THROUGH
THE CYCLE
SUSTAINABLY
AnnuAl RepoRt And Accounts 2019
CENTRAL ASIA METALS
IS A DIVERSIFIED
RESOURCES COMPANY
THAT OPERATES LOW
COST MINERAL
ASSETS IN NORTH
MACEDONIA AND
KAZAKHSTAN
STRATEGIC REPORT
01
Highlights
02
At a Glance
04
Chairman’s Statement
Our Values and Culture
06
Chief Executive Officer’s Statement 08
11
Strategy
12
Business Model
14
Market Overview
18
Operational review
30
Sustainability
34
Stakeholder Engagement
36
Financial Review
41
Non-IFRS Financial Measures
42
Risk Management
44
Principal Risks and Uncertainties
GOVERNANCE
Introduction to Corporate Governance 48
52
Board of Directors
54
Board Report
58
Audit Committee Report
60
Nomination Committee Report
62
Remuneration Committee Report
70
Sustainability Committee
Directors’ Report
72
Statement of Directors’
Responsibilities
74
FINANCIAL STATEMENTS
Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Statements of Financial Position
Consolidated Statement of
Changes in Equity
Company Statement of
Changes in Equity
Consolidated Statement of
Cash Flows
Notes to the Financial Statements
Glossary of Technical Terms
Directors, Secretary and Advisors
75
79
80
81
83
84
85
86
116
117
FINANCIAL HIGHLIGHTS
OPERATIONAL HIGHLIGHTS
EBITDA margin
SASA, NORTH MACEDONIA
60%
2018: 61%
Dividend full year
6.5p
2018: 14.5p
Kounrad C1 copper
cash cost
$0.52/lb
2018: $0.54/lb
Sasa C1 zinc equivalent
cash cost
$0.47/lb
2018: $0.46/lb
Zinc in concentrate production of 23,369 tonnes
(2018: 22,532 tonnes)
lead in concentrate production of 29,201 tonnes
(2018: 29,388 tonnes)
KOUNRAD, KAZAKHSTAN
copper cathode production of 13,771 tonnes
(2018: 14,049 tonnes)
copper sales of 13,600 tonnes
(2018: 14,081 tonnes)
CORPORATE
lost-time injury frequency rate (‘ltIFR’) of 0.42
(2018: 3.76)
debt repayments of $38.4 million
Appointment of dr Gillian davidson as an
Independent non-executive director and chair of
the sustainability committee in november 2019
nick clarke transitions to non-executive
chairman from 1 January 2020
See page 41 for definition of non-IFRS alternative performance
financial measures.
For more info, visit us online:
www.centralasiametals.com
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
1
Strategic ReportFinancial StatementsGovernance AT A GLANCE
UNLOCKING
VALUE IN BASE
METALS
central Asia Metals (‘cAMl’) is a diversified
mining company with two low-cost
operations producing three base metals
essential for modern living.
REVENUE BY
GEOGRAPHY
REVENUE BY
METAL
Kazakhstan
$81.7m
Copper
$81.7m
Silver
$1.9m
KAZAKHSTAN
KOUNRAD OPERATION
COPPER
KAZAKHSTAN
NORTH MACEDONIA
SASA MINE
ZINC
LEAD
SILVER
SKOPJE
NUR-SULTAN
ALMATY
KOUNRAD
SASA
North Macedonia
Zinc
$99.1m
$40.2m
Lead
$57.0m
NORTH
MACEDONIA
EMPLOYEES BY GEOGRAPHY
North Macedonia
67%
Kazakhstan
31%
UK
2%
1 Silver sold to Osisko Gold Royalties, in accordance with its streaming agreement.
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CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
KOUNRAD
OVERVIEW
In 2012, CAML completed construction and
began producing copper from the Kounrad
in-situ dump leach and solvent extraction
electro-winning (‘SX-EW’) operation close to
Balkhash in central Kazakhstan.
Two self-funded expansions followed, and the
Company has now fully developed Kounrad,
with copper production expected to continue
until the end of the licence period in 2034.
Since production commenced, 96,245 tonnes
of copper have been produced at Kounrad, at
costs that are amongst the lowest in the world.
Life of operation, to
2019 copper sales
2034
2019 copper
production
13,771t
13,600t
Estimated remaining
recoverable copper
resources
160,000t
For operations in Kazakhstan see page 26
SASA
OVERVIEW
Sasa is a zinc, lead and silver mine in North
Macedonia, approximately 150 kilometres from
the capital city, Skopje. The operation is an
underground mine and the processing plant
uses froth flotation to produce a zinc
concentrate and a lead concentrate containing
silver. These products are then trucked to
nearby smelters.
In 2019, the mine produced 23,369 tonnes of
zinc in concentrate and 29,201 tonnes of lead
in concentrate.
Life of mine
Probable Reserve
(2020)
18 years
8.9mt
Zinc grade
Lead grade
3.1%
3.9%
For operations in North Macedonia see page 20
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
03
Strategic ReportFinancial StatementsGovernance
CHAIRMAN’S STATEMENT
NICK CLARKE, CHAIRMAN
ENSURING WE
ARE SUSTAINABLE
FOR ALL
STAKEHOLDERS
2019 was another good year for cAMl.
While commodity markets were
challenging with lower year-on-year
metal prices prevailing, we have managed
to maintain strong financial margins and
generate significant profits and cash flow.
OPERATIONAL AND FINANCIAL EFFICIENCY
As we report our results, we are in the midst of
the coVId-19 pandemic. the challenges and
outlook for our health, our business and the
global economy are changing daily. our priority
during this time is the welfare of our employees
and contractors.
strong 2019 production from our operations led
to cAMl eBItdA of $108.6 million and free cash
flow of $69.8 million. this has, in turn, meant we
continued to deleverage and we ended the year
with gross debt of $108.8 million, some $36.1
million lower than 2018.
We have now been listed on the AIM market of
the london stock exchange for almost ten years
and have been producing copper at our Kounrad
facility in Kazakhstan for eight years. In the first
half of 2020 we expect to achieve the significant
milestone of 100,000 tonnes of copper
production from Kounrad. We are proud that this
copper has been produced from what was waste
material, and at costs that are amongst the
lowest in the world.
We grew in 2017 by acquiring the sasa zinc and lead
mine in north Macedonia and we have successfully
integrated this operation into our business. We
have made significant advances since we bought
the mine, having made many incremental
improvements in optimising operations and
making the recent decision in principle to change
our mining method for the long term.
Indeed, we have since our listing generated
gross revenue of $831.8 million and eBItdA
of $502.3 million, and we have returned to
shareholders in dividends $176.4 million or
97.7 pence. despite this strong long-term
performance, we are currently recommending no
final dividend for 2019. While we have a robust
balance sheet and low cost operations, the
situation regarding coVId-19 and its potential
impact on the global economy and our operations
remains uncertain and is rapidly changing, so we
believe that, currently, preserving cash is the
most prudent approach.
RECOGNISING ALL OUR STAKEHOLDERS
In addition to our supportive shareholders, we
recognise that there are many other stakeholders
in our business such as our employees, the
communities which surround our operations,
host governments and suppliers, to name a few.
We have contributed meaningfully to the
economies of the countries in which we operate,
employing over 1,000 people across Kazakhstan
and north Macedonia, and providing real financial
I was particularly
proud of the
support that we
provided
to the Kind Heart
Centre in Balkhash,
Kazakhstan.
NICK CLARKE, CHAIRMAN
Free cash flow
$69.8m
2018: $73.8m (adjusted)
Dividend per share
6.5p
2018: 14.5p
support and time to important social
development programmes. I was particularly
proud of the financial and practical support that
we provided to the Kind Heart centre for
disabled children in Balkhash, Kazakhstan, as we
purchased and refurbished a day care building for
the charity.
BOARD CHANGES
I was delighted to announce the appointment
of dr Gillian davidson to the cAMl Board
in november 2019. she is an experienced
company director, whose sustainability
knowledge has already been invaluable in
guiding the company forwards to continually
improve in this important area.
SUSTAINABILITY
2019 has rightly been a year of increased focus
on sustainability and environmental, social
and governance (‘esG’) both in the investment
community as a whole and in particular in
the extractives industries. While we have
had a site-based sustainability director since
2013, during the year we have revisited our
approaches and policies to keep abreast of
current developments.
In 2019, I took part in an esG investor roadshow,
where we approached some of our major
shareholders to ask what they expect to see from
us in terms of governance and sustainability, and
their important feedback has informed some of
the paths that we have taken.
We will soon be publishing our first standalone
sustainability Report, which is to cover the
activities of 2019 and our general approach
and strategy with regard to sustainability, as we
recognise the growing interest in us providing
increased granularity and numerical metrics in
this regard.
sustainability is a wide-ranging and crucial topic
and we believe that this forthcoming report will
provide our investors and other stakeholders
with a greater understanding of our efforts and
achievements in this important aspect of our
business. We hope that it will be seen as a big
and positive step in our sustainability journey
and no doubt there will be areas for continued
improvement going forwards.
While I remain chairman of cAMl, my role has
now transitioned from an executive position to
becoming non-executive chairman and I have
therefore taken a step back from the day to day
running of the company. this change is part of
a long-term succession plan that was initially
implemented when I moved from ceo to
executive chairman four years ago. this enabled
nigel Robinson and Gavin Ferrar to grow into
their current roles as ceo and cFo respectively
and I am confident that they are very capable of
managing our business. My efforts going forward
will centre on governance and succession
planning to ensure that we continue to plan for
the long-term sustainable future of cAMl.
ACKNOWLEDGEMENTS AND OUTLOOK
I would like to thank the Board of directors,
our senior management team and all of our
employees for their dedication to our business
during 2019. Your efforts do not go unnoticed
and we very much appreciate your hard work.
NICK CLARKE
non-eXecutIVe cHAIRMAn
31 March 2020
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CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
opening the Kind Heart centre in Balkhash
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
05
Strategic ReportFinancial StatementsGovernance
OUR VALUES AND CULTURE
AN OPEN AND
TRANSPARENT
BUSINESS
OUR PURPOSE
our purpose is to produce base metals, which are essential for
modern living, profitably in a safe and sustainable environment
for all our stakeholders.
We promote low-cost, sustainable and ethical metal
production to benefit our workforce, local communities, host
governments and shareholders. We enrich communities close
to our operations with employment opportunities and
education, sports facilities, medical care and help for
underprivileged members of society. Focus on environmental
responsibilities remains key to our business strategy.
the metals we produce are essential for modern living and a
technologically advancing future. they play a key role in
transmitting power and transporting people in order to foster
economic growth and development.
OUR CULTURE
since inception of the company, our culture has been to
operate in an open and transparent manner and develop a
long-term and sustainable business. cAMl as a business has
been built around embracing technology and continues to
operate with an enterprising spirit.
OUR VALUES
our values inform the behaviour and standards expected of all
our colleagues in the business regardless of location or role of
that individual. our employees are the essence of the
company and their conduct affects our work ethic, the
decisions we make and our performance.
We encourage our people to take ownership of their work,
lead by example, and set achievable goals. through this we
facilitate improvement in our processes and practices
enabling us to meet the targets we set ourselves.
Accountability for us means defining our responsibilities and
fulfilling our commitments to our partners, employees and
stakeholders. this means delivering on our objectives and
goals efficiently in respect of time and cost.
OUR VALUES
HEALTH & SAFETY
The safety of our employees is a core value and we
are passionate about protecting the health and
wellbeing of our people. We work hard to monitor,
assess and mitigate all the risks that could
potentially cause harm to our employees. We strive
to ensure that every individual within the Company
understands that safety is their responsibility.
SUSTAINABILITY
Taking responsibility for sustainable development is
our core objective and its importance is considered
in each decision that we make. We aim to positively
affect our employees and local communities, while
minimising any adverse impacts on the natural
environment.
EFFICIENCY AND INNOVATION
We encourage our team to embrace change and
commit to continuing to bring technology and
innovation together to improve our operations.
This approach helps us to use our resources
wisely and efficiently in achieving long-term
sustainable production.
RESPECT AND TRUST
We encourage open and constructive
communications with team members and value
collaborative working. We accomplish transparency
through fair and open communication with all key
stakeholders built on disclosure, clarity, and
accuracy. We are open to recognising our faults and
improving practices.
training at Kounrad
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AnnuAl RepoRt And Accounts 2019
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
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Strategic ReportFinancial StatementsGovernance CHIEF EXECUTIVE OFFICER'S STATEMENT
NIGEL ROBINSON, CHIEF EXECUTIVE OFFICER
A ROBUST
OPERATIONAL
PERFORMANCE
We have enjoyed a successful year at
cAMl, having delivered copper
production above guidance at Kounrad
and zinc and lead production on target at
sasa, at costs that remain, on average,
within the lowest industry quartile of the
copper cost curve.
2019 OVERVIEW
sasa produced 23,369 tonnes of zinc in
concentrate and 29,201 tonnes of lead in
concentrate at a c1 zinc equivalent cash
cost of production of $0.47 per pound,
which is comparable to prior years.
our Kounrad operations continued to perform
well, delivering copper cathode output of
13,771 tonnes, which exceeded production
guidance. Kounrad’s 2019 c1 copper cash
cost of production was $0.52 per pound,
demonstrating once again that the operation
is one of the lowest cost in the world.
despite challenging 2019 commodity prices, due
to continuing trade wars between the usA and
china and an increase in zinc and lead mine
supply, our robust operational performance
resulted in gross revenue of $180.8 million
and eBItdA of $108.6 million, and we
maintained our strong margin of 60%.
We have continued to deleverage during 2019,
having repaid a further $38.4 million of our debt,
plus the remainder of the $12.0 million deferred
consideration that was owed to the sasa
vendors. We ended 2019 in a net debt position
of $80.2 million, with cash in the bank of
$32.6 million (including restricted cash). We view
this as a positive development given that cAMl
had debt of almost $200 million on acquiring
sasa in november 2017. the Group generated
2019 free cash flow of $69.8 million.
our decision not to recommend a final 2019
dividend was a difficult one, but we firmly believe
that preservation of cash is key, given the current
uncertainty and as yet unquantifiable impact of
the coVId-19 pandemic. We intend to revisit this
decision during 2020 as and when there is
increased clarity on the impact of the virus. We
have over 1,000 employees and are determined
to look after their welfare as best as we can in
the current environment.
SUSTAINABILITY
this strong economic and financial performance
underpins our business and we place significant
emphasis on ensuring that we are sustainable for
all stakeholders. to demonstrate our credentials
in this area, we will soon be publishing our first
sustainability Report, which will provide
quantitative data to support material sustainability
topic areas for us and other stakeholders.
We remain focused on safety and are pleased to
report a significant improvement in performance
in 2019, with a ltIFR of 0.42, which represents a
decrease of 86% from 2018 and compares well
We spent
$0.6 million at
Sasa and Kounrad
supporting the
local communities.
NIGEL ROBINSON, CHIEF
EXECUTIVE OFFICER
LTIFR
0.42
2018: 3.76
Gross revenue
$180.8m
2018: $204.2m
with wider industry standards. Whilst the number
of lost-time injuries (‘ltI’) reduced from eight in
2018 to only one in 2019, we are committed to
achieving a zero-harm workplace.
during 2019, we spent $0.6 million at sasa and
Kounrad supporting the local communities. this
is a vital aspect of what we do in the areas close
to the operations and, as a result, we enjoy good
relations with our neighbours and we believe we
have brought some real positive change. We
established the Kounrad Foundation for
charitable donations in 2018 and, during 2019, we
committed to establishing a similar sasa
foundation to formalise charitable donations that
should be operational during 2020.
We have completed construction of our new
tailings storage facility 4 (‘tsF4’) in north
Macedonia, which is of downstream construction
and has been fully lined in accordance with
industry best practice. our facilities have been
reviewed by external expert consultants and we
have complied fully with all disclosure
requirements in the 2019 Investor Mining &
tailings safety Initiative, which is governed
through a steering committee chaired by the
church of england pensions Board.
SASA
At sasa, we have during the year identified many
opportunities for incremental improvement, such
as using 3d technology as a basis for our mining,
geological and ventilation work. We are in the
process of installing internet underground to
enable better analysis of availability and utilisation
of equipment, plus improved communications
and health and safety. At surface, we have
installed two new crushers during the year, which
should allow us to comfortably increase
production to a run rate of approximately
850,000 tonnes per annum.
In 2019, our life of Mine study primarily focused
on whether sasa’s mining method should be
changed from the current sub-level caving
operation to a more selective cut and fill stoping,
and the Board has made the decision in principle
to make this transition. this should optimise our
production while allowing the storage of
potentially over 40% of our tailings underground.
detailed technical study work will continue
throughout 2020.
KOUNRAD
during the year at Kounrad, leaching operations
performed well, as did the sX-eW processing
facilities which achieved availability of over 96%.
We continued to transition the leaching
operations from the eastern dumps to the
Western dumps and during 2019, 68% of the
copper produced came from the west. this trend
is expected to continue over the next three years
by which time all production will come from the
Western dumps.
capital expenditure remained very low at $1.6
million, comprising some replacement anodes
and cathodes, plus increasing our footprint of
leaching infrastructure and collector trenches
around the Western dumps.
MARKET PERFORMANCE
At the end of 2019, the cAMl share price closed
up 1.4% at £2.20 and the Ftse AIM All share/
Basic Resources Index performed in a similar
manner, gaining 1.8% during the year. the average
prices received of the commodities that cAMl
produces were lower than those received in
2018. the cAMl share price performance was
likely also affected by investor concerns
regarding liquidity.
08
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
training at Kounrad
CENTRAL ASIA METALS PLC
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09
Strategic ReportFinancial StatementsGovernance CHIEF EXECUTIVE OFFICER’S STATEMENT contInued
STRATEGY
throughout this uncertainty, we will continue
to maintain strong health and safety and
environmental standards at both of our
operations and we will strengthen our
relationships with the local communities by also
working closely with them on overcoming the
difficulties posed by the coVId-19 pandemic.
NIGEL ROBINSON
cHIeF eXecutIVe oFFIceR
31 March 2020
EBITDA
$108.6m
2018: $125.3m
OUTLOOK
the outlook for 2020 is uncertain given the
severity of the coVId-19 pandemic and our
immediate priority is the welfare of our
employees and contractors.
EBITDA margin
60%
2018: 61%
currently, we reiterate our previously announced
production guidance for sasa, which has
increased year-on-year to between 23,000 and
25,000 tonnes of zinc and between 30,000 and
32,000 tonnes of lead, generated from higher
throughput levels of between 825,000 tonnes
and 850,000 tonnes. likewise, we maintain our
Kounrad copper production guidance of 12,500
to 13,500 tonnes. We are facing some headwinds
due to the current weak commodity prices
exacerbated by coVId-19, coupled with increased
2020 global zinc and lead treatment charges.
We have to date encountered no disruption to
either the production or sale of our copper or our
zinc and lead concentrates, but we are very
conscious that the situation could change swiftly
in the coming weeks and months. We will
continue to monitor the coVId-19 position daily
in both countries of operation and respond to the
threats accordingly to protect both our
employees and our business interests.
OUR STRATEGIC GOALS AND MEASURES
2019 saw our team focused on maximising value from sasa
and Kounrad and we believe that we have to date achieved
this, and we will continue to optimise our operations going forward.
Kounrad 2019 copper production exceeded guidance and sasa
2019 production was delivered at the top end of the guidance
range for zinc and lead. We have delivered another year of strong
profits and cash flow and also deleveraged our balance sheet.
We aim to strike the right balance for our shareholders in terms of
capital allocation. Reducing debt and continuing to pay the sector
leading dividends, for which we have become known, is a priority,
yet we remain mindful of the challenges of our scale and liquidity
so keep a watchful eye on potential growth opportunities.
Strategic goal
Risks
Measures in 2019
Safe and efficient operations
´ safely extracting maximum value from
operational
Zinc production
Lead production
Kounrad and sasa
Maintain low production costs
´ continued focus on maintaining cAMl’s
Group position firmly in the lowest quartile
of the c1 copper equivalent cost curve
´ continued capital cost control at
both operations
29,201t
(2018: 29,388t)
23,369t
(2018: 22,253t)
Copper production
13,771t
(2018: 14,049t)
operational
external
Sasa C1 zinc
equivalent cash cost
Kounrad C1 copper
cash cost
Maintain high sustainability standards
´ putting the safety of our employees
operational
above profits
´ looking after our operating environment
´ enhancing the local communities
´ contributing to the development of
the economies in which we operate
$0.52/lb
(2018: $0.54/lb)
Group capital
expenditure
$11.0m
(2018: $14.8m)
Group LTIFR
0.42
(2018: 3.76)
$0.47/lb
(2018: $0.46/lb)
Group EBITDA
margin
60%
(2018: 61%)
Total social
contributions
$0.6m
(2018: $0.6m)
Total tax paid
in-country
$35.1m
(2018: $43.9m)
Increase shareholder value
´ Reward shareholders with attractive
dividends
operational
external
´ deleverage our balance sheet
´ continue to appraise business
development opportunities
Debt repayments
$38.4m
(2018: $38.5m)
Dividends paid
$32.2m
(2018: $39.6m)
Earnings per share
29.36 cents
(2018: 31.33 cents)
drilling at sasa
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For principal risks and uncertainties see page 44-47
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Strategic ReportFinancial StatementsGovernance BUSINESS MODEL
HOW WE GENERATE VALUE
FOR ALL OF OUR STAKEHOLDERS
OPERATING WITH EXCELLENCE
People, knowledge
and experience
´ We are proud of the experienced
and capable teams that we have
at Sasa and Kounrad and now
employ over 1,000 people,
with less than 10 expatriates
combined at both of our sites.
´ We provide wide-ranging training
programmes for our operational
teams and in some cases tertiary
education for key talent.
´ We have a strong Board with
complementary skills and a
London-based senior
management team.
´ We have a 14 year operational
track record in Kazakhstan, with
senior Board representation
from Non-Executive Director
Nurlan Zhakupov.
Sasa local workforce
99%
Kounrad local workforce
100%
Efficient extraction
Low-cost operations
´ In-situ dump leaching
CAML has now had eight years of
successful leaching at Kounrad.
The SX-EW plant produces copper
cathode in a relatively simple and
reliable processing facility, with the
capacity to produce 50 tonnes of
cathode daily.
Kounrad has 160,000 tonnes of
estimated remaining recoverable
copper resources, which should
ensure a life of operation to the end
of the licence in 2034.
Kounrad estimated remaining
recoverable copper resources
160,000t
´ Mining ore
Sasa is a conventional underground
mine and ore is treated by froth
flotation to produce separate zinc
and lead concentