authorities in Egypt and administration of the Concession Agreement.
• Formalisation and communications of business strategy.
• In‑country stakeholder management and shareholder relations.
Details of the achievements of the Company for 2017 are set out in the strategic report, which the committee considered
when applying the performance measures under the strategic, corporate and individual KPIs.
On this basis, the committee determined that 68% of the maximum bonus of 175% of Josef El‑Raghy’s 2017 base salary
had been achieved. This resulted in a payment of GBP631,235.
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REMUNERATION REPORT
continued
5. Annual remuneration report continued
2017 annual bonus continued
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 (exploration success in Egypt and elsewhere, M&A opportunities including geographical
diversification); and
• 10% corporate (corporate governance improvements, shareholder relations and in‑country stakeholder
management).
• 30% – the individual tasks are 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.
2017 – bonus achieved for Andrew Pardey (audited)
Performance
measure
Target
Maximum
Achieved of
the maximum
bonus
Awarded opportunity
Business targets
Financial (see breakdown below)
Operational (see breakdown below)
Individual targets
Strategic
Corporate
Individual KPIs
25%
25%
10%
10%
30%
Performance targets achieved for the financial and operational performance measures:
Total
100%
31%
31%
12.5%
12.5%
37.5%
125%
52%
60%
100%
100%
96%
14%
15%
10%
10%
29%
78%
Category
Performance % of bonus
measure opportunity
Threshold
Maximum
Actual
Achieved of
the maximum
bonus
Awarded opportunity
Financial (25%)
EBITDA (US$m)
15%
Operational (20%)
All‑in sustaining cost
(US$ per ounce)
Production
(‘000 ounces)
LTIFR
10%
20%
5%
297
790
486
0.27
363
330
67%
10%
711
768
40%
594
0.01
545
0.22
67%
40%
4%
13%
2%
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.
• A minor adjustment to EBITDA has been applied for non‑cash impairments during the period resulting in the actual performance measure above.
• AISC is based on ounces produced.
• Production is based on ounces produced.
• LTIFR is based on 200,000 working hours calculated for the group.
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 (AUDITED)
Strategic (sustainability, prioritising stakeholder returns, optimal growth and social responsibility)
• Sukari underground reserve expansion.
Total achieved: 10%
• Further optimisation of the process plant (throughput rates).
• Exploration programme over licence areas in Burkina Faso and Côte d’Ivoire.
Corporate
• HSES objectives including Sukari, Burkina Faso and Côte d’Ivoire social initiatives.
• Emissions controls and water management.
• Culture at an operational level including training and development of HODs and staff.
Individual KPIs
• Management of team and senior staffing levels.
• Reserve and resource preparation at Sukari and Côte d’Ivoire and Burkina Faso preliminary resource development
• Development of Cleopatra.
• Sustainability objectives including CDP and moving to GRI compliance.
• Environmental incident record and improvements in emissions .
• Governance objectives including diversity improvements and senior management appointments.
• Mine management, zero industrial action and strong leadership.
Total achieved: 10%
Total achieved: 29%
Details of the achievements of the Company for 2017 are set out in the strategic report, which the committee considered
when applying the performance measures under the strategic, corporate and individual KPIs.
On this basis, the committee determined that 78% of the maximum bonus of 125% of Andrew Pardey’s 2017 base salary
had been achieved. This resulted in a payment of GBP479,895.
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT
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REMUNERATION REPORT
continued
5. Annual remuneration report continued
Performance targets for 2018
The objectives for 2018 are set against the balanced scorecard. For both executive directors, the performance will be
measured against a combination of financial targets (EBITDA and AISC) and operational targets (production and LTIFR)
as illustrated below, together with strategic, corporate and individual KPIs:
O
Pro
25
30
%
d
u
%
p
era
ti
ctio
n
o
n
d A I S C
%
Financial
A Operatin g c o s t s a
% 1 0
20%
D
BIT
E
0
1
n
a
l
5
%
L
T
I
F
R
c
i
g
e
t
a
s
e
v
ti
c
bje
%
0
%
0
0
% 1
% 1
o rate Str
b j e ctives o
1
0
1
o r p
C
o
p
e
r
f
I
n
o
r
d
m
ivid
a
n
c
3
0
3
0
%
%
ual key
e indicators
2018 bonus
The committee notes that during 2018,
Josef El‑Raghy will be serving a
twelve‑month notice period under his
contract, during which time a
successor for the role of chairman will
be identified. Whilst Josef El‑Raghy is
actively undertaking the role of
executive chairman and handover of
responsibilities, a bonus award will be
applied based on a balance scorecard
approach. The committee noted that
specific annual metrics would not be
appropriate during this period;
however, both financial and
operational targets will be based on
the disclosed metrics and, where
appropriate, time apportioned. The
balance scorecard is set out overleaf:
• 70% – the business targets are
• 30% – the individual tasks are
based on:
• 40% – financial and operational
(based on an improvement in
profitability, cost against budget,
health, safety and environment
and operational efficiency);
• 20% – strategic measures (M&A
opportunities, maintaining the
dividend policy and project
delivery); and
• 10% – corporate (maintaining
sound corporate governance and
structure, board leadership and
effective management of the
board, executive development
and succession planning).
based on an orderly handover of
chairmanship responsibilities,
continuing to build and motivate
the management team, handover
of executive roles to the COO,
continuing to communicate the
business strategy and ongoing
stakeholder management and
shareholder relations.
The committee notes that other than
annual salary, payment in lieu of
pension and the annual bonus
opportunity, which will be payable
during the notice period, there are no
other entitlements (contractual or
otherwise) that are due to Josef
El‑Raghy.
For Andrew Pardey the bonus for 2018
will be based upon the balanced
scorecard approach, as follows:
• 70% – the business targets are
based on:
• 20% – financial (profitability/
financial position, cost against
budget and operational
efficiency);
• 30% – operational (meeting
production guidance, health,
safety and environment, CSR
development, open pit and
underground mining, resource
and reserve growth);
• 10% – strategic measures (Sukari
underground reserve expansion,
exploration success in Egypt and
elsewhere, M&A opportunities
including geographical
diversification); and
• 10% – corporate (HSES
objectives including Sukari,
Burkina Faso and Côte d’Ivoire
social initiatives, emissions
controls and water management
and developing the
organisational culture).
• 30% – achieving pre‑feasibility
study in West Africa and building
relations with the authorities in
Burkina Faso and Côte d’Ivoire.
Governance objectives including
diversity improvements and senior
management appointments. A new
element will be assessed under the
individual KPIs and these relate
specifically to ESG related targets.
These include the following for
2018:
• environmental: preparation
of a feasibility study for the
installation of a 15MW solar
power plant on site at Sukari;
• employee welfare: continue to
develop and review HR policies
and procedures;
• human rights: review the 2015
Act further with a view to
enhancing the Company’s
existing human rights policies
during 2018, giving
consideration to the 2015 Act
and related UK guidance on
adherence with the Act’s
principles; and
• disclosure: develop policies and
processes towards GRI
compliance.
For Ross Jerrard the bonus for 2018
will be based upon the balanced
scorecard approach, as follows:
• 70% – the business targets are
based on:
• 20% – financial (profitability/
financial position, cost against
budget and operational
efficiency);
• 30% – operational (meeting
production guidance, health,
safety and environment, CSR
development, open pit and
underground mining, resource
and reserve growth);
• 10% – strategic measures (M&A
opportunities including
geographical diversification and
exploration success in Egypt and
elsewhere); and
• 10% – corporate: deliver on
annual audit plans (internal and
external), financial controls and
framework, deliver all financial
compliance across the group
and subsidiaries and overall
responsibility for tax, treasury,
risk and insurance.
• 30% – the individual tasks are
based on building the management
team and taking on the new
responsibilities as executive
director. These include building
team capabilities across finance and
HR, delivering high quality and
timely financial and non‑financial
metrics, providing quality and
timely financial information to the
board and implementing upgrades
to financial systems and reporting.
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT
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REMUNERATION REPORT
continued
5. Annual remuneration report continued
Performance targets for the financial and operational performance measures for 2018 are as follows:
% of bonus
Performance opportunity for opportunity for opportunity for
Ross Jerrard
Josef El‑Raghy Andrew Pardey
% of bonus
% of bonus
measure
Financial
Operational
Strategic
Corporate
Individual KPIs
EBITDA
AISC and production costs
Production
LTIFR
Financial and operational metrics
Balanced scorecard
Balanced scorecard
Balanced scorecard
—
—
—
—
40%
20%
10%
30%
10%
10%
25%
5%
10%
10%
30%
Notes to table:
• Threshold achievement represents 25% of the bonus opportunity for the respective performance measure.
• Target achievement represents 75% of the bonus opportunity for the respective performance measures.
• 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.
Financial and operational performance measures
%
awarded
Threshold
(25%)
Target
(75%)
EBITDA
AISC and production costs
Production
LTIFR
10%
10%
25%
5%
‑10%
+10%
‑10%
Budget
Guidance
Guidance
Based on improvement on prior
year to near‑zero injury
Notes to table:
• An adjustment to EBITDA shall be applied for non‑cash impairments during the period when calculating actual performance.
• AISC and cash cost are based on ounces produced (targets assume gold produced is equal to gold sold in the year).
• Production is based on ounces produced.
• LTIFR is based on 200,000 working hours calculated for the group.
• Guidance is set out in the preliminary production announcement in January 2018. Budget EBITDA is based on internal assumptions including gold
price and other cost parameters and is therefore not disclosed for reasons of commercial sensitivity. The performance against these metrics will be
disclosed in full in the 2018 annual report.
Pension arrangements (audited)
Josef El‑Raghy is entitled to a payment in respect of pension entitlement equal to 20% of base pay. Andrew Pardey and
Ross Jerrard do not currently receive a pension entitlement.
10%
10%
25%
5%
10%
10%
30%
Max
(100%)
+5%
‑5%
+5%
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 performance share plan (PSP) for directors and senior
management.
The performance conditions, as published in 2015, for the 4 June 2015 awards yielded a 100% return. Of the 900,000
awards granted in 2015 to Andrew Pardey, 50% of the awards are due to vest on 4 June 2018 with the remainder subject
to a holding period of two years. The performance conditions for the grants made in June 2015 covered the period from
31 December 2014 to 31 December 2017. The performance conditions have now been met and achieved the maximum
percentage across the vesting period (refer to the table in remuneration at a glance on page 105).
2015
Grant
2018
Vesting of award
2020
Release of 50% of award
THREE YEAR PERIOD – PERFORMANCE CRITERIA
TWO YEAR HOLDING PERIOD
FIVE YEAR HOLDING PERIOD
Award
End of
performance
period
Type
Basis of
award
granted
PSP 4 June 2015 Conditional
award
31 Dec
150% of
2017 base salary
PSP 4 June 2016 Conditional
award
31 Dec
150% of
2018 base salary
PSP 4 June 2017 Conditional
award
31 Dec
150% of
2019 base salary
Total
vested
Total
unvested(4)
Value of
award at
grant date
in US$
Total
vested
in 2017
—
900,000
861,660(1)
Granted
900,000
690,000
—
690,000
931,597(2)
440,000
—
440,000
824,560(3)
—
—
—
(1) The value of the award granted under the terms of the PSP on 4 June 2015 in US$ is 20% TSR: 0.7894; 50% EPS: 0.9994; 30% gold production: 0.9994.
The market value of the shares as at the date of the award, in accordance with the scheme rules, was £0.69 per share.
(2) The value of the award granted under the terms of the PSP on 4 June 2016 in US$ is 20% TSR: 0.9107; 30% reserve growth: 20% EBITDA: 1.46 30% gold
production: 1.46. The market value of the shares as at the date of the award, in accordance with the scheme rules, was £0.985 per share.
(3) The value of the award granted under the terms of the PSP on 4 June 2017 in US$ is 20% TSR: 1.49; 30% reserve growth: 20% EBITDA: 1.97 30% gold
production: 1.97. The market value of the shares as at the date of the award, in accordance with the scheme rules, was £1.67 per share.
(4) The performance conditions for the grant made in June 2015 were met in full at 31 December 2017 and the current market value is included in the
single figure table. The awards made in June 2015 will vest in June 2018.
Payment to past directors (audited)
There are no payments to past directors of the Company.
Payment for loss of office (audited)
There are no payments to directors for loss of office.
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT
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REMUNERATION REPORT
continued
5. Annual remuneration report continued
Service agreements for directors continued
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.
Executive directors’ contacts of employment and non‑executive directors’ service agreements are available at the
registered office and at the annual general meeting.
JOSEF EL‑RAGHY
8 May 2015.
Date of
agreement
ANDREW PARDEY
8 May 2015.
Notice period
Twelve months’ notice from either party.
Twelve months’ notice from either party.
Expiry date
No fixed expiry date as rolling contract.
No fixed expiry date as rolling contract.
Pension
Entitlement to 20% of base pay.
Andrew Pardey does not receive a pension or a cash
payment in lieu of a pension and this will remain under
review.
Benefits
Entitlement in accordance with the remuneration policy.
Entitlement in accordance with the remuneration policy.
Annual bonus
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.
Termination
payment
Long term
incentives
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.
Eligible to participate in the PSP.
Eligible to participate in the PSP.
To encourage ownership of shares and thereby create a link of interest between shareholders 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
2017
Unvested
awards
under the PSP
Percentage
of base
salary/fees(3,4)
10,500,000
—
3,000%
1,069,268(1)
2,030,000
180%
102,056
32,600
150,000
49,000
—
—
—
—
129%
91%
278%
60%
(1) Excludes unvested awards under the PSP.
(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 2017 to the date of this report.
(4) The valuations of the shareholdings are based on the share price at 31 December 2017.
6. Comparative remuneration data
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. The graphs were chosen to allow shareholders to compare the Company’s performance
against other mining companies in the sector.
Centamin plc
FTSE Gold Mine
FTSE 250
$
S
U
250
200
150
100
50
0
2011
2012
2013
2014
2015
2016
2017
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)
2017 (chairman)
CEO – Andrew Pardey
2015 (eleven months as CEO)
2016
2017(1)
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
US$1,704,196
Single figure
remuneration
US$1,063,348
US$1,205,892
US$3,096,791
Annual
bonus as %
of maximum
68%
77%
78%
Annual
bonus as %
of maximum
Long term
incentives
65%
80%
75%
80%
70%
75%
68%
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Long term
incentives
PSP award
150% of base salary
PSP award
150% of base salary
PSP award
150% of base salary
(1) Includes the value of the long term incentive plan which is based on value of 2015 PSP award at full market value on 31 December 2017.
The CEO pay from 2012 to 2014 reflects the total remuneration for Josef El‑Raghy while he held the position of CEO and
chairman. Andrew Pardey was appointed CEO from 1 February 2015.
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT
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REMUNERATION REPORT
continued
6. Comparative remuneration data continued
Percentage change in remuneration (unaudited)
The Company has chosen the comparator group to be all the employees of the Centamin group (excluding non‑executive
directors).
Percentage change
in salary between
2016 and 2017
Percentage change
in benefits between
2016 and 2017
Percentage change
in bonus between
2016 and 2017
Comparator group(1)
Centamin’s chief executive officer(2)
‑10%
5%
‑48%
34%
‑11%
21%
(1) Based on the average number of employees based in Egypt in 2017: 1,345 (2016: 1,341 employees). See page 33 for details on the devaluation of EGP.
(2) Based on the US$ amount disclosed in the single figure table (excludes change in PSP).
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.
Between
2016 and 2017
Comparator group(1)
Remuneration of Centamin’s executive directors
Remuneration of Centamin’s non‑executive directors
Distributions to Centamin shareholders(2)
Percentage
change
‑12%
5%
0%
‑20%
(1) Based on the average number of employees based in Egypt in 2017: 1,345 (2016: 1,341 employees). See page 33 for details on the devaluation of EGP.
(2) The percentage change relates to distributions to shareholders based on the amount paid during 2016 and 2017.
Centamin is not required to report under the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 as only a
few members of staff are either UK tax residents or have a UK nexus. The majority of the workforce are based in Egypt.
Since the government of Egypt floated EGP in November 2016, the Egyptian pound has been significantly devalued and
during 2017 there was a notable increase in inflation rates. In response, the Company has increased salaries across the
majority of the workforce who receive salary in EGP. The general workforce at Sukari received a 20% increase in 2017 and
heads of department, who are paid in EGP, received a 30% increase in 2017. During the same period, US$ has significantly
outperformed US$ which is illustrated in the table above.
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.
Deferred bonus scheme
(not for directors)
This plan, introduced in 2012, allows
the annual bonus to be matched with
shares which are then ordinarily
released in three annual tranches,
conditional upon 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.
The DBSP, now in its sixth year,
provides a simple yet effective
incentive to senior management and
senior employees below board level,
motivating and retaining individuals
over the longer term. Three
employees remain in the scheme.
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.
Following the adoption of the
performance 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).
June 2017
3,459,000 conditional awards to
employees of the group (of which
440,000 awards were made to
Andrew Pardey, CEO).
In total, 40 employees participate in
the PSP, including heads of
department and senior personnel
based on site, as well as members of
the senior management team located
at the head office.
The awards 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.
Details can be found in the 2016
annual report and accounts.
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.
Details can be found in the 2016
annual report and accounts.
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 based on the
performance conditions over the
three‑year financial period ended
31 December 2017, 100% of the award
shall vest. Details can be found in the
2016 annual report and accounts.
At the AGM of the Company on 21 March 2017 the following votes for and against the adoption of the remuneration
report were as follows:
Approval of the remuneration report
606,171,125 (76.42%)
186,206,250 (23.47%)
Approval of the remuneration policy
774,144,510 (97.59%)
18,755,959 (2.36%)
This report was approved by the board of directors and signed on its behalf by:
For
Against
Withheld
870,666
347,571
Edward Haslam
Chairman of the remuneration committee
31 January 2018
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT
130
131
AUDIT AND RISK REPORT
Inspection
of grinding
balls delivered
to Sukari
Mark Arnesen
Chairman of the audit and risk committee
The committee were satisfied with the adequacy
of the systems and controls in place during the year
and the effectiveness of the external auditor.
Dear shareholders
I am pleased to present this report
covering the activities of the audit
and risk committee during 2017.
The report also summarises the
work of the external auditor and
our assessment of their effectiveness,
the activities and assurances given
by the internal auditor and the
responsibilities of the committee
in line with the Code. As an audit and
risk committee reporting to the board,
the committee considers in detail
the suitability of the Company’s risk
management and internal
control systems.
The committee meetings are regularly
attended, by invitation, by the
chairman, CEO and CFO along with
the company secretary. 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 financial statements and
interim MD&A (a requirement of the
Toronto Stock Exchange).
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
92 and 93. All committee members
attended all six scheduled meetings
during 2017.
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. All members of
the audit and risk committee are
financially literate and competent
within this industry.
A summary of the committee’s responsibilities and activities carried out during 2017 are set out below:
TOPICS
External auditor
Internal audit
Financial reporting
COMMITTEE RESPONSIBILITIES
Approval of the external audit plan and assessment of the effectiveness of the external
auditor. Review of the audit committee report prepared by the auditor following the half year
review and annual audit.
Approval of the scope of the internal audit function and review of work carried out in 2017.
Making recommendations to the board for the approval of the quarterly, half‑year and annual
results.
Accounting matters and judgments
Review of management papers and challenging the proposals relating to areas of significant
judgments and estimates.
Risk reporting
Internal controls
Review and monitoring of the risk management processes including periodic reviews of the
corporate, strategic and operational risks, linkages to strategic goals and adequacy of the
assessment of risk throughout the business.
Review of the internal control environment, to include controls over financial reporting,
budgeting and reporting obligations. Carrying out an assessment of the control environment
and reporting findings to the board.
Accounting for transactions
Review of the cost recovery model and mechanism for profit sharing with EMRA.
Responding to regulators
Responding to requests from regulatory bodies; see note below on the committee’s
involvement in responding to the FRC’s periodic review.
Taxation
Dividends
IT systems
Charter
Review of the Company’s global tax strategy, in‑country taxes and cross jurisdictional tax
compliance. Responding to the Australian Tax Authority streamline review.
Ensuring the dividend proposals are in line with the group policy and making
recommendations to the board.
Review of recommendations relating to the IT infrastructure, IT systems development and
controls, software upgrades and the impact and implementation of GDPR.
Update of the committee charter in line with the Code and best practice guidelines.
During the year, the committee carried
out an evaluation of its own
performance. The assessment
considered the activities of the
committee and the improvements in
timely and accurate delivery of
financial information, the continued
development of the external
relationships with the auditor and
internal auditors, particularly given
new members were involved on both
sides this year. 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 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. During the evaluation, the
committee and board were mindful
that each of the three members of the
committee had served for six years.
The nomination report sets out details
of the review that has been
undertaken and considerations and
plans for progressive refreshment of
the board.
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT 132
133
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).
TOPIC
SIGNIFICANT ISSUE
SUMMARY OF THE SIGNIFICANT ISSUE
KEY ACTION POINTS
Accounting for
transactions
Impairment of
assets (other
than financial
assets)
Accounting treatment
Cost recovery
and profit
share
Accounting for
transactions
Valuation of
stores and
consumables
inventory
Accounting for
transactions
Amortisation
of
underground
development
drives
Revenue
recognition
Accounting standards
A full analysis has been performed by
management on the cost recovery model
(“CRM”), the timing and mechanism for profit
share.
With the commencement of profit share
payments to the Egyptian Mineral Resource
Authority (“EMRA”) the committee considered
management’s judgments in determining
profit share and the approach taken in
reconciling the CRM under the terms of the
Concession Agreement.
The committee agreed with the accounting
treatment and judgments in determining the
allocation of profit share.
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 of
inventory however, in respect of inventory
obsolescence, a provision of US$5.14 million
had been applied.
The transfer of underground development
from capital work in progress to mine
development properties occurred roughly
every two years when a reserve and resources
statement was issued. Management and the
board determined that this was not sufficient
and a new estimate of a theoretical reserve
was created to allow this transfer to occur
every six months. The board agreed with the
assessment produced by management and
this was put into effect, the result of which was
a much smaller underground development
balance within capital work in progress at year
end and a reduced amortisation balance
compared to prior years.
An analysis of IFRS 15 was performed and it
was concluded that the new standard will not
have an impact on the timing of our revenue
recognition.
Revenue from development assets (E&E) and
analysis of IFRS 6 and the treatment of revenue
generated from an exploration asset at Sukari
(Cleopatra).
The committee agreed with management’s
assessment of revenue recognition.
Committee actions
• Approval of CRM.
• Agreement on timing and mechanism of
profit sharing in compliance with the
Concession Agreement.
Management actions
• Profit share payments to EMRA and
reconciliation of amounts due under
the CRM.
• Accounting for profit sharing and residual
cost recovery payments.
Committee actions
• Review of management accounting papers.
• Monitoring system improvements
of identification of slow‑moving or
obsolete stock.
Management actions
• Inventory software upgrades to assist
management in categorising stock.
• Action taken to reduce stock levels and
improve inventory holding periods,
identification of slow‑moving and
obsolete stock.
Committee actions
• Review of management accounting papers.
• Agreement on calculation of theoretical
reserve and timing of transfers from capital
work in progress to mine development
properties.
Management actions
• Collection of data and review of changes in
theoretical reserve which triggers the
transfer to mine development properties.
• Amortising the new mine development
properties balance correctly over the new
theoretical reserve.
Committee actions
• Review of the new standard which is
effective 1 January 2018.
• Consideration of the management paper
and potential impact on key metrics.
Management actions
• Review of the new standard against the
terms of the refining agreement, timing and
transfer of risk to the refiner as well as the
physical movement of gold doré.
• Review of the treatment of offsetting any
revenue generated against cost capitalised
during the exploration phase.
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. Any
exploration permits relinquished or lapsed
have been written off during the period.
In making the assessment as to the possibility
of whether impairment losses have arisen, the
committee assessed:
• exploration and evaluation of mineral
resource for indicators of impairment; and
• exploration and evaluation assets for Sukari,
Burkina Faso and Côte d’Ivoire.
The committee agreed with management that
there were no triggers for a full impairment
review under IAS 36.
Committee actions
• The committee reviewed the papers
presented by management in respect to
IAS 36 and IFRS 6 and were in agreement
with the conclusions set out above.
• Review of the exploration strategy at Sukari,
Burkina Faso and Côte d’Ivoire presented
by the CEO, GM and chief exploration
manager.
Management actions
• Analysis of the trigger events that may
initiate an impairment review.
• Review of exploration activity and strategic
milestones for resource identification.
• Technical geological review and assessment
of the exploration programmes.
• Budgeting for exploration programmes and
capital commitments.
Committee actions
• Noting that the FRC review covered the key
judgments which the committee and board
have previously considered.
Regulatory review
Financial
Reporting
Council
(“FRC”)
The FRC requested further information on
27 October 2017 across three principal areas:
• significant judgments – control of Sukari
Gold Mine (“SGM”);
Accounting
basis of
preparation
Going concern and
longer‑term viability
• sensitivity of estimates disclosures; and
• Review of the information request and reply
• alternative performance measures (“APMs”)
– free cash flow.
to the FRC.
Management actions
Management prepared a detailed and
comprehensive response addressing each of
the areas raised, for review by the committee.
• Preparing a detailed response to the FRC
with input from PwC.
• Collating relevant papers and supporting
documents to respond to the review.
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 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 22 to the financial statements;
• forecast gold price;
• production volumes; and
• costs and recovery rates.
These financial statements for the year ended 31 December 2017 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.
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT 134
135
AUDIT AND RISK REPORT
continued
Fair, balanced and understandable
The committee was satisfied that the
controls over the accuracy and
consistency of the information in the
2017 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 committee, in reviewing the
annual report and accounts, also
noted the need for concise reporting.
The committee has worked with
management to clearly demonstrate,
through carefully structured tables,
graphs and images, the linkages
between risk, the Company’s
strategic aims and the structure for
rewarding performance.
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 2017, 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, which the
committee are pleased to see have
increased in 2017 in line with the
improvements made to the control
environment. The committee also
agreed with the key audit risk areas
that were identified by PwC.
During the year the FRC carried out a
review of the 2016 annual report which
sought clarification on three areas:
i) significant judgments relating to the
control of SGM; ii) the sensitivity
analysis of estimates and disclosures;
and iii) disclosure of APMs relating to
free cash flow. A comprehensive reply
was approved by the committee and
sent to the FRC in December 2017 and
as at the date of this report there has
been no further correspondence.
Certain of the matters raised by the
FRC have been incorporated into the
2017 annual report, including
sensitivity analysis of estimates and
disclosures of APMs relating to free
cash flow.
External auditor effectiveness
The committee undertook a review of
the effectiveness of the external
auditor at the half‑year and annual
statutory audit. This review compared
the original audit plan against the
delivery of the audit. The committee
also reviewed the effectiveness of the
audit by considering the efficiency and
use of resources and the delivery and
relevance of the reporting. The
committee is pleased with the
improvements to the annual report
and response of the auditor to the
accelerated timeframe.
As part of the evaluation, the
committee completed a questionnaire
which also took into account the views
of the senior members of the finance
team and the CFO. Following the
evaluation process, any relevant
findings were relayed to the audit
partner and, where applicable, actions
were incorporated into the audit plan.
AUDIT AREA
Audit planning
OBSERVATIONS BY THE COMMITTEE
With an accelerated timeframe, careful planning is essential to ensure delivery of a quality
audit. The planning documents had sufficient detail and were presented to the committee in
a timely manner. The audit plan was adhered to by the auditors and the opinion released as
scheduled on 31 January 2018.
Leadership and communication
The committee notes that a new audit manager was introduced to the audit team this year
and worked well with the team who welcomed a fresh and challenging approach.
Assessment of independence
There were no areas that conflicted PwC’s independence. Please see below in relation to the
audit partner.
Audit costs
Internal controls and use of internal auditor
While the audit process is still substantive based, with continued improvement in the internal
control systems and the use of technology, the committee was pleased with the ability to
meet the accelerated timetable and therefore able to spend more time on material
judgments within the accounts. The committee noted that additional time and resource were
allocated to deal with the increase in compliance and regulation. The committee was
encouraged by the way the auditors shared information across the jurisdictions, to assist with
subsidiary audits which included SGM. The combined and joined up nature of the audit team
as well as the use of local Egyptian auditors in‑country is also welcomed. The fees year on
year have remained in line with expectations.
Now in the third year of internal audit, the committee will discuss with the external auditor the
extent to which work undertaken by the internal auditor could provide further assurance on
the internal control environment and additional support to the external auditor.
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.
The audit team visit Sukari regularly to
carry out inventory as well as control
and substantive testing. PwC carry 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 2017 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 in advance. Fees for
audit services incurred during the year
amounted to US$460k; there were
non‑audit services carried out by PwC
during the year of US$196k. Full details
are set out in note 24 to the financial
statements. Our policy on non‑audit
services and auditor independence
can be found on our website at
www.centamin.com/investors/
corporate‑governance.
Change to audit partner
The committee notes that as a former
PwC partner, having left PwC in 2016,
PwC and Alison Baker are required to
assess their independence given the
potential familiarity risk. The current
audit partner, Richard Spilsbury, and
Alison had worked together on other
clients (unrelated to Centamin) within
the last two years at PwC and
therefore Richard, for audit
independence purposes, is a ‘covered
person’ to Alison. Due to the
requirement of a mandatory ‘cooling
off period’ of two years, the current
audit partner will be required to step
down from the audit before Alison
joins the board. Richard Spilsbury has
served four of his possible five years as
audit partner on the Centamin account
and signed the audit opinion on the
2017 financial statements on
31 January 2018. With an appointment
date for Alison of 5 February 2018,
PwC have confirmed that they are not
aware of any ongoing independence
issues that impact the 2017 audit or
any independence issues arising from
the appointment of Alison Baker.
Jonathan Lambert, PwC partner from
2011, with over 20 years’ audit
experience, will replace Richard
Spilsbury following the 2017 audit.
The Company’s policy is to tender the
external audit every ten years. The last
audit tender was undertaken in 2014
when PwC were appointed auditor.
PwC have been auditor of the
Company for four years.
Auditor objectivity and independence
The committee continues to monitor
the auditor’s objectivity and
independence and is satisfied that
PwC and the group have appropriate
policies and procedures in place to
ensure that these requirements are
not compromised, as evidenced by
the change in audit partner.
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT 136
137
AUDIT AND RISK REPORT
continued
Internal auditor
BDO LLP, the group’s externally
appointed internal auditor, carried out
a detailed review of Centamin’s key
financial processes, risk and inventory
management and IT controls. The
internal audit team spent time onsite
at Sukari to carry out their review and
provide their findings to the
committee. The findings are
summarised in the table below.
The level of assurance over the design
and operational effectiveness was
deemed ‘substantial’, meaning there is
a sound system of internal control
designed to achieve system objectives
and the controls in place are being
consistently applied.
The committee considers the
effectiveness of the internal auditor
by reviewing the actions against the
original scoping document, any
improvements in controls over systems
or policies and the cost effectiveness
of the actions and assurance review.
As well as providing assurance over
key areas identified in the scoping
document, the committee assesses
the performance of the internal auditor
for areas of value add. In particular,
where the audit review process
provides recommendations to
management to improve systems of
controls and the implementation of
those recommendations is monitored
and reported back to the committee.
AREA AUDITED WORK CARRIED OUT
FINDINGS
Procurement and
contract
management
Comprehensive review of the tendering, contract
management and payment cycles with a focus on larger
material contracts and the design of and adherence to
the overall process at Sukari. The scope covered:
• tendering and procurement;
• contract management procedures;
• testing of contract payments (focus on accuracy and
pricing); and
• cash management.
Key financial
processing
A review of core financial processes was a follow‑up audit
following the recommendations raised in 2015.
A review of controls within specified key financial
processes covered the following:
• financial close processes; and
• gold book and sales cycle controls.
This follows and builds upon the work carried out in 2015
on the core financial controls.
Risk management
reporting
A review of the risk management reporting was a
follow‑up audit following the recommendations raised in
2015.
Inventory
management
The review of inventory management covered the
following key areas:
• stock levels;
• stock replenishment;
• stock classification;
• stock security and reconciliation; and
• management information.
IT penetration
testing
The penetration testing provided assurance over the
security of Centamin’s IT systems. This covered:
• 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.
There were a total of nine medium and two low rated
items reported. These related to updating site policies in
line with current practices, consistent application of the
policies and record keeping to demonstrate the
application of the policies. Remedial action has been
applied over these administrative and procedural aspects
of procurement and contract management.
There were two medium level findings relating to controls
over the workbook security and segregation of duties on
input and approval. Procedures have been updated to
remedy these findings.
The follow‑up report noted the improvements that had
been made in both internal and external reporting of
principal risks at a corporate level and wider operational
risks. An additional workshop, facilitated by the internal
auditor, will be carried out on site to assist further with
mapping risks across the business, assigning owners and
communicating identified risk factors to the wider
workforce.
There were one high, one medium and four low level
findings. These related to the reliability of record keeping
and controls, particularly over obsolete or damaged
stock. The findings have supported the decision to
improve the systems (both IT and procedural) which have
been rolled out during 2017 and resulted in a reduction in
stock holding values and a robust assessment of
provisions stock obsolescence.
The testing commenced in 2017 and will be concluded in
Q1 2018. To date, results have assisted the IT team to
build additional layers of security, particularly over
portable devices and at remote locations.
The committee will be working with
BDO LLP and management to agree a
scope of work for 2018.
The committee will monitor the
auditor’s progress this year and ensure
they continue to have access to the
required resources and information to
complete their scope in 2018.
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.
Control environment
While the board has overall
responsibility for ensuring the adequacy
of internal controls, the board has
delegated certain responsibilities to
this committee. These include
responsibility over monitoring the
effectiveness and design of policies
and internal control 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.
During the year, the committee
reviewed the overall control
environment, including specific
financial controls and procedures.
The review pulled heavily on the work
of both the external and internal
auditors and the work of management
to enhance the policies and
procedures and IT systems to
improve the control environment.
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.
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.
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. 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.
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.
Centamin plc Annual report 2017DIRECTORS’ REPORTCentamin plc Annual report 2017DIRECTORS’ REPORT 139
Centamin plc Annual report 2017
DIRECTORS’ REPORT
Targets in 2018
The committee considered the action
plan for 2018 and the key milestones
for the year. The areas of focus for
2018 include, but are not limited to,
the following:
• continued focus on cost reduction
and working capital management;
• continue to meet the financial and
reporting obligations whilst
meeting the accelerated timelines;
• review of regulatory compliance
and impacts on the finance
function, including cyber security
and GDPR;
• approval of the SGM audited
accounts for 2016/2017 and
allocation of profit share;
• conclude on the matters raised by
the FRC following their periodic
review of the 2016 accounts;
• scope the internal audit function to
ensure the tasks are aligned with
the business needs;
• roll out of IT upgrades for stock and
inventory;
• build and develop the finance
function in West Africa in
anticipation of developing a mine in
the region; and
• develop the treasury function and
identify opportunities to improve
yields on deposits.
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.
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.
Conclusion
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
AGM 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.
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.
Mark Arnesen
Chairman of the
audit and risk committee
31 January 2018
138
AUDIT AND RISK REPORT
continued
Risk assessment continued
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
Reviews 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 and risk reporting
SECONDARY RISK REVIEW
– EVALUATION
THIRD RISK REVIEW
– ASSURANCE
During the year, the audit and risk
committee and the board evaluated
their risk management processes and
reporting. The evaluation pulled on
the work of both the external and
internal auditors and the management
reports prepared in accordance with
the risk management framework.
The assessment considered the
principal risks and wider strategic,
corporate, operational and
environmental risks. The following
reports were prepared for the audit
and risk committee’s review:
• monthly and quarterly reporting on
the operational activity, including
enhanced reporting on any
significant operational and
corporate issues;
• comprehensive control environment
memorandum and
recommendations for further
improvement prepared by the
management team;
• environmental risk assessments
reported via the Carbon
Development Project (“CDP”);
• internal audit work;
• 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.
Having considered the risks in detail,
the principal risks have been identified
and are set out on pages 34 to 37.
The assessment carried out during the
year, which also took note of the work
carried out by the internal auditor,
concluded that there were adequate
procedures, polices and controls in
place at an operational level and that
the risks at a corporate level, taking
into account the Company’s strategic
objectives, had been adequately
identified.
The audit and risk committee and the
board are pleased to confirm that the
Company remains in compliance with
best practice guidelines and with the
Code and relevant Canadian
requirements.
Centamin plc Annual report 2017DIRECTORS’ REPORT 140
Centamin plc Annual report 2017
FINANCIAL STATEMENTS
DIRECTORS’ RESPONSIBILITIES
Directors’ responsibilities
in respect of the annual report
and financial statements
The directors are responsible for preparing
the annual report and the financial
statements in accordance with applicable
law and regulations.
Company law requires the directors to
prepare financial statements for each
financial year. Under that law the directors
have prepared the group financial
statements in accordance with International
Financial Reporting Standards (“IFRSs”) as
adopted by the European Union. Under
company law the directors must not
approve the group financial statements
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 the
financial statements, the directors are
required to:
• select suitable accounting policies and
then apply them consistently;
• state whether applicable IFRSs as
adopted by the European Union have
been followed, subject to any material
departures disclosed and explained in
the financial statements;
• make judgments and accounting
estimates that are reasonable and
prudent; and
• prepare the financial statements on the
going concern basis unless it is
inappropriate to presume that the
group will continue in business.
The directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the group’s
transactions and disclose with reasonable
accuracy at any time the financial position
of the group and enable them to ensure
that the financial statements and the
directors’ remuneration report comply with
The Companies (Jersey) Law, 1991 and, as
regards the group financial statements,
Article 4 of the IAS Regulation.
The directors are also responsible for
safeguarding the assets of the group and
hence for taking reasonable steps for the
prevention and detection of fraud and
other irregularities.
The directors are responsible for the
maintenance and integrity of the
Company’s website. Legislation in the
United Kingdom and Jersey governing the
preparation and dissemination of financial
statements may differ from legislation in
other jurisdictions.
The directors consider that the annual
report and financial statements, taken as a
whole, is fair, balanced and understandable
and provides the information necessary for
shareholders to assess the group’s
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 137 and 138 and the risk
management section on pages 34 to 37.
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 31 January 2018
and signed on their behalf by Andrew
Pardey (CEO) and Ross Jerrard (CFO).
Each of the directors, whose names and
functions are listed in the directors’ report,
confirm that, to the best of their
knowledge:
• the group financial statements, which
have been prepared in accordance with
IFRSs as adopted by the European
Union, give a true and fair view of the
assets, liabilities, financial position and
profit of the group; and
• the strategic report includes a fair
review of the development and
performance of the business and the
position of the group, together with a
description of the principal risks and
uncertainties that it faces.
In the case of each director in office at the
date the directors’ report is approved:
• so far as the director is aware, there is
no relevant audit information of which
the group’s auditors are unaware; and
• they have taken all the steps that they
ought to have taken as a director in
order to make themselves aware of any
relevant audit information and to
establish that the group’s auditors are
aware of that information.
On behalf of the board:
Andrew Pardey
Ross Jerrard
Chief executive officer Chief financial officer
31 January 2018
31 January 2018
INDEPENDENT AUDITOR’S REPORT
to the members of Centamin plc
Report on the audit of the financial
statements
Opinion
In our opinion, Centamin Plc’s group
financial statements (the “financial
statements”):
• give a true and fair view of the state of
the group’s affairs as at 31 December
2017 and of its profit and cash flows for
the year then ended;
• have been properly prepared in
accordance with IFRSs as adopted by
the European Union; and
• have been prepared in accordance with
the requirements of the Companies
(Jersey) Law 1991.
We have audited the financial statements,
included within the Annual Report, which
comprise: the consolidated statement of
financial position as at 31 December 2017;
the consolidated statement of
comprehensive income, the consolidated
statement of cash flows, and the
consolidated statement of changes in
equity for the year then ended; and the
notes to the financial statements, which
include a description of the significant
accounting policies.
Basis for opinion
We conducted our audit in accordance
with International Standards on Auditing
(UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further
described in the Auditors’ responsibilities
for the audit of the financial statements
section of our report. We believe that the
audit evidence we have obtained is
sufficient and appropriate to provide a
basis for our opinion.
Independence
We remained independent of the group in
accordance with the ethical requirements
that are relevant to our audit of the financial
statements in the UK, which includes the
FRC’s Ethical Standard, as applicable to
listed entities, and we have fulfilled our
other ethical responsibilities in accordance
with these requirements.
Our audit approach
Overview
• Overall group materiality: $9.5 million
(2016: $6.78 million), based on 5%of
three‑ year average of profit before tax,
after exceptional items, weighted on
production.
• 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. One component
and the parent entity 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 key audit matters was
performed by the Group
engagement team.
Materiality
Audit
Scope
Key Audit
Matters
141
Key Audit Matters
• The appeal before the Supreme
Administrative Court in Egypt
concerning the validity of the Sukari
Concession Agreement.
• The claim before the Administrative
Court concerning diesel fuel disputes.
• Amounts due to government with
respect to operating and exploration
properties.
Impairment of Exploration and
Evaluation Assets in West Africa.
• Reserves and Resources Statement.
•
The scope of our audit
As part of designing our audit, we
determined materiality and assessed the
risks of material misstatement in the
financial statements. In particular, we
looked at where the directors made
subjective judgements, 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
testing journals and evaluating whether
there was evidence of bias by the directors
that represented a risk of material
misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in
the auditors’ professional judgement, were
of most significance in the audit of the
financial statements of the current period
and include the most significant assessed
risks of material misstatement (whether or
not due to fraud) identified by the auditors,
including those which had the greatest
effect on: the overall audit strategy; the
allocation of resources in the audit; and
directing the efforts of the engagement
team. These matters, and any comments
we make on the results of our procedures
thereon, were addressed in the context of
our audit of the financial statements as a
whole, and in forming our opinion thereon,
and we do not provide a separate opinion
on these matters. This is not a complete list
of all risks identified by our audit.
Centamin plc Annual report 2017FINANCIAL STATEMENTS
142
143
INDEPENDENT AUDITOR’S REPORT CONTINUED
to the members of Centamin plc
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
The appeal before the Supreme Administrative Court in
Egypt concerning the validity of the Sukari Concession
Agreement
Refer to page 172 (note 22 to the financial statements) and
page 36 (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 site
will be reduced to the area of 3km2 determined by the
Administrative Court of first instance. This may lead to the risk of
material impairment of property, plant and equipment outside of
the 3km2 area as the tailings dam spans across this boundary and
materially impacts Sukari operations. The outcome of this case is
subject to significant uncertainty due to ongoing political, social
and economic volatility in Egypt.
We discussed the legal case with the Group’s legal advisors, 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 legal
counsel by considering professional qualifications, fee arrangements
and other relevant factors. These procedures satisfied us 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 agreed the disclosures in note 22 to the financial statements with
the results of our audit work and determined that they were consistent
with the requirements of IFRSs as adopted by the European Union.
The claim before the Administrative Court concerning diesel
fuel disputes
Refer to page 172 (note 22 to the financial statements) and
page 36 (Principal risks).
We discussed the legal fuel subsidy cases with the Group’s legal
advisors, and considered appropriate documentation to understand the
legal position and to evaluate the directors’ assessment of the outcome
of the case.
The Group is involved in an ongoing legal case relating to
historical and current fuel subsidies. The potential amount that
could be recouped by the Group relating to the current subsidy
case is $274 million and the potential amount that the Group
could have to pay if they lose the historical case is EGP403 million
(approximately $22.7 million at the exchange rate as at
31 December 2017).
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.
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
22 to the financial statements. No contingent asset has been
recognised.
Amounts due to government with respect to operating and
exploration properties
Refer to page 160 (note 7 to the financial statements) and
page 34 (Principal risks).
The Group operates across a number of jurisdictions and, like
most groups, is subject to periodic challenges by 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 judgement of the probable amount of the
profit share liability.
As at 31 December 2017 the Group has an expense of
$112.6 million and a net payable of $5 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 assessed the competence, capability and objectivity of 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 also considered the sufficiency of the disclosure regarding the
case and found that it was consistent with the requirements of IFRSs
as adopted by the European Union 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.
We also considered the sufficiency of the disclosure regarding the
case and found that it was consistent with the requirements of IFRSs
as adopted by the European Union and gave a balanced description
of the case.
Impairment of Exploration and Evaluation Assets in
West Africa
We examined management’s impairment triggers assessment for
Exploration and Evaluation assets in West Africa.
Refer to page 168 (note 14 to the financial statements) and
page 36 (Principal risks).
The Group has made substantial investment in its exploration
program in West Africa in recent years. The capitalised amount is
$140 million. An impairment decision would be likely to have a
material impact on earnings in the period.
As these projects are nearing a development decision there is an
increased possibility of impairment triggers being present.
Reserves and resources statement
Refer to page 157 (note 4 to the financial statements) and
page 36 (Principal risks).
Management have updated the reserves and resources
statement as of 30 June 2017. The statement is the key source
of information underpinning the key areas of the audit including
the carrying value of the mining assets, accounting for mine
development properties, the depreciation charge and the asset
retirement obligations.
We performed procedures to confirm that licences held by the Group
remain valid. We have challenged management on their future plans for
the West African region. We have corroborated these plans to future
budgeted expenditure for the region. We have reviewed Board reports
and minutes to confirm ongoing exploration activity continues pending
decision in any future development plan.
We performed procedures to identify whether any impairment
triggers under the specific requirements of IFRS 6 had been identified
in respect of exploration and evaluation. We did not identify any
impairment triggers.
We reviewed the updated reserve and resource statements
and performed extensive discussions with senior management
and management’s qualified external expert over the key
assumptions applied.
We assessed the objectivity and competence of management’s expert
who performed the supervision over the preparation of the statement.
We have reviewed management’s updated estimates of the carrying
value of the mining assets, accounting for the mine development
properties, the updated depreciation charge estimates and the asset
requirement obligations.
We agreed the disclosures in the notes 4 and 28 to the financial
statements with the results of our audit work and determined that they
were consistent with the requirements of IFRS as adopted by the
European Union.
How we tailored the audit scope
We tailored the scope of our audit to
ensure that we performed enough work to
be able to give an opinion on the financial
statements as a whole, taking into account
the structure of the group, the accounting
processes and controls, and the industry in
which it operates.
Centamin plc is listed on the London Stock
Exchange and the Toronto Stock Exchange.
For compliance with Toronto Stock
Exchange regulations and Canadian
statutory requirements, the group
produces separate financial statements.
We provide a separate auditors’ report on
those financial statements.
The Group’s principal operation is the
Sukari Gold mine in Egypt. Production
continues at high levels and this together
with the positive impact on profitability of
gold prices set the context for our audit in
2017. In addition to the operation of Sukari
the Group continues its exploration
programs in Burkina Faso and Côte
d’Ivoire.
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 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.
Materiality
The scope of our audit was influenced by
our application of materiality. We set
certain quantitative thresholds for
materiality. These, together with qualitative
considerations, helped us to determine the
scope of our audit and the nature, timing
and extent of our audit procedures on the
individual financial statement line items
and disclosures and in evaluating the effect
of misstatements, both individually and in
aggregate on the financial statements as a
whole.
Based on our professional judgement, we
determined materiality for the financial
statements as a whole as follows:
Overall group $9.5 million
materiality
(2016: $6.78 million).
How we
determined it
5% of three‑ year
average of profit
before tax, after
exceptional items,
weighted on production.
Rationale for We used the profit
benchmark
applied
before tax after
exceptional items (PBTAEI)
benchmark and took a
three‑year weighted
average based on
production volumes since
the large increase in
production following the
upgrade of the Sukari
Plant. A three‑year
weighted average of
PBTAEI also allows for
volatility of gold price
which is out of
management’s control.
We chose PBTAEI as it is
the key indicator of the
financial performance of
the group.
For each component in the scope of our
group audit, we allocated a materiality that
is less than our overall group materiality.
The range of materiality allocated across
components was $8.2 million to $3 million.
We agreed with the Audit Committee that
we would report to them misstatements
identified during our audit above $475,000
(2016: $338,000) as well as misstatements
below that amount that, in our view,
warranted reporting for qualitative reasons.
Centamin plc Annual report 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS 144
145
INDEPENDENT AUDITOR’S REPORT CONTINUED
to the members of Centamin plc
Going concern
In accordance with ISAs (UK) we report as follows:
REPORTING OBLIGATION
OUTCOME
We are required to report if we have anything material to add or
draw attention to in respect of the directors’ statement in the
financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting in
preparing the financial statements and the directors’
identification of any material uncertainties to the group’s ability
to continue as a going concern over a period of at least twelve
months from the date of approval of the financial statements.
We are required to report if the directors’ statement
relating to Going Concern in accordance with Listing Rule
9.8.6R(3) is materially inconsistent with our knowledge
obtained in the audit.
We have nothing material to add or to draw attention to.
However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the group’s
ability to continue as a going concern.
We have nothing to report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’
report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the
other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this
report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are
required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) and the Listing Rules of
the Financial Conduct Authority (FCA) require us also to report certain opinions and matters as described below (required by ISAs
(UK) unless otherwise stated).
The directors’ assessment of the prospects of the group and of the principal risks that would threaten the solvency or liquidity
of the group
We have nothing material to add or draw attention to regarding:
• The directors’ confirmation on page 140 of the Annual Report that they have carried out a robust assessment of the principal risks facing
the group, including those that would threaten its business model, future performance, solvency or liquidity.
• The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
• The directors’ explanation on page 31 of the Annual Report 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 to report having performed a review of the directors’ statement that they have carried out a robust assessment of the
principal risks facing the group and statement 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 UK Corporate Governance Code (the “Code”); and considering whether the
statements are consistent with the knowledge and understanding of the group and its environment obtained in the course of the audit.
(Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
• The statement given by the directors, on page 140, that they consider the Annual Report taken as a whole to be fair, balanced and
understandable, and provides the information necessary for the members to assess the group’s position and performance, business
model and strategy is materially inconsistent with our knowledge of the group obtained in the course of performing our audit.
• The section of the Annual Report on page 131 describing the work of the Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
• The directors’ statement relating to the parent company’s compliance with the Code does not properly disclose a departure from a
relevant provision of the Code specified, under the Listing Rules, for review by the auditors.
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.
In our opinion, the information given in the
Corporate Governance Statement set out
on pages 137 and 138, as well as page 84,
with respect to internal control and risk
management systems and about share
capital structures is consistent with the
financial statements.
Responsibilities for the financial
statements and the audit
Responsibilities of the directors for the
financial statements
As explained more fully in the Directors’
Responsibilities Statement set out on page
140, the directors are responsible for the
preparation of the financial statements in
accordance with the applicable framework
and for being satisfied that they give a true
and fair view. The directors are also
responsible for such internal control as they
determine is necessary to enable the
preparation of financial statements that are
free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the
directors are responsible for assessing the
group’s ability to continue as a going
concern, disclosing as applicable, matters
related to going concern and using the
going concern basis of accounting unless
the directors either intend to liquidate the
group or to cease operations, or have no
realistic alternative but to do so.
Auditors’ responsibilities for the audit
of the financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditors’
report that includes our opinion.
Reasonable assurance is a high level of
assurance, but is not a guarantee that an
audit conducted in accordance with ISAs
(UK) will always detect a material
misstatement when it exists. Misstatements
can arise from fraud or error and are
considered material if, individually or in the
aggregate, they could reasonably be
expected to influence the economic
decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities
for the audit of the financial statements is
located on the FRC’s website at: www.frc.
org.uk/auditorsresponsibilities. This
description forms part of our auditors’
report.
Use of this report
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.
Other required reporting
Companies (Jersey) Law 1991
exception reporting
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.
Richard Spilsbury
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Recognised
Auditors
London
31 January 2018
Centamin plc Annual report 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS
146
147
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2017
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2017
Revenue
Cost of sales
Gross profit
Other income
Other operating costs
Impairment of exploration and evaluation assets
Finance income
Profit for the year before tax
Tax
Profit for the year 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 (US cents per share)
Diluted (US cents per share)
Earnings per share after profit share:
Basic (US cents per share)
Diluted (US cents per share)
31 December
2017
US$’000
31 December
2016
US$’000
675,510
(414,341)
261,169
680
687,387
(389,276)
298,111
—
(36,927)
(32,077)
(3,557)
2,729
(122)
917
224,094
266,829
(2,063)
222,031
(112,629)
109,402
(821)
266,008
(51,253)
214,755
109,402
214,755
(91)
(91)
45
45
109,311
214,800
19.303
19.154
9.511
9.438
23.170
23.054
18.705
18.612
Notes
5
6
6
14
6
8
7
15
26
26
26
26
The above audited consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Non‑current assets
Property, plant and equipment
Exploration and evaluation asset
Prepayments
Other receivables
Total non‑current assets
Current assets
Inventories
Available‑for‑sale financial assets
Trade and other receivables
Prepayments
Cash and cash equivalents
Total current assets
Total assets
Non‑current liabilities
Provisions
Total non‑current liabilities
Current liabilities
Trade and other payables
Tax liabilities
Provisions
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share option reserve
Accumulated profits
Total equity attributable to:
– owners of the parent
Total equity
31 December
2017
US$’000
31 December
2016
US$’000
Notes
13
14
12
10
11
15
10
12
27
17
16
8
17
18
19
851,099
168,832
—
96
868,926
153,918
295
81
1,020,027
1,023,220
105,210
128,582
125
34,467
9,793
359,680
509,275
130
24,870
7,508
399,873
560,963
1,529,302
1,584,183
10,961
10,961
56,585
469
9,311
66,365
77,326
7,697
7,697
47,991
—
3,976
51,967
59,664
1,451,976
1,524,519
668,732
4,323
778,921
667,472
3,048
853,999
1,451,976
1,451,976
1,524,519
1,524,519
The above audited consolidated statement of financial position should be read in conjunction with the accompanying notes.
The consolidated financial statements were approved by the board of directors on 31 January 2018 and signed on its behalf by:
Andrew Pardey
Chief executive officer
31 January 2018
Ross Jerrard
Chief financial officer
31 January 2018
Centamin plc Annual report 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS
148
149
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2017
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2017
Balance as at 1 January 2017
Profit for the year after tax
EMRA profit share
Other comprehensive income for the year
Total comprehensive income for the year
Issue of shares
Transfer of share‑based payments
Recognition of share‑based payments
Dividend paid – shareholders
Balance as at 31 December 2017
Balance as at 1 January 2016
Profit for the year after tax
EMRA profit share
Other comprehensive income for the year
Total comprehensive income for the year
Issue of shares
Transfer of share‑based payments
Recognition of share‑based payments
Dividend paid – shareholders
Balance as at 31 December 2016
Issued
capital
US$’000
667,472
—
—
—
—
—
1,260
—
—
Share
option Accumulated
profits
reserve
US$’000
US$’000
Total
equity
US$’000
3,048
853,999
1,524,519
—
—
—
—
—
(1,260)
2,535
222,031
222,031
(112,629)
(112,629)
(91)
(91)
109,311
109,311
—
—
—
—
—
2,535
—
(184,389)
(184,389)
668,732
4,323
778,921
1,451,976
Accumulated
profits
US$’000
685,273
266,008
(51,253)
45
Total
equity
US$’000
1,353,332
266,008
(51,253)
45
Issued
capital
US$’000
665,590
—
—
—
—
(17)
1,899
—
—
667,472
Share
option
reserve
US$’000
2,469
—
—
—
—
—
(1,899)
2,478
—
3,048
Cash flows from operating activities
Cash generated in operating activities
Income tax refund received
Income tax paid
Finance income
Net cash generated by operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Exploration and evaluation expenditure
Finance income
Net cash used in investing activities
Cash flows from financing activities
Dividend paid
EMRA profit share paid
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effect of foreign exchange rate changes
31 December
2017
US$’000
31 December
2016
US$’000
Notes
27(b)
363,110
374,811
108
(1,678)
(2,729)
—
(7,599)
(917)
358,811
366,295
(76,576)
(30,896)
2,729
(57,204)
(49,487)
917
(104,743)
(105,774)
(184,389)
(111,629)
(296,018)
(41,950)
399,873
1,757
(46,073)
(18,503)
(64,576)
195,945
199,616
4,312
399,873
6
7
The above audited consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
214,800
214,800
Cash and cash equivalents at the end of the period
27
359,680
—
—
—
(46,073)
(17)
—
2,478
(46,073)
853,999
1,524,519
The above audited consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Centamin plc Annual report 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS
150
151
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2017
1. General information
Centamin plc (the “Company”) is a listed
public company, incorporated and
domiciled in Jersey and operating through
subsidiaries and jointly controlled entities
operating in Egypt, Burkina Faso, Côte
d’Ivoire, United Kingdom and Australia.
It is the parent company of the group,
comprising the Company and its
subsidiaries and joint arrangements.
Registered office and principal place
of business:
Centamin plc
2 Mulcaster Street
St Helier, Jersey JE2 3NJ
The nature of the group’s operations and
its principal activities are set out in the
directors’ report and the strategic report
of the annual report.
2. Adoption of new and
revised accounting standards
Standards not affecting the
reported results or 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 has
assessed the impact of IFRS 15 and
determined that its application will result in
no changes in its revenue recognition. 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 three
measurement categories: those measured
at fair value through profit and loss, those
measured at fair value through other
comprehensive income 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
impairment model, hedging rules and
derecognition rules have also been
amended under IFRS 9. The group believes
there is no material impact of IFRS 9 on
current results, had it been effective in the
year ended 31 December 2017, 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. The group
has considered the impact of IFRS 9 on the
accounting for assets currently held as
available‑for‑sale and determined it not be
material. 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
most 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 leases will
come on balance sheet on adoption of
IFRS 16 and the impact is still being
assessed. IFRS 16 will be applied for annual
periods beginning on or after 1 January
2019 with the cumulative effect of initially
applying the standard recognised at the
date of initial application.
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 (“AUD”).
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 2017, 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 2017. 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 to the financial statement presentation adopted for the current year. These
are categorisation changes for comparison purposes only and have no effect on results as previously reported. The changes included:
Stock obsolescence provision reallocated to inventories(1)
(Decrease) in inventory
Decrease in provisions
Prepayments reallocation(2)
Increase in prepayments
(Decrease) in inventory
Year ended
31 December
2017
US$’000
Year ended
31 December
2016
US$’000
(5,136)
5,136
6,272
(6,272)
(2,500)
2,500
5,480
(5,480)
(1) Per IAS 2 ‘Inventories’, it is required to show the provision for obsolete inventory within the inventory note as the inventory balance in the statement of
financial position should be net of such a provision; as such this has been reclassified from provisions to inventory.
(2) Prepayments for items within the inventory balance were identified by management for which the risks and rewards of ownership had not passed, and as
such these have been reclassified from inventory to prepayments.
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 Mine (“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 23) 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 2017 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 22, 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.
Centamin plc Annual report 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS
152
153
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
3. Summary of significant
accounting policies continued
Going concern continued
In the unlikely event that the group is
unsuccessful in either or both of its legal
actions, and that the operating activities
are restricted to a reduced area, it is the
directors’ belief that the group will be able
to continue as going concern.
Having assessed the principal risks and the
other matters discussed in connection with
the long term viability statement (refer to
the risk management report included
within the annual report), the directors
considered it appropriate to adopt the
going concern basis of accounting in
preparing the financial statements.
Accounting policies
Accounting policies are selected and
applied in a manner which ensures that the
resulting financial statements satisfy the
concepts of relevance and reliability,
thereby ensuring that the substance of the
underlying transactions or other events is
reported. These policies have been
consistently applied to all the years
presented, unless otherwise stated.
The following significant policies have been
adopted in the preparation and
presentation of these financial statements:
Cash and cash equivalents
Other financial liabilities
Other financial liabilities, including
borrowings, are initially measured at
fair value, net of transaction costs.
Other financial liabilities are subsequently
measured at amortised cost using the
effective interest method, with interest
expense recognised on an effective
yield basis.
Derecognition of financial liabilities
The group derecognises financial liabilities
when, and only when, the group’s
obligations are discharged, cancelled or
they expire.
Financial assets
Financial assets are recognised when, and
only when, the entity becomes a party to
the contractual provisions of the
instrument, 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’s 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.
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.
An entity shall derecognise a financial
asset when, and only when the contractual
rights to the cash flows from the financial
asset expire or it transfers the financial
asset by transferring its rights to the related
cash flows.
Financial instruments
Effective interest method
Financial assets and financial liabilities are
recognised in the group’s balance sheet
when the group becomes a party to the
contractual provisions of the instrument.
Financial liabilities and equity
Debt and equity instruments are classified
as either financial liabilities or as equity in
accordance with the substance of the
contractual arrangement as defined below.
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.
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 28. 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.
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.
Derecognition of financial assets
The group derecognises a financial asset
only when the contractual rights to the
cash flows from the asset expire, or when
it transfers the financial asset and
substantially all the risks and rewards of
ownership of the asset to another entity.
If the group neither transfers nor retains
substantially all the risks and rewards of
ownership and continues to control the
transferred asset, the group recognises its
retained interest in the asset and an
associated liability for amounts it may have
to pay. If the group retains substantially all
the risks and rewards of ownership of a
transferred financial asset, the group
continues to recognise the financial asset
and also recognises a collateralised
borrowing for the proceeds received.
Employee benefits
A liability is recognised for benefits
accruing to employees in respect of wages
and salaries, annual leave, long service
leave and sick leave when it is probable
that settlement will be required and they
are capable of being measured reliably.
Liabilities recognised in respect of
employee benefits expected to be settled
within twelve months, are measured at
their nominal values using the
remuneration rate expected to apply at the
time of settlement. Liabilities recognised in
respect of employee benefits which are not
expected to be settled within twelve
months are measured at the present value
of the estimated future cash flows to be
made by the consolidated entity in respect
of services provided by employees up to
reporting date.
Superannuation
The Company contributes to, but does not
participate in, compulsory superannuation
funds (defined contribution schemes) on
behalf of the employees and directors in
respect of salaries and directors’ fees paid.
Contributions are charged against income
as they are made.
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
is also met:
• 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.
Exploration and evaluation assets are
assessed for impairment when facts and
circumstances (as defined in IFRS 6
‘Exploration for and evaluation of mineral
resources’) suggest that the carrying
amount of exploration and evaluation
assets may exceed its recoverable amount.
The recoverable amount of the exploration
and evaluation assets (or the cash
generating unit(s) to which it has been
allocated, being no larger than the relevant
area of interest) is estimated to determine
the extent of the impairment loss (if any).
Where an impairment loss subsequently
reverses, the carrying amount of the asset
is increased to the revised estimate of its
recoverable amount, but only to the extent
that the increased carrying amount does
not exceed the carrying amount that would
have been determined had no impairment
loss been recognised for the asset in
previous years.
Where a decision is made to proceed with
development in respect of a particular area
of interest, the relevant exploration and
evaluation asset is tested for impairment,
reclassified to mine development properties,
and then amortised over the life of the
reserves associated with the area of interest
once mining operations have commenced.
Mine development expenditure is
recognised at cost less accumulated
amortisation and any impairment losses.
When commercial production in an area of
interest has commenced, the associated
costs are amortised over the estimated
economic life of the mine on a units of
production basis.
Changes in factors such as estimates of
proved and probable reserves that affect
unit of production calculations are dealt
with on a prospective basis.
Foreign currencies
The individual financial statements of each
group entity are presented in its functional
currency being the currency of the primary
economic environment in which the entity
operates. For the purpose of the
consolidated financial statements, the
results and financial position of each entity
are expressed in US dollars, which is the
functional currency of most companies in
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.
Centamin plc Annual report 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS 154
155
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
3. Summary of significant
accounting policies continued
Accounting policies continued
Segment reporting
Operating segments are reported in
a manner consistent with the internal
reporting provided to the chief operating
decision‑maker. The chief operating
decision‑maker, who is responsible
for allocating resources and assessing
performance of the operating
segments, has been identified as the
board of directors.
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.
Inventory comprises ore stockpiles, gold
in circuit and finished goods which are
valued by applying absorption costing
methodology.
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 23).
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,
net of any pre‑production revenues.
Amortisation is first charged to new mine
development ventures from the date of
first commercial production. Amortisation
of mine properties is on a unit of
production basis resulting in an
amortisation charge proportional to the
depletion of the proved and probable ore
reserves. The unit of production can be on
a 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 unit of
production basis, whereby the
denominator is estimated ounces of gold in
proven and probable reserves within that
ore block or area where it is considered
probable that those resources will be
extracted economically.
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
orebody) associated with the stripping
activity will flow to the entity;
• the entity can identify the component
of the orebody 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 orebody that becomes
more accessible as a result of the stripping
activity. The stripping activity asset is
depreciated using a unit of production
method based on the total ounces to be
produced over the life of the component
of the orebody.
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.
As at 31 December 2017, no stripping costs
have been deferred.
Impairment of assets
(other than exploration and
evaluation and financial assets)
At each reporting date, the group reviews
the carrying amounts of its tangible and
intangible assets to determine whether there
is any indication that those assets have
suffered an impairment loss. If any such
indication exists, the recoverable amount of
the asset is estimated in order to determine
the extent of the impairment loss (if any).
For the purposes of assessing impairment,
assets are grouped at the lowest levels for
which there are largely independent cash
inflows (cash generating units).
Recoverable amount is the higher of fair
value loss costs to sell and value in use. In
assessing value in use, the estimated future
cash flows are discounted to their present
value using a pre‑tax discount rate that
reflects current market assessment of the
time value of money and the risks specific
to the asset for which the estimates of
future flows have not been adjusted.
If the recoverable amount of a cash
generating unit is estimated to be less than
its carrying amount, the carrying amount of
the cash generating unit is reduced to its
recoverable amount. Where an impairment
loss subsequently reverses, the carrying
amount of the cash generating unit is
increased to the revised estimate of its
recoverable amount, but only to the extent
that the increased carrying amount does
not exceed the carrying amount that would
have been determined had no impairment
loss been recognised for the cash
generating unit in prior years.
A reversal of an impairment loss is
recognised immediately in profit or loss,
unless the relevant asset is carried at a
revalued amount, in which case the reversal
of an impairment loss is treated as a
revaluation increase.
Revenue
Revenue is measured at the fair value of the
consideration received or receivable for
goods and services in the normal course of
business, net of discounts, VAT and other
sales‑related taxes.
Sale of goods
Revenue from the sale of mineral
production is recognised when the group
has passed the significant risks and rewards
of ownership of the mineral production to
the buyer, it is probable that economic
benefits associated with the transaction will
flow to the group, the sales price can be
measured reliably, and the group has no
significant continuing involvement and the
costs incurred or to be incurred in respect
of the transaction can be measured
reliably. This is when insurance risk has
passed to the buyer and the goods have
been collected at the agreed location.
Where the terms of the executed sales
agreement allow for an adjustment to the
sales price based on a survey of the mineral
production by the buyer (for instance an
assay for gold content), recognition of the
revenue from the sale of mineral production
is based on the most recently determined
estimate of product specifications.
Pre‑production revenues
Income derived by the entity prior to the
date of commercial production is offset
against the expenditure capitalised and
carried in the consolidated statement of
financial position. All revenues recognised
after commencement of commercial
production are recognised in accordance
with the revenue policy stated above.
The commencement date of commercial
production is determined when stable
and sustained production capacity has
been achieved.
Production royalty
The Arab Republic of Egypt (“ARE”) is
entitled to a royalty of 3% of net sales
revenue (revenue net of freight and refining
costs) as defined from the sale of gold and
associated minerals from the Sukari Gold
Mine. This royalty is calculated and
recognised on receipt of the final certificate
of analysis document received from the
refinery. Due to its nature, this royalty is not
recognised in cost of sales but rather in
other operating costs.
Other income
Interest income
Interest income is recognised when it is
probable that the economic benefits will
flow to the group and the amount of
income can be measured reliably. Interest
income is accrued on a time basis, by
reference to the principal outstanding and
at the effective interest rate applicable,
which is the rate that exactly discounts
estimated future cash receipts through the
expected life of the financial asset to that
asset’s net carrying amount.
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.
Centamin plc Annual report 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS
156
157
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
3. Summary of significant
accounting policies continued
Accounting policies continued
Share‑based payments continued
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 20. 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 purchase the
Company’s equity share capital, the
consideration paid is deducted from the
total shareholders’ equity of the group
and/or of the Company as treasury shares
until they are cancelled. Where such shares
are subsequently sold or reissued, any
consideration received is included in
shareholders’ equity of the group and/or
the Company.
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.
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.
Ore reserves
Estimates of recoverable quantities of
reserves include assumptions on
commodity prices, exchange rates,
discount rates and production costs for
future cash flows. It also involves
assessment and judgment of complex
geological models. The economic,
geological and technical factors used to
estimate ore reserves may change from
period to period. Changes in ore reserves
affect the carrying values of mine
properties, property, plant and equipment,
provision for rehabilitation assets and
deferred taxes. Ore reserves are integral to
the amount of depreciation and
amortisation charged to the consolidated
statement of comprehensive income and
the calculation in the valuation of inventory.
Production forecasts from the underground
mine at Sukari are partly based on
estimates regarding future resource and
reserve growth. It should be specifically
noted that the potential quantity and grade
from the Sukari underground mine is
conceptual in nature, that there has been
insufficient exploration to define a mineral
resource and that it is uncertain if further
exploration will result in the target being
delineated as a mineral resource.
Mineral reserve and resource statement
The group published a mineral reserve and
resource statement for the Sukari Gold
Mine on 10 January 2018 with an effective
date of 30 June 2017. The group reports its
mineral resources and ore reserves in
accordance with NI 43‑101. The most
current statement has used an assumed
gold price of US$1,300 per ounce as a
basis of preparation. The information on
the mineral resources and ore reserves is
prepared by qualified persons as defined
by the instrument.
There are numerous uncertainties inherent
in estimating mineral resources and ore
reserves. Assumptions that are valid at the
time of estimation may change significantly
when new information becomes available.
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 live 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 impairment 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.
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.
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 22 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 Concession
Agreement under which Sukari operates,
are given in note 22 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 of the national fuel
subsidy, it is not currently possible to
quantify with sufficient precision the
impact of any restrictions placed on the
terms of the group’s operations under the
Concession Agreement.
Every action is being taken to contest these
decisions, including the making of formal
legal appeals and, although their resolution
may still take some time, management
remains confident that a satisfactory
outcome will ultimately be achieved.
In the meantime, however, the group 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.
Centamin plc Annual report 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS 158
159
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
4. Critical accounting judgments
continued
Critical judgments in applying
the entity’s accounting policies continued
Litigation continued
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.
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 12 months from
31 January 2018. Key assumptions
underpinning this forecast include:
•
litigation as discussed in note 22 to the
financial statements;
forecast gold price;
•
• production volumes; and
• costs and recovery rates.
These financial statements for the year
ended 31 December 2017 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 Mine (“SGM”)
SGM is consolidated within the Centamin
group of companies, reflecting the
substance and economic reality of the
5. Revenue
Concession Agreement (see note 23 to the
financial statements). The IFRS 10 definition
of control encompasses three distinct
principles, which, if present, identify the
existence of control by an investor over
an investee, hence forming a parent‑
subsidiary relationship:
• power over the investee;
• exposure, or rights, to variable returns
from its involvement with the investee;
and
• the ability to use its power over the
investee to affect the amount of the
investor’s returns.
An investor has power over an investee
when the investor has existing rights that
give it the current ability to direct the
relevant activities (i.e. the activities that
significantly affect the investee’s returns).
The following is a list of some of the
relevant activities which the Company
directs through Pharaoh Gold Mines NL
(holder of an Egyptian branch) in relation to
the operation of the Sukari Gold Mine:
• conducting exploration, development,
production and marketing operations;
• co‑ordinating SGM operations and
activities, including its dealings with all
contractors and subcontractors;
• bearing ultimate responsibility for all
•
•
costs and expenses required in carrying
out any and all operations under the CA;
funding the operations of SGM and
recovering costs and expenses
throughout the life of the mine (i.e.
exploration, development and
production phases);
funding additional exploration and
expansion programmes during the
production phase;
• preparing SGM’s work programmes and
budget covering the operations to be
carried out throughout the life of the
mine and approval of the same;
• approval of the annual budget;
• approval of expenditure and recharges;
• custody of SGM’s stock and
management of its funds;
• shipping, marketing and selling of all
gold and associated metals produced;
• entering into and managing gold sales
or hedging contracts and forward sale
agreements; and
• appointment of the chairman of the
board of directors.
The Company is therefore exposed to the
variable returns, has the ability to affect the
amount of those returns, has power over
SGM through its ability to direct its relevant
activities and therefore meets all the
criteria to consolidate SGM’s results within
the Centamin group of companies to
reflect the substance and economic reality
of the Concession Agreement.
Other critical accounting judgments,
estimates and assumptions are discussed
in the following notes:
Gold price
The realised gold price has a direct impact
on the group’s post‑tax profit for the year
and cash generation. Please refer to market
risk, note 28(c).
Fuel price
Diesel Fuel Oil is one of the single biggest
individual costs for the operation. Any
variation in the fuel price has a direct
impact on the mine production costs.
Please refer to market risk, note 28(d).
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.
Please refer to market risk, note 28(j).
6. Profit before tax
Profit for the year has been arrived at after crediting/(charging) the following gains/(losses) and expenses:
Finance income
Interest received
Expenses
Cost of sales
31 December
2017
US$’000
31 December
2016
US$’000
2,729
917
Mine production costs (including costs related to gold produced from Cleopatra)
(308,892)
(288,317)
Mine production costs related to gold produced from Cleopatra
– transferred to exploration and evaluation asset
Mine production costs
Movement in inventory
Depreciation and amortisation
Other operating costs
Corporate compliance
Auditing fees
Corporate consultants
Communications and IT
Salaries and wages
Travel, accommodation and entertainment
Office rents and lease payment
Other administration expenses
Insurances
Other taxes
Employee equity settled share‑based payments
Corporate costs (sub‑total)
Impairment reversal
Other provisions
Provision for stock obsolescence
Office related depreciation
Fixed royalty – attributable to the Egyptian government
Foreign exchange gain/(loss), net
Finance charges
Loss on disposal of asset
1,329
—
(307,563)
(288,317)
(2,490)
(104,288)
(414,341)
5,926
(106,885)
(389,276)
31 December
2017
US$’000
31 December
2016
US$’000
(1,281)
(656)
(338)
(188)
(1,746)
(641)
(370)
(169)
(6,202)
(5,353)
(731)
(166)
(193)
(387)
(3)
(2,535)
(12,680)
—
(1,170)
(2,636)
(274)
(20,404)
1,470
(341)
(263)
(629)
(859)
(156)
(207)
(225)
(1,400)
(2,478)
(13,604)
484
—
(2,500)
(87)
(20,575)
5,025
(239)
—
(581)
(36,927)
(32,077)
An analysis of the group’s revenue for the year, from continuing operations, is as follows:
Provision for restoration and rehabilitation – unwinding of discount
Gold sales (including pre‑production gold sales related to Cleopatra)
Less: pre‑production gold sales related to Cleopatra – transferred to exploration and evaluation asset
Gold sales (excluding pre‑production gold sales related to Cleopatra)
Silver sales
All gold and silver sales during the year were made to a single customer in North America.
31 December
2017
US$’000
31 December
2016
US$’000
680,513
686,306
(6,170)
674,343
1,167
675,510
—
686,306
1,081
687,387
Centamin plc Annual report 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS
160
161
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
7. EMRA profit share
8. Tax
EMRA is entitled to a share of 50% of SGM’s net production surplus which can be defined as ‘revenue less payment of the fixed royalty
to Arab Republic of Egypt (“ARE”) and recoverable costs’. However, in accordance with the terms of the Concession Agreement, in the
first and second years in which there is a profit share, PGM will be entitled to an additional 10% of net production surplus and an
additional 5% in the third and fourth years.
Payments made to EMRA pursuant to the provisions of the Concession Agreement are recognised as a variable charge in the income
statement (below profit after tax) of Centamin, which leads to a reduction in the earnings per share. The profit share payments during
the year will be reconciled against SGM’s audited financial statements. The SGM financial statements for the year ended 30 June 2017
have not been signed off at the date of this report and are in the process of being audited.
Certain terms of the Concession Agreement and amounts in the cost recovery model may also vary depending on interpretation and
management and the board making various judgments and estimates that can affect the amounts recognised in the financial
statements.
a) Income statement and balance sheet impact
Income statement
EMRA profit share(1)
Balance sheet
EMRA opening profit share accrual
EMRA accrual/(release)
EMRA closing profit share accrual
31 December
2017
US$’000
31 December
2016
US$’000
(112,629)
(51,253)
4,000
1,000
5,000
—
4,000
4,000
(1) Profit share commenced during the third quarter of 2016.
Any variation between payments made during the year (which are based on the Company’s estimates) and the SGM audited financial
statements, may result in a balance due and payable to EMRA or advances to be offset against future distributions. This will be reflected
as an accrual or prepayment in each reporting period.
b) Cash flow statement impact
31 December
2017
US$’000
31 December
2016
US$’000
Cash flows
EMRA cash payments during the year(1)
(1) Profit share commenced during the third quarter of 2016.
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. All profit share payments will be reconciled against SGM’s audited June
financial statements for current and future periods.
c) SGM cash flow statement extract
In order to reconcile the cash payments made during the period, the SGM cash flow statement is tabled below:
Cash flows
Cash available for profit share(1)
60% profit share to Pharaoh Gold Mines NL(2)
40% profit share to EMRA(3)
EMRA accrual
(1) After US$5,898 million was paid to Pharaoh Gold Mines NL as a cost recovery payment in 2017.
(2) 100% owned subsidiary of Centamin plc with a registered Egyptian branch, refer to note 23 Subsidiaries.
(3) Profit share commenced during the third quarter of 2016.
31 December
2017
US$’000
31 December
2016
US$’000
279,073
(167,444)
(111,629)
1,000
118,133
(70,880)
(47,253)
4,000
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 Egypt, Pharaoh Gold Mines NL 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, other than the fixed royalty
attributable to the Egyptian government.
Relevance of tax consolidation to the consolidated entity
In Australia, Centamin Egypt Limited and Pharaoh Gold Mines NL, both wholly owned Australian resident entities within the group,
have elected to form a tax‑consolidated group from 1 July 2003 and therefore are treated as a single entity for Australian income tax
purposes. The head entity within the tax‑consolidated group is Centamin Egypt Limited. Pharaoh Gold Mines NL, which has a registered
Egyptian branch, benefits from the ‘branch profits exemption’ whereby foreign branch income will generally not be subject to Australian
income tax. Ampella Mining Limited is a single entity for Australian income tax purposes.
Nature of tax funding arrangements and tax-sharing agreements
Entities within the tax‑consolidated group have entered into a tax funding arrangement and a tax‑sharing agreement with the head
entity. Under the terms of the tax‑funding agreement, Centamin Egypt Limited and each of the entities in the tax‑consolidated group
have agreed to pay a tax‑equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the
entity. Such amounts are reflected in amounts receivable from or payable to other entities in the tax‑consolidated group.
The tax‑sharing agreement entered 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.
Tax recognised in profit is summarised as follows:
111,629
18,503
Current tax expense in respect of the current year
Tax expense
Current tax
Deferred tax
Total tax expense
31 December
2017
US$’000
31 December
2016
US$’000
(2,063)
—
(2,063)
(821)
—
(821)
The tax expense for the year can be reconciled to the profit per the consolidated statement of comprehensive income as follows:
Profit before income tax
Tax expense calculated at 0% (2016: 0%)(1) of profit before tax
Tax effect of amounts which are not deductible/taxable in calculating taxable income:
Effect of different tax rates of subsidiaries operating in other jurisdictions
Tax expense for the year
31 December
2017
US$’000
31 December
2016
US$’000
224,094
266,829
—
(2,063)
(2,063)
—
(821)
(821)
(1) The tax rate used in the above reconciliation is the corporate tax rate of 0% payable by Jersey corporate entities under the Jersey tax law (2016: 0%).
There has been no change in the underlying corporate tax rates when compared to the previous financial period.
Tax recognised in the balance sheet is summarised as follows:
Current tax liabilities
Non‑current tax liabilities
31 December
2017
US$’000
31 December
2016
US$’000
469
23
—
—
Centamin plc Annual report 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS
162
163
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
9. Segment reporting
Statement of comprehensive income by operating segment:
The group is engaged in the business of exploration and mining of precious metals, which represents three operating segments, two in
the business of exploration and one in mining of precious metals. The board is the group’s chief operating decision‑maker within the
meaning of IFRS 8. Management has determined the operating segments based on the information reviewed by the board for the
purposes of allocating resources and assessing performance.
The board considers the business from a geographic perspective and a mining of precious metals versus exploration for precious metals
perspective. Geographically, management considers the performance in Egypt, Burkina Faso, Côte d’Ivoire and Corporate (which
includes Jersey, United Kingdom and Australia). From a mining of precious metals versus exploration for precious metals perspective,
management separately considers the Egyptian mining of precious metals from the West African exploration for precious metals in
these geographies. The Egyptian mining operations derive its revenue from sale of gold while the West African entities are currently
only engaged in precious metal exploration and do not currently produce any revenue.
The board assesses the performance of the operating segments based on profits and expenditure incurred as well as exploration
expenditure in each region. Egypt is the only operating segment mining precious metals and therefore has revenue and cost of sales
whilst the remaining operating segments do not. All operating segments are reviewed by the board as presented and are key to the
monitoring of ongoing performance and assessing plans of the Company, hence the change is disclosure from prior external reporting.
Non‑current assets other than financial instruments by country:
Egypt
Burkina Faso
Côte d’Ivoire
Corporate
Statement of financial position by operating segment:
31 December 2017
Statement of financial position
Total assets
Total liabilities
Net assets/total equity
31 December 2016
Statement of financial position
Total assets
Total liabilities
Net assets/total equity
31 December
2017
US$’000
31 December
2016
US$’000
878,509
898,423
68,589
31,202
41,727
62,232
18,248
44,317
1,020,027
1,023,220
US$’000
Total
US$’000
Egypt
US$’000
Burkina Faso
US$’000
Côte d’Ivoire
US$’000
Corporate
1,529,302
1,028,927
(77,326)
1,451,976
(73,655)
955,272
70,116
(786)
69,330
31,640
398,619
(307)
(2,578)
31,333
396,041
US$’000
Total
US$’000
Egypt
US$’000
Burkina Faso
US$’000
Côte d’Ivoire
US$’000
Corporate
1,584,183
1,059,554
(59,664)
(54,943)
1,524,519
1,004,611
63,494
(1,538)
61,956
18,826
(298)
18,528
442,309
(2,885)
439,424
US$’000
Total
US$’000
Egypt
US$’000
Burkina Faso
US$’000
Côte d’Ivoire
US$’000
Corporate
Profit/(loss) for the year after EMRA profit share
109,402
122,608
US$’000
Total
US$’000
Egypt
US$’000
Burkina Faso
US$’000
Côte d’Ivoire
US$’000
Corporate
31 December 2017
Statement of comprehensive income
Revenue
Cost of sales
Gross profit
Other income
Other operating costs
Impairment of exploration and evaluation assets
Finance income
Profit/(loss) for the year before tax
Tax
Profit/(loss) for the year after tax
EMRA profit share
31 December 2016
Statement of comprehensive income
Revenue
Cost of sales
Gross profit
Other income
Other operating costs
Impairment of exploration and evaluation assets
Finance income
675,510
675,510
(414,341)
(414,341)
261,169
261,169
680
23
(36,927)
(25,483)
(3,557)
2,729
—
41
224,094
235,750
(2,063)
(513)
222,031
235,237
(112,629)
(112,629)
687,387
687,387
(389,276)
(389,276)
298,111
298,111
—
—
(32,077)
(21,032)
(122)
917
(37)
72
Profit/(loss) for the year before tax
266,829
277,114
Tax
Profit/(loss) for the year after tax
EMRA profit share
Profit/(loss) for the year after EMRA profit share
(821)
266,008
(51,253)
214,755
(43)
277,071
(51,253)
225,818
—
—
—
—
197
(35)
—
162
—
162
—
162
—
—
—
—
96
(972)
—
(876)
—
(876)
—
(876)
—
—
—
657
(11,737)
(2,550)
2,688
(10,942)
(1,550)
(12,492)
—
(12,492)
—
—
—
—
(549)
—
—
(549)
—
(549)
—
(549)
—
—
—
—
—
—
—
—
(170)
(10,326)
—
—
(170)
—
(170)
—
(170)
(85)
845
(9,566)
(778)
(10,344)
—
(10,344)
Exploration expenditure by operating segment
The following table provides a breakdown of the total exploration expenditure of the group by operating segment:
Burkina Faso
Côte d’Ivoire
Egypt (Sukari tenement including Cleopatra)
Total exploration expenditure
1 January to
31 December
2017
US$ million
1 January to
31 December
2016
US$ million
6.4
13.9
10.6
30.9
26.3
12.7
10.5
49.5
Centamin plc Annual report 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS
164
165
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
10. Trade and other receivables
Non‑current
Other receivables – deposits
Current
Gold and silver sales debtors
Other receivables
31 December
2017
US$’000
31 December
2016
US$’000
96
96
81
81
31 December
2017
US$’000
31 December
2016
US$’000
31,007
3,460
34,467
23,009
1,861
24,870
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 nor impaired.
The average age of the receivables is nine days (2016: nine 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 and silver 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 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.
11. Inventories
Mining stockpiles and ore in circuit
Stores inventory(1)
Provision for obsolete stores inventory(2)
31 December
2017
US$’000
31 December
2016
US$’000
31,728
78,618
(5,136)
34,217
96,865
(2,500)
105,210
128,582
(1) Prepayments for items within the inventory balance were identified by management for which the risks and rewards of ownership had not passed, and as
such these have been reclassified from inventory to prepayments, refer to note 3.
(2) Per IAS 2 ‘Inventories’, it is required to show the provision for obsolete inventory within the inventory note as the inventory balance in the statement of
financial position should be net of such a provision, as such this has been reclassified from provisions to inventory, refer to note 3.
12. Prepayments
Current
Prepayments(1)
Fuel prepayments
31 December
2017
US$’000
31 December
2016
US$’000
7,545
2,248
9,793
6,631
877
7,508
(1) Prepayments for items within the inventory balance were identified by management for which the risks and rewards of ownership had not passed,
and as such these have been reclassified from inventory to prepayments, refer to note 3.
Non‑current
Prepayments
Movement in fuel prepayments
Balance at the beginning of the year
Fuel prepayment recognised
Less: provision charged to:
Mine production costs
Property, plant and equipment
Inventories
Balance at the end of the year
Cumulative fuel prepayment and provision recognised
Fuel prepayment recognised
Less: provision charged to:
Mine production costs
Property, plant and equipment
Inventories
Fuel advance down payment
31 December
2017
US$’000
31 December
2016
US$’000
—
—
295
295
31 December
2017
US$’000
31 December
2016
US$’000
877
42,869
(39,030)
(2,761)
292
2,247
3,169
23,014
(22,844)
(2,269)
(193)
877
31 December
2017
US$’000
31 December
2016
US$’000
274,088
231,218
(257,030)
(218,000)
(16,880)
(1,098)
3,167
(14,120)
(1,390)
3,169
Centamin plc Annual report 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS
166
167
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
12. Prepayments continued
Diesel Fuel Oil (“DFO“) dispute
As more fully described in note 22 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$274.1 million to 31 December 2017, of which US$42.9 million was provided for during 2017.
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$41.9 million in the profit and loss for the year.
31 December 2017
31 December 2016
Before
adjustment
US$’000
Adjustment
US$’000
Total
US$’000
Before
adjustment
US$’000
Adjustment
US$’000
Total
US$’000
Expenses
Cost of sales
Mine production costs
Movement in inventory
Depreciation and amortisation
(268,533)
(39,030)
(307,563)
(265,473)
(22,844)
(288,317)
341
(2,831)
(104,288)
(372,480)
—
(41,861)
(2,490)
(104,288)
(414,341)
7,710
(106,885)
(364,648)
(1,784)
—
(24,628)
5,926
(106,885)
(389,276)
The effect on earnings per share is shown below:
31 December 2017
31 December 2016
Before
adjustment
US$’000
Adjustment
US$’000
Total
US$’000
Before
adjustment
US$’000
Adjustment
US$’000
Total
US$’000
Earnings per share before profit share:
Basic (US cents per share)
Diluted (US cents per share)
Earnings per share after profit share:
Basic (US cents per share)
Diluted (US cents per share)
22.942
22.765
13.150
13.049
(3.639)
(3.611)
(3.639)
(3.611)
19.303
19.154
9.511
9.483
25.315
25.188
20.850
20.746
(2.145)
(2.134)
(2.145)
(2.134)
23.170
23.054
18.705
18.612
13. Property, plant and equipment
Office
equipment
US$’000
Buildings
US$’000
Plant and
equipment
US$’000
Mine
Mining development
properties
US$’000
equipment
US$’000
Capital
work in
progress
US$’000
Total
US$’000
Cost
Balance at 31 December 2016
6,052
2,019
584,113
Additions
Increase in rehabilitation asset
Transfers from capital
work in progress
Transfers from exploration
and evaluation asset
Disposals
744
—
—
—
—
32
—
—
—
—
7,304
—
—
—
(316)
249,491
25,485
—
—
—
—
365,902
75,775
1,283,352
3,186
2,542
40,122
—
76,873
2,542
77,899
(77,899)
—
7,584
—
—
—
7,584
(316)
Balance at 31 December 2017
6,796
2,051
591,101
274,976
457,113
37,998
1,370,035
Accumulated depreciation
Balance at 31 December 2016
(5,400)
Depreciation and amortisation
(490)
Disposals
—
(412)
(136)
—
(127,913)
(129,610)
(151,091)
(29,060)
(34,292)
(40,584)
52
—
—
Balance at 31 December 2017
(5,890)
(548)
(156,921)
(163,902)
(191,675)
Cost
Balance at 31 December 2015
5,535
Additions
Transfers
Disposals
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
—
—
(414,426)
(104,562)
52
(518,936)
1,179,672
56,960
47,523
(803)
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
Disposals
(558)
25
Balance at 31 December 2016
(5,400)
(293)
(119)
—
(412)
(98,504)
(100,826)
(103,715)
(29,496)
(29,424)
(47,376)
87
640
—
(127,913)
(129,610)
(151,091)
—
—
—
—
(308,205)
(106,973)
752
(414,426)
Net book value
As at 31 December 2016
As at 31 December 2017
652
906
1,607
1,503
456,200
434,180
119,881
111,074
214,811
265,438
75,775
37,998
868,926
851,099
No impairment review was performed in 2016 or 2017 as no indicators of impairment were identified.
Assets that have been cost recovered under the terms of the Concession Agreement in Egypt are included on the statement of financial
position under property, plant and equipment due to the Company having right of use of these assets. These rights will expire together
with the Concession Agreement.
Centamin plc Annual report 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS
168
169
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
14. Exploration and evaluation asset
Balance at the beginning of the period
Expenditure for the period
Net pre‑production gold sales related to Cleopatra
Transfer to property, plant and equipment
Impairment of exploration and evaluation asset
Balance at the end of the period
31 December
2017
US$’000
31 December
2016
US$’000
153,918
30,896
(4,841)
(7,584)
(3,557)
168,832
152,077
49,487
—
(47,524)
(122)
153,918
The exploration and evaluation asset relates to the drilling, geological exploration and sampling of potential ore reserves and can be
attributed to Egypt (US$28.7 million), Burkina Faso (US$109.4 million, including items relating to the acquisition of Ampella Mining
Limited) and Côte d’Ivoire (US$30.7 million). The impairment of exploration and evaluation assets relates to costs of permits that have
expired and have not been renewed.
15. Available‑for‑sale financial assets
Balance at the beginning of the period
Loss on foreign exchange movement
Gain on fair value of investment – other comprehensive income
Balance at the end of the period
31 December
2017
US$’000
31 December
2016
US$’000
130
86
(91)
125
163
(78)
45
130
The available‑for‑sale financial asset at period end relates to a 5.33% (2016: 5.33%) equity interest in Nyota Minerals Limited, a listed
public company, as well as a 0.29% (2016: 0.53%) equity interest in KEFI Minerals plc (“KEFI”), an AIM listed company.
Management made the decision to sell its interest in Nyota and the financial asset is classed as a current asset.
16. Trade and other payables
Trade payables
Other creditors and accruals
31 December
2017
US$’000
31 December
2016
US$’000
32,540
24,045
56,585
23,734
24,257
47,991
Trade payables principally comprise the amounts outstanding for trade purchases and ongoing costs. The average credit period taken
for trade purchases is 29 days (2016: 22 days). Trade payables are interest free for periods ranging from 30 to 180 days. Thereafter
interest is charged at commercial rates. The group has financial risk management policies in place to ensure that all payables are paid
within the credit timeframe.
The directors consider that the carrying amount of trade payables approximate their fair value.
17. Provisions
Current(4)
Employee benefits(1)
Fuel(2)
Customs, rebates and withholding tax
Non‑current
Restoration and rehabilitation(3)
Other non‑current provisions
Movement in restoration and rehabilitation provision
Balance at beginning of the year
Additional provision recognised/(provision derecognised)
Interest expense – unwinding of discount
Balance at end of the year
31 December
2017
US$’000
31 December
2016
US$’000
2,510
2,000
4,801
9,311
10,868
93
10,961
7,697
2,542
629
10,868
367
—
3,609
3,976
7,697
—
7,697
7,139
(23)
581
7,697
(1) Employee benefits relate to annual, sick and long service leave entitlements and bonuses.
(2) Fuel provision relates to a backdated fuel charge for Q4 2017.
(3) The provision for restoration and rehabilitation represents the present value of the directors’ best estimate of the future outflow of economic benefits
that will be required to remove the facilities and restore the affected areas at the group’s sites discounted by 8.01% (2016: 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 2017 has resulted in a US$2.542 million increase in the provision.
(4) Per IAS 2 ‘Inventories’, it is required to show the provision for obsolete inventory within the inventory note as the inventory balance in the statement of
financial position should be net of such a provision, as such this has been reclassified from provisions to inventory, refer to note 3.
18. Issued capital
Fully paid ordinary shares
31 December 2017
31 December 2016
Number
US$’000
Number
US$’000
Balance at beginning of the period
1,152,107,984
667,472
1,152,107,984
665,590
Cancellation of shares
Transfer from share option reserve
Balance at end of the period
—
—
—
1,260
—
—
(17)
1,899
1,152,107,984
668,732
1,152,107,984
667,472
The authorised share capital is an unlimited number of no par value shares.
At 31 December 2017, the trustee of the share plan held 939,716 ordinary shares (2016: 2,109,710 ordinary shares). These shares are held
by the trustee pursuant to the deferred bonus share plan.
Fully paid ordinary shares carry one vote per share and carry the right to dividends. See note 20 for more details of the share options.
Centamin plc Annual report 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS
170
171
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
19. Share option reserve
Share option reserve
Balance at beginning of the period
Share‑based payments expense
Transfer to accumulated profits
Transfer to issued capital
Balance at the end of the period
31 December
2017
US$’000
31 December
2016
US$’000
3,048
3,156
(621)
(1,260)
4,323
2,469
2,937
(459)
(1,899)
3,048
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. 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 2018 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 five tranches, as set out
in the directors’ remuneration report. These measures are assessed by reference to current market practice and the remuneration
committee will have regard to current market practice when establishing the precise performance conditions for awards.
To date, the Company has granted the following conditional awards to employees of the group:
June 2015 awards
Of the 5,145,000 awards granted on 4 June 2015 under the RSP, 3,015,000 awards remain granted to eligible participants (15 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, 4,254,000 awards remain granted to eligible participants (28 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.
June 2017 awards
Of the 3,459,000 awards granted on 4 June 2017 under the RSP, 3,459,000 awards remain granted to eligible participants (37 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 2016 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, EBITDA and gold production: fair value at grant date GBP(1)
Reserve, EBITDA and gold production: fair value at grant date US$(1)
Vesting period (years)
Expected volatility
Expected dividend yield (%)
RSP 2017
4 June 2017
3,459,000
1.16
1.49
1.54
1.97
3
45.68%
3.6%
(1) The vesting of 20% of the awards granted under this plan are dependent on a TSR performance condition. As relative TSR is defined as a market
condition under IFRS 2 ‘Share‑based payments’, this requires that the valuation model used takes into account the anticipated performance outcome.
We have therefore applied a Monte‑Carlo simulation model. The simulation model takes into account the probability of performance based on the
expected volatility of Centamin and the peer group companies and the expected correlation of returns between the companies in the comparator
group. The remaining 80% of the awards are subject to reserve, EBITDA and gold production performance conditions. As these are classified as
non‑market conditions under IFRS 2 they do not need to be taken into account when determining the fair value. These grants have been valued
using a Black‑Scholes model. The fair value calculated was then converted at the closing GBP:US$ foreign exchange rate on that day.
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.
Centamin plc Annual report 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS
172
173
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
20. Share‑based payments continued
Deferred bonus share plan (“DBSP”) continued
DBSP awards granted during the period:
Grant date
Number of instruments
Share price/fair value at grant date Tranche 1 £(1)
Share price/fair value at grant date Tranche 1 US$(1)
Share price/fair value at grant date Tranche 2 £(1)
Share price/fair value at grant date Tranche 2 US$(1)
Share price/fair value at grant date Tranche 3 £(1)
Share price/fair value at grant date Tranche 3 US$(1)
Vesting period Tranche 1 (years)(2)
Vesting period Tranche 2 (years)(2)
Vesting period Tranche 3 (years)(2)
Expected dividend yield Tranche 1 (%)
Expected dividend yield Tranche 2 (%)
Expected dividend yield Tranche 3 (%)
DBSP 2017
4 June 2017
300,000
1.66
2.13
1.61
2.06
1.54
1.97
1
2
3
3.67%
3.40%
3.73%
(1) The fair value of the shares awarded under the DBSP were calculated by using the closing share price on grant date, converted at the closing GBP:US$
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.
21. Commitments
The following is a summary of the Company’s outstanding commitments as at 31 December 2017:
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
Longer than five years
Operating lease commitments are limited to office premises in Jersey.
22. Contingent liabilities and contingent assets
Contingent liabilities
Fuel supply
31 December
2017
US$’000
31 December
2016
US$’000
85
340
297
722
56
47
—
103
As set out in note 12 above, in January 2012, the group received a letter from Chevron to the effect that Chevron would only be able to
supply DFO (Diesel Fuel Oil) to the mine at Sukari at international prices rather than at local subsidised prices. It is understood that the
reason that this letter was issued was that Chevron had received a letter instructing it to do so from the EGPC. It is further understood
that EGPC itself issued this instruction because it had received legal advice from the Legal Advice Department of the Council of State
(an internal government advisory department) that companies operating in the gold mining sector in Egypt were not entitled to such
subsidies. In November 2012, the group received a further demand from Chevron for the repayment of fuel subsidies received during
the period from late 2009 through to January 2012, for EGP403 million (approximately US$22.7 million at current exchange rates).
The group has taken detailed legal advice on this matter (and, in particular, on the opinion given by the Legal Advice Department of the
Council of State) and in June 2012 lodged an appeal against EGPC’s decision in the Administrative Courts. Again, the group believes
that its grounds for appeal are strong and that there is a good prospect of success. However, as a practical matter, and in order to
ensure the continuation of supply whilst the matter is resolved, the group has since January 2012 advanced funds to its fuel supplier,
based on the international price for fuel.
As at the date of this document, no decision had been taken by the courts regarding this matter. The group has received an
unfavourable State Commissioner’s report in the case; however, the report is non‑binding and the group’s legal advisers remain of the
view that the group has a strong case. The group remains of the view that an instant move to international fuel prices is not a reasonable
outcome and will look to recover funds advanced thus far should the court action be successfully concluded. However, management
recognises the practical difficulties associated with reclaiming funds from the government and for this reason has fully provided against
the prepayment of US$274 million. Refer to note 12 of these financial statements for further details on the impact of this provision on the
group’s results for 31 December 2017.
No provision has been made in respect of the historic subsidies prior to January 2012 as, based on legal advice, the Company believes
that, notwithstanding the unfavourable State Commissioner’s report, the prospects of a court finding in its favour in relation to this
matter remain very strong.
Concession Agreement court case
On 30 October 2012, the Administrative Court in Egypt handed down a judgment in relation to a claim brought by, amongst others,
an independent member of a previous parliament, in which he argued for the nullification of the agreement that confers on the group
rights to operate in Egypt. This agreement, the Concession Agreement, was entered into between the Arab Republic of Egypt, the
Egyptian Mineral Resources Authority and Centamin’s wholly owned subsidiary Pharaoh Gold Mines, and was approved by the People’s
Assembly as Law 222 of 1994.
In summary that judgment states that, although the Concession Agreement itself remains valid and in force, insufficient evidence had
been submitted to court in order to demonstrate that the 160km2 exploitation lease between PGM and EMRA had received approval
from the relevant minister as required by the terms of the Concession Agreement. Accordingly, the Court found that the exploitation
lease in respect of the area of 160km2 was not valid although it stated that there was in existence such a lease in respect of an area of
3km2. Centamin, however, is in possession of the executed original lease documentation which clearly shows that the 160km2
exploitation lease was approved by the Minister of Petroleum and Mineral Resources. It appears that an executed original document
was not supplied to the court in the first instance.
Upon notification of the judgment the group took various steps to protect its ability to continue to operate the mine at Sukari. These
included lodging a formal appeal before the Supreme Administrative Court on 26 November 2012. In addition, in conjunction with the
formal appeal the group applied to the Supreme Administrative Court to suspend the initial decision until such time as the court was
able to consider and rule on the merits of the appeal. On 20 March 2013 the Court upheld this application thus suspending the initial
decision and providing assurance that normal operations would be able to continue whilst the appeal process was underway.
EMRA lodged its own appeal in relation to this matter on 27 November 2012, the day after the Company’s appeal was lodged,
supporting the group’s view in this matter. Furthermore, in late December 2012, the Minister of Petroleum lodged a supporting appeal
and shortly thereafter publicly indicated that, in his view, the terms of the Concession Agreement were fair and that the exploitation
lease was valid. The Minister of Petroleum also expressed support for the investment and expertise that Centamin brings to the country.
The Company believes this demonstrates the government’s commitment to the group’s investment at Sukari and the government’s
desire to stimulate further investment in the Egyptian mining industry.
The Supreme Administrative Court has stayed the Concession Agreement appeal until the Supreme Constitutional Court has ruled on
the validity of Law no. 32 of 2014. Law no. 32 of 2014 restricts the capacity for third parties to challenge contractual agreements
between the Egyptian government and an investor. This law, whilst in force and ratified by the new parliament, is currently under review
by the Supreme Constitutional Court (“SCC”). During Q2 2017, the SCC re‑referred the case to the state commissioner to prepare a
complementary report to an initial report provided by the state commissioner in Q1 2017 which found Law no. 32 to be unconstitutional.
The state commissioner’s report and complementary report are advisory and non‑binding on the SCC. The Company continues to
believe that it has a strong legal position and that in the event that the SCC rules that Law no. 32 is invalid, the group remains confident
that its own appeal will be successful on the merits.
The Company does not yet know when the appeal will conclude, although it is aware of the potential for the process in Egypt to be
lengthy. The Company has taken extensive legal advice on the merits of its appeal from a number of leading Egyptian law firms who
have confirmed that the proper steps were followed with regard to the grant of the 160km² lease. It therefore remains of the view that
the appeal is based on strong legal grounds and will ultimately be successful. In the event that the appellate court fails to be persuaded
of the merits of the case put forward by the group, the operations at Sukari may be adversely 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 case is heard.
Contingent assets
There were no contingent assets at year end (31 December 2016: nil).
Centamin plc Annual report 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS
174
175
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
23. 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 (liquidated)
North African Resources NL (liquidated)
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
Ownership interest
Country of
incorporation
31 December
2017
%
31 December
2016
%
Australia(2)
Australia(2)
Egypt(4)
Australia(2)
Australia(2)
UK(3)
UK(3)
UK(3)
Jersey(8)
Jersey(8)
Bermuda(7)
Australia(2)
Australia(2)
Australia(2)
Australia(2)
Burkina Faso(5)
Burkina Faso(5)
Côte d’Ivoire(6)
Côte d’Ivoire(6)
Côte d’Ivoire(6)
Côte d’Ivoire(6)
Burkina Faso(5)
Burkina Faso(5)
100
100
50
—
—
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
(1) Previously Sheba Exploration (UK) Plc.
(2) Address of all Australian entities: 57 Kishorn Road, Mount Pleasant, WA 6153.
(3) Address of all UK entities: Hill House, 1 Little New Street, London, EC4A 3TR.
(4) Address of all Egypt entities: 361 El‑Horreya Road, Sedi Gaber, Alexandria, Egypt.
(5) Address of all Burkina Faso entities:
Ampella Resources Burkina Faso: 11 BP 1974 Ouaga 11.
Ampella Mining SARL: 01 BP 1621 Ouaga 01.
Ampella Mining Gold SARL: 11 BP 1974 CMS 11 Ouaga 11.
Konkera SA: 11 BP 1974 Ouaga CM11.
(6) Address of all Côte d’Ivoire entities: 20 BP 945 Abidjan 20.
(7) Address of Bermuda entity: Appleby Corporate Services (Bermuda) Ltd, Canon’s Court, 22 Victoria Street, Hamilton HM EX, Bermuda.
(8) Address of all Jersey entities: 2 Mulcaster Street, St Helier, Jersey JE2 3NJ.
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 subcontractors are entitled to import machinery, equipment and consumable items under the “Temporary
•
Release System” which provided exemption from Egyptian customs duty; and
legal title of all operating assets of PGM will pass to EMRA when cost recovery is completed. The right of use of all fixed and movable
assets remains with PGM and SGM.
24. 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
Risk management and advisory services
Other services
Total non‑audit fees
31 December
2017
US$’000
31 December
2016
US$’000
374
—
86
460
107
52
13
24
196
386
10
94
490
109
15
—
27
151
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 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS
176
177
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
25. 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
2017
%
31 December
2016
%
50
50
The group has a US$1 (cash) interest in the above joint operation. The amount is included in the consolidated financial statements of the
group. There are no capital commitments arising from the group’s interests in the joint operation as disclosed in note 21.
26. Earnings per share (“EPS“)
Basic earnings per share(1)
Diluted earnings per share(1)
Basic earnings per share(2)
Diluted earnings per share(2)
(1) Before profit share.
(2) After profit share.
31 December
2017
US cents
per share
31 December
2016
US cents
per share
19.303
19.154
9.511
9.438
23.170
23.054
18.705
18.612
Basic earnings per share
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:
Earnings used in the calculation of basic EPS(1)
Earnings used in the calculation of basic EPS(2)
(1) Before profit share.
(2) After profit share.
31 December
2017
US$’000
31 December
2016
US$’000
222,031
109,402
266,008
214,755
31 December
2017
Number
31 December
2016
Number
Weighted average number of ordinary shares for the purpose of basic EPS
1,150,221,295
1,148,092,347
Diluted earnings per share
The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows:
Earnings used in the calculation of diluted EPS(1)
Earnings used in the calculation of diluted EPS(2)
(1) Before profit share.
(2) After profit share.
31 December
2017
US$’000
31 December
2016
US$’000
222,031
109,402
266,008
214,755
31 December
2017
Number
31 December
2016
Number
Weighted average number of ordinary shares for the purpose of basic EPS
1,150,221,295
1,148,092,347
Shares deemed to be issued for no consideration in respect of employee options
8,993,379
5,755,404
Weighted average number of ordinary shares used in the calculation of diluted EPS
1,159,214,674
1,153,847,751
No potential ordinary shares were excluded from the calculation of weighted average number of ordinary shares for the purpose of
diluted earnings per share.
27. Notes to the statements of cash flows
(a) Reconciliation of cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents includes cash on hand and at bank and deposits.
Cash and cash equivalents
(b) Reconciliation of profit for the year to cash flows from operating activities
Profit for the year before tax
Add/(less) non‑cash items:
31 December
2017
US$’000
31 December
2016
US$’000
359,680
399,873
31 December
2017
US$’000
31 December
2016
US$’000
224,094
266,829
Depreciation/amortisation of property, plant and equipment
104,562
106,973
Inventory obsolescence provision
Foreign exchange (gain)
Impairment (reversal of)/loss on available‑for‑sale financial assets
Loss on disposal of property, plant and equipment
Impairment of exploration and evaluation assets
Share‑based payments expense
Changes in working capital during the period:
(Increase) in trade and other receivables
Decrease in inventories
Increase in prepayments
Decrease/(increase) in trade and other payables
Increase in provisions
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.
2,636
(1,757)
(91)
263
3,557
2,535
(9,596)
20,736
(2,286)
9,859
8,598
2,500
(4,312)
45
—
122
2,478
(1,085)
3,693
(3,474)
(1,838)
2,880
363,110
374,811
28. Financial instruments
(a) Group risk management
The group manages its capital to ensure that entities within the group will be able to continue as a going concern while maximising the
return to stakeholders through the optimisation of the cash and equity balance. The group’s overall strategy remains unchanged from
the previous financial period.
The group has no debt and thus not geared at the year end or in the prior year. The capital structure consists of cash and cash
equivalents and equity attributable to equity holders of the parent, comprising issued capital and reserves as disclosed in notes 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
2017
US$’000
31 December
2016
US$’000
125
359,680
33,745
393,550
130
399,873
24,337
424,340
56,585
47,991
Centamin plc Annual report 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS
178
179
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
28. 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 and risk committee. The group’s principal financial
instruments comprise interest bearing cash and cash equivalents. Other financial instruments include trade receivables and trade
payables, which arise directly from operations.
It is, and has been throughout the period under review, group policy that no speculative trading in financial instruments be undertaken.
(c) Market risk
The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with
respect to the Australian dollar, Great British pound and Egyptian pound. Foreign exchange risk arises from future commercial
transactions and recognised assets and liabilities that are denominated in a currency that is not the entity’s functional currency.
The risk is measured by regularly monitoring, forecasting and performing sensitivity analyses on the group’s financial position.
Financial instruments denominated in Great British pounds, Australian dollars and Egyptian pounds are as follows:
Great British pound
Australian dollar
Egyptian pound
31 December
2017
US$’000
31 December
2016
US$’000
31 December
2017
US$’000
31 December
2016
US$’000
31 December
2017
US$’000
31 December
2016
US$’000
Financial assets
Cash and cash equivalents
Available‑for‑sale assets
Financial liabilities
Trade and other payables
Net exposure
193
110
303
79
79
224
1,303
113
1,416
391
391
1,025
1,493
15
1,508
4,569
4,569
(3,061)
4,114
17
4,131
628
628
3,503
488
—
488
2,259
2,259
(1,771)
705
—
705
7,780
7,780
(7,075)
The following table summarises the sensitivity of financial instruments held at the reporting date to movements in the exchange rate of
the Great British pound, Egyptian pound and Australian dollar to the US dollar, with all other variables held constant. The sensitivities
are based on reasonably possible changes over a financial period, using the observed range of actual historical rates.
US$/GBP increase by 10%
US$/GBP decrease by 10%
US$/AUD increase by 10%
US$/AUD decrease by 10%
US$/EGP increase by 10%
US$/EGP decrease by 10%
Impact on profit
Impact on equity
31 December
2017
US$’000
31 December
2016
US$’000
31 December
2017
US$’000
31 December
2016
US$’000
(18)
18
(136)
136
(44)
44
(81)
81
(314)
314
639
(639)
(10)
10
(2)
2
—
—
(10)
10
(2)
2
—
—
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$63,530)
and West African franc (US$452,530), and net payables of US$2,259,367 in euro and US$865,760 in West African franc. A movement of
10% up or down in these currencies would have a negligible effect on the assets/liabilities.
The group has not entered into forward foreign exchange contracts. Natural hedges are utilised wherever possible to offset foreign
currency liabilities. The Company maintains a policy of not hedging its currency positions and maintains currency holdings in line with
underlying requirements and commitments.
(d) Commodity price risk
The group’s future revenue forecasts are exposed to commodity price fluctuations, in particular gold and fuel prices. The group has not
entered into forward gold hedging contracts.
Gold price
The table below summarises the impact of increases/decreases of the average realised gold price on the group’s post‑tax profit for the
year. The analysis is based on the assumption that the average realised gold price per ounce had increased/decreased by 10% with all
other variables held constant.
Average realised gold price
Profit after tax
Fuel price
Decrease
by 10%
31 December
2017
US$/oz
1,135
US$’000
156,145
US$/oz
1,261
US$’000
222,031
Increase
by 10%
US$/oz
1,387
US$’000
288,075
Any variation in the fuel price has an impact on the mine production costs. The analysis is based on the assumption that the average fuel
price had increased/decreased by a few US cents per litre with all other variables held constant.
Fuel price
Increase/(decrease) in mine production costs
Profit after tax
Decrease
by 10%
31 December
2017
US$/litre
US$/litre
0.40
0.46
Increase
by 10%
US$/litre
0.50
US$’000
US$’000
US$’000
(8,933)
—
230,964
222,031
5,955
216,076
(e) Interest rate risk
The group’s main interest rate risk arises from cash and short term deposits and is not considered to be a material risk due to the short
term nature of these financial instruments. Cash deposits are placed on term period of no more than 30 days at a time.
The financial instruments exposed to interest rate risk and the group’s exposure to interest rate risk as at balance date were as follows:
Weighted
average
effective
interest rate
%
Less than
one month
US$’000
One to
twelve
months
US$’000
More than
twelve
months
US$’000
Total
US$’000
31 December 2017
Financial assets
Variable interest rate instruments
Non‑interest bearing
Financial liabilities
Non‑interest bearing
31 December 2016
Financial assets
Variable interest rate instruments
Non‑interest bearing
Financial liabilities
Non‑interest bearing
Non‑interest bearing
0.52
—
—
0.24
—
—
179,360
38,330
217,690
56,585
56,585
200,330
23,788
224,118
47,991
47,991
175,860
—
175,860
—
—
200,223
—
200,223
—
—
—
—
—
—
—
—
—
—
—
—
355,220
38,330
393,550
56,585
56,585
400,553
23,788
424,341
47,991
47,991
Centamin plc Annual report 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS
180
181
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
28. Financial instruments continued
(f) Liquidity risk
The group’s liquidity position is managed to ensure that sufficient funds are available to meet its financial commitments in a timely and
cost effective manner.
Ultimate responsibility for liquidity risk management rests with the board, which has established an appropriate management framework
for the management of the group’s funding requirements. The group manages liquidity risk by maintaining adequate cash reserves and
management monitors rolling forecasts of the group’s liquidity on the basis of expected cash flow. The tables in section (a) to (c) of
note 28 reflect a balanced view of cash inflows and outflows and show the implied risk based on those values. Trade payables and other
financial liabilities originate from the financing of assets used in the group’s ongoing operations. These assets are considered in the
group’s overall liquidity risk. Management continually reviews the group’s liquidity position including cash flow forecasts to determine
the forecast liquidity position and maintain appropriate liquidity levels.
31 December 2017
Financial assets
Variable interest rate instruments
Non‑interest bearing
Financial liabilities
Non‑interest bearing
31 December 2016
Financial assets
Variable interest rate instruments
Non‑interest bearing
Financial liabilities
Non‑interest bearing
Less than
one month
US$’000
One to
twelve
months
US$’000
More than
twelve
months
US$’000
Total
US$’000
179,360
38,330
217,690
56,585
56,585
200,330
23,788
224,118
47,991
47,991
175,860
—
175,860
—
—
200,223
—
200,223
—
—
—
—
—
—
—
—
—
—
—
—
355,220
38,330
393,550
56,585
56,585
400,553
23,788
424,341
47,991
47,991
(g) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the group. The
group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral or other security where
appropriate, as a means of mitigating the risk of financial loss from defaults. The group measures credit risk on a fair value basis. The
group’s credit risk is concentrated on one entity, the refiner Asahi, but the group has good credit checks on customers and none of the
trade receivables from the customers has been past due. Also, the cash balances held in Australian dollars 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
125
Level 1
130
2017
Level 2
Level 3
—
2016
—
Level 2
Level 3
—
—
Total
125
Total
130
There were no financial assets or liabilities subsequently measured at fair value on Level 3 fair value measurement bases.
(j) Ore reserves
Production forecasts from the underground mine at Sukari are partly based on estimates regarding future mineral reserve and resource
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.
The following disclosure provides information to help users of the financial statements understand the judgments made about the
future and other sources of estimation uncertainty. The key sources of estimation uncertainty described in note 4 and the range of
possible outcomes are described more fully below.
Depreciation of capitalised underground mine development costs
Depreciation of capitalised underground mine development costs at 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. The analysis is based on the
assumption that the reserve estimate has increased/decreased by 10% with all other variables held constant.
Amortisation of rehabilitation asset (within mine development properties)
Amortisation of mine development properties (remainder)
Mine development properties – net book value
Property, plant and equipment – net book value
Decrease
by 10%
31 December
2017
US$’000
US$’000
(367)
(42,035)
263,619
849,281
(342)
(40,242)
265,437
851,099
Increase
by 10%
US$’000
(321)
(38,749)
266,951
852,613
Centamin plc Annual report 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS
182
183
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
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
30. Related party transactions
(a) Equity interests in related parties
Equity interests in subsidiaries
31 December
2017
US$
31 December
2016
US$
6,919,135
5,846,954
—
8,037
2,174,475
9,101,647
—
7,764
2,301,743
8,156,461
Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 23.
Equity interests in associates and jointly controlled arrangements
Details of interests in joint ventures are disclosed in note 25.
(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 2017 are as follows:
31 December 2017
J El‑Raghy(2)
A Pardey
T Schultz
G Haslam
M Arnesen
M Bankes
R Jerrard
Y El‑Raghy
C Boreham
J Stephens
N Bailie
M Smith
D Le Masurier
H Brown
Balance at
1 January
2017
Granted as
remuneration
(“DBSP”)
Granted as
remuneration
(“RSP”)
Net other
change(1)
Balance at
31 December
2017
53,849,372
2,692,601
30,000
102,056
49,000
150,000
875,000
869,530
1,182,977
—
—
670,000
540,000
460,000
—
—
—
—
—
—
—
—
—
300,000
—
—
—
—
—
(43,349,372)
10,500,000
440,000
(33,333)
3,099,268
—
—
—
—
420,000
2,600
—
—
—
—
32,600
102,056
49,000
150,000
1,295,000
72,000
(262,777)
678,753
(66,666)
1,325,311
209,000
329,000
166,000
166,000
107,000
—
—
(133,333)
(100,000)
56,000
(200,000)
629,000
166,000
702,667
547,000
316,000
(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 2017 to the date of this report there have been no transactions notified to the Company under DTR 3.1.2.R.
Gold purchased
Refining costs
Freight costs
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
C Boreham
M Smith
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
1,039,644
—
—
—
—
—
—
—
—
—
—
400,000
500,000
650,000
—
—
—
—
—
—
—
690,000
875,000
140,000
210,000
270,000
160,000
60,000
(17,595,714)
53,849,372
—
—
—
—
30,000
102,056
49,000
150,000
(966,199)
2,692,601
—
(51,103)
(66,667)
—
(120,000)
(250,000)
875,000
869,530
1,182,977
670,000
540,000
460,000
(1) “Net other change” relates to the on‑market acquisition or disposal of fully paid ordinary shares.
(2) Includes the El‑Raghy family.
(d) Key management personnel share option holdings
There were no options held, granted or exercised during the year by directors or senior management in respect of ordinary shares in
Centamin plc.
(e) Other transactions with key management personnel
The related party transactions for the year ended 31 December 2017 are summarised below:
• Salaries, superannuation contributions, bonuses, LTIs, consulting and directors’ fees paid to directors during the year ended
31 December 2017 amounted to US$4,001,383 (31 December 2016: US$3,754,145).
• 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 AU$70,564 or US$54,269 (31 December
2016: AU$69,600 or US$51,710).
(f) Transactions with the government of Egypt
Royalty costs attributable to the government of Egypt of US$20,404,473 (2016: US$20,574,673) were incurred in 2017.
Profit share to EMRA of US$112,629,332 (2016: US$51,253,333) was incurred in 2017.
(g) Gold sales agreement
On 20 December 2016, SGM entered into a contract with the Central Bank of Egypt (“CBE”). The agreement provides that the parties
may elect, on a monthly basis, for the CBE to supply SGM with its local Egyptian currency requirements for that month (to a maximum
value of EGP50 million). In return, SGM facilitates the purchase of refined gold bullion for the CBE from SGM’s refiner, Asahi Refining.
This transaction has been entered into as SGM requires local currency for its operations in Egypt (it receives its revenue for gold sales in
US dollars). Two transactions have been entered into at the date of this report, pursuant to this agreement, and the values related
thereto are as follows:
31 December
2017
US$
31 December
2016
US$
5,619,063
3,303
8,500
5,630,866
—
—
—
—
At 31 December 2017 the net payable in EGP owing to the Central Bank of Egypt is approximately the equivalent of US$43,660.
Centamin plc Annual report 2017FINANCIAL STATEMENTSCentamin plc Annual report 2017FINANCIAL STATEMENTS
184
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
COMPANY LEGAL FORM AND STRUCTURE
30. Related party transactions continued
(h) Transactions with other related parties
Other related parties include the parent entity, subsidiaries, and other related parties.
During the financial period, the Company recognised tax payable in respect of the tax liabilities of its wholly owned subsidiaries.
Payments to/from the Company are made in accordance with terms of the tax funding arrangement.
During the financial period the Company provided funds to and received funding from subsidiaries.
All amounts advanced to related parties are unsecured. No expense has been recognised in the period for bad or doubtful debts in
respect of amounts owed by related parties.
Transactions and balances between the Company and its subsidiaries were eliminated in the preparation of the consolidated financial
statements of the group.
31. Dividends per share
The dividends paid in 2017 were US$184,388,830 and are reflected in the consolidated statement of changes in equity for the period
(2016: US$46,072,599).
A final dividend in respect of the year ended 31 December 2017 of 10.0 US cents per share, totalling approximately US$115.2 million has
been proposed by the board of directors and is subject to shareholder approval at the annual general meeting on 26 March 2018. These
financial statements do not reflect this dividend payable.
As announced on 9 January 2017, the update to the Company’s dividend policy sets a minimum payout level relative to cash flow while
considering the financial condition of, and outlook for, the Company. When determining the amount to be paid, the board will take into
consideration the underlying profitability of the Company and significant known or expected funding commitments. Specifically, the
board will aim to approve an annual dividend of at least 30% of the Company’s net cash flow after sustaining capital costs and following
the payment of profit share due to the government of Egypt.
32. Subsequent events
As referred to in note 31, subsequent to the year end, the board proposed a final dividend for 2017 of 10.0 US cents per share.
Subject to shareholder approval at the annual general meeting on 26 March 2018, the final dividend will be paid on 6 April 2018
to shareholders on the record date of 23 March 2018.
There were no other significant events occurring after the reporting date requiring disclosure in the financial statements.
Centamin plc, number 109180 (the
“Company”) is a mineral exploration,
development and mining company dual
listed on the London Stock Exchange
(LSE: CEY) and the Toronto Stock Exchange
(TSX: CEE).
The 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 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 23 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 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 re‑appointed during that
meeting. Each appointed director shall
retire from office at each annual general
meeting and may, if willing to act, be
re‑appointed.
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.
185
Centamin plc Annual report 2017
SHAREHOLDER INFORMATION
Directors’ indemnity insurance
In accordance with the 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.
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 2017 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
2017
1,152,107,984
939,716
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.
The Company was authorised by shareholders at the 2017 AGM to purchase in the market up to 5% of the Company’s issued shares, as
permitted under the Company’s Articles. No shares were bought back under this authority during the year ended 31 December 2017.
This standard authority is renewable annually and the directors will seek to renew this authority at the 2018 AGM. This resolution shall
expire on 30 June 2018.
Centamin plc Annual report 2017FINANCIAL STATEMENTS
186
187
COMPANY LEGAL FORM AND STRUCTURE
continued
Substantial shareholders
Summary table of dividends declared by Centamin plc
Based on shareholder disclosures and register analysis, 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 Guidance and
Transparency Rules of the UK Financial Conduct Authority (“DTRs”), in the issued share capital of Centamin in compliance with
LR 9.8.6 (2):
Name
BlackRock Inc.
VanEck Inc.
Dimensional Fund Advisors
Standard Life Aberdeen
Government of Norway
Shareholding
% holding
183,442,125
126,783,792
57,289,080
44,731,410
35,704,283
15.92
11.00
4.97
3.88
3.10
2017
2016
2015
Interim
Declared on: 3 August 2017
Declared on: 10 August 2016
Declared on: 12 August 2015
Amount: 2.5 US cents per share
Amount: 2 US cents per share
Amount: 0.97 US cents per share
Paid on: 29 September 2017
Paid on: 7 October 2016
Paid on: 9 October 2015
Total: approximately US$28.8 million
Total: approximately US$23 million
Total: approximately US$11 million
Final
Proposed on: 31 January 2018
Proposed on: 1 February 2017
Declared on: 11 May 2016
Declared date: 26 March 2018
Declared date: 21 March 2017
Amount: 1.97 US cents per share
Amount: 10 US cents per share
Amount: 13.5 US cents per share
Paid on: 27 May 2016
To be paid on: 6 April 2018
To be paid on: 31 March 2017
Total: approximately US$22.7 million
Total: approximately US$115 million
Total: approximately US$155.5 million
Note to table:
Information at 29 December 2017 based on registry analysis and information received by the Company from holders of notifiable interests and includes details
of notifications received by the Company pursuant to DTR 5 between the year end and the date of this report.
AGM
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. There are
no other disclosures to report under
LR 9.8.4 R.
Dividend policy
Centamin announced its dividend policy
on 16 May 2014 which 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 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.”
The following dividends have been
declared in respect to the financial year
ended 31 December 2017:
2017 interim dividend
An interim dividend of 2.5 US cents per
share on Centamin plc ordinary shares
(totalling approximately US$28.8 million)
was declared on 3 August 2017. The interim
dividend for the half‑year period ending
30 June 2017 was paid on 29 September
2017 to shareholders on the register on the
record date of 1 September 2017.
2017 final dividend
A final dividend of 10 US cents per share
on Centamin plc ordinary shares (totalling
approximately US$115 million) was
proposed by the directors on 31 January
2018. The final dividend for the financial
year ended 31 December 2017 will be paid
on 6 April 2018 to shareholders on the
register on the record date of 23 March
2018, subject to approval at the AGM on
26 March 2018. The ex‑dividend date is
22 March 2018 for LSE and TSX listed
shareholders.
All shareholders are encouraged to attend our AGM on 26 March 2018, which will be held in Jersey. This will be an excellent opportunity
to meet members of the team.
Indicative financial calendar
26 March 2018
9 April 2018
3 May 2018
9 July 2018
2 August 2018
8 October 2018
1 November 2018
Annual general meeting to be held in Jersey
Q1 2017 preliminary production results
Results for the quarter ended 31 March 2018
Q2 2016 preliminary production results
Results for the quarter ended 30 June 2018
Q3 2016 preliminary production results
Results for the quarter ended 30 September 2018
Company details
Centamin plc (LSE:CEY, TSX:CEE)
ISIN: JE00B5TT1872
LEI: 213800PDI9G7OUKLPV84
Company number: 109180
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
Broker
BMO Capital Markets
95 Queen Victoria Street
London EC4V 4HG
Telephone: +44 (0)20 7236 1010
Auditor
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
Telephone: +44 (0)20 7583 5000
Centamin plc Annual report 2017SHAREHOLDER INFORMATIONCentamin plc Annual report 2017SHAREHOLDER INFORMATION
188
GLOSSARY
AFS
available‑for‑sale financial assets
AIF
Annual Information Form
AIFR
all incident frequency rate
AISC
all‑in sustaining costs
APMs
alternative performance measures
ARE
Arab Republic of Egypt
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
CBE
Central Bank of Egypt
CDP
carbon development project
CEO
chief executive officer
CFO
chief financial officer
Code
the 2016 version of the UK Corporate
Governance Code published by the FRC
DBSP
deferred bonus share plan
DFO
Diesel Fuel Oil
directors
the directors of the board of Centamin plc
DRR
directors’ remuneration report
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
EGPC
The Egyptian General Petroleum Corporation
ELFSP
employee loan funded share plan
EMRA
Egyptian Mineral Resource Authority
EOS
employee option scheme
EPS
earnings per share
ESIA
environmental social impact assessment
FCA
Financial Conduct Authority
feasibility study
extensive technical and financial study to assess
the commercial viability of a project
flotation
mineral processing technique used to separate
mineral particles in a slurry, by causing them to
selectively adhere to a froth and float to the surface
FRC
Financial Reporting Council
FVTPL
financial value through profit or loss
GAIP
gradient array induced polarisation
grade
relative quantity or the percentage of ore mineral
or metal content in an orebody
GRI
Global Reporting Initiative
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
inferred resource
as defined in the JORC Code, is that part of a
mineral resource for which the tonnage and
grade and mineral content can be estimated with
a low level of confidence. It is inferred from the
geological evidence and has assumed but not
verified geological and/or grade continuity. It is
based on information gathered through the
appropriate techniques from locations such as
outcrops, trenches, pits, workings and drill holes
which may be limited or of uncertain quality and
reliability
JORC
Joint Ore Reserves Committee of the
Australasian Institute of Mining and Metallurgy,
Australian Institute of Geoscientists and the
Minerals Council of Australia
LTI
lost time 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
MTI
medical treatment injury
MTIFR
medical treatment injury frequency
Mtpa
million tonnes per annum
NCI
non‑controlling interest
net production surplus or profit share
revenue less payment of the 3% royalty to Arab
Republic of Egypt (“ARE”) and recoverable costs
Nyota
Nyota Minerals plc
open pit
large scale hard rock surface mine
ore
mineral deposit that can be extracted and
marketed profitably
orebody
mining term to define a solid mass of mineralised
rock that can be mined profitably under current
or immediately foreseeable economic conditions
ore reserve
the economically mineable part of a measured or
indicated mineral resource. It includes diluting
materials and allowances for losses which may
occur when the material is mined. Appropriate
assessments, which may include feasibility
studies, have been carried out, and include
consideration of and modification by realistically
assumed mining, metallurgical, economic,
marketing, legal, environmental, social and
governmental factors. These assessments
demonstrate at the time of reporting that
extraction could be reasonably justified. Ore
reserves are sub‑divided in order of increasing
confidence into probable and proven
ounce or oz
troy ounce (= 31.1035 grams)
PGM
Pharaoh Gold Mines NL
PPE
property, plant and equipment
probable
measured and/or indicated mineral resources
which are not yet proven, but where technical
economic studies show that extraction is
justifiable at the time of the determination and
under specific economic conditions
PSP
performance share plan (formerly the restricted
share plan)
R&R
resources and reserves
ROM
run of mine
RSP
restricted share plan
SEDAR
system for electronic document analysis and
retrieval
SGM
Sukari Gold Mine
SID
senior independent non‑executive director
TSF
tailings storage facility
TSR
total shareholder return
VAT
value added tax
FORWARD-LOOKING STATEMENTS
Cautionary note regarding
forward‑looking statements
There are risks associated with an investment in
the shares of Centamin. Recipients of this
presentation should review the risk factors and
other disclosures regarding Centamin contained
in the preliminary prospectus and subsequent
annual reports and Management Discussion and
Analysis reports of Centamin that have been filed
with Canadian securities regulators and are
available at www.sedar.com.
This announcement contains “forward‑looking
information” (or “forward‑looking statements”)
which may include, but are not limited to,
statements with respect to the future financial or
operating performance of the Company, its
subsidiaries and its projects (including the Sukari
Gold Mine), the future price of gold, the
estimation of mineral reserves and resources, the
realisation of mineral reserve estimates, the
timing and amount of estimated future
production, revenues, margins, costs of
production, capital, operating and exploration
expenditures, costs and timing of the
development of new deposits, costs and timing
of construction, costs and timing of future
exploration, the timing for delivery of plant and
equipment, requirements for additional capital,
foreign exchange risk, government regulation of
mining and exploration operations,
environmental risks, reclamation expenses, title
disputes or claims, insurance coverage and the
timing and possible outcome of pending
litigation and regulatory matters. Often, but not
always, forward‑looking statements can be
identified by the use of words such as “plans”,
“hopes”, “expects”, “is expected”, “budget”,
“scheduled”, “estimates”, “forecasts”, “intends”,
“anticipates”, or “believes” or variations
(including negative variations) of such words and
phrases, or state that certain actions, events or
results “may”, “could”, “would”, “might” or “will”
be taken, occur or be achieved.
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.
Qualified person and quality control
Please refer to the technical report entitled
“Mineral Resource and Reserve Estimate for the
Sukari Gold Project, Egypt” effective on 30 June
2015 and issued on 23 October 2015 and filed on
SEDAR at www.sedar.com, for further discussion
of the extent to which the estimate of mineral
resources/reserves may be materially affected by
any known environmental, permitting, legal, title,
taxation, socio‑political, or other relevant issues
as well as details of the qualified persons and
quality control.
Investors should be aware that the reserve and
resource estimate dated 30 June 2017, and
announced on 10 January 2018, does not
constitute a material change on the prior reserve
and resource estimate and an updated NI 43‑101
resource and reserve report was not required to
be prepared.
Information of a scientific or technical nature in
this document was prepared under the
supervision of Quinton De Klerk of Cube
Consulting Pty Ltd, Australia, a qualified person
under the Canadian National Instrument 43‑101.
The total mineral resource was prepared by
Norman Bailie of Centamin plc. The open pit
mineral reserve and underground mineral
reserve were prepared by Quinton De Klerk of
Cube Consulting Pty Ltd, Australia. The
underground mineral resource was prepared by
Mark Zammit of Cube Consulting Pty Ltd,
Australia. Mr Bailie, Mr Zammit and Mr De Klerk
are Qualified Persons under the Canadian
National Instrument 43‑101.
Such qualified persons have verified the data
disclosed, including sampling, analytical, and
test data underlying the information or opinions
contained in this announcement in accordance
with standards appropriate to their qualifications.
Forward‑looking information involves and is
subject to known and unknown risks, uncertainties
and other factors which may cause the actual
results, performance or achievements of the
Company and/or its subsidiaries to be materially
different from any future results, performance or
achievements expressed or implied by the
forward‑looking information. Such factors include,
among others, general business, economic,
competitive, political and social uncertainties; the
actual results of current exploration activities and
feasibility studies; assumptions in economic
evaluations which prove to be inaccurate;
fluctuations in the value of the United States dollar
and the Canadian dollar relative to each other, to
the Australian dollar and to other local currencies
in the jurisdictions in which the Company
operates; changes in project parameters as plans
continue to be refined; future prices of gold and
other metals; possible variations of ore grade or
recovery rates; failure of plant, equipment or
processes to operate as anticipated; accidents,
labour disputes or slow downs and other risks of
the mining industry; climatic conditions; political
instability, insurrection or war; arbitrary decisions
by governmental authorities; delays in obtaining
governmental approvals or financing or in the
completion of development or construction
activities. Discovery of archaeological ruins of
historical value could lead to uncertain delays in
the development of the mine at Sukari.
Although the Company has attempted to identify
important factors that could cause actual actions,
events or results to differ materially from those
described in forward‑looking information, there
may be other factors that cause actions, events
or results to differ from those anticipated,
estimated or intended. Forward‑looking
information contained herein is made as of the
date of this announcement and the Company
disclaims any obligation to update any
forward‑looking information, whether as a result
of new information, future events or results or
otherwise. There can be no assurance that
forward‑looking information or statements will
prove to be accurate, as actual results and future
events could differ materially from those
anticipated in such information or statements.
Accordingly, readers should not place undue
reliance on forward‑looking statements.
LEI: 213800PDI9G7OUKLPV84
Company No: 109180
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Centamin plc Annual report 2017SHAREHOLDER 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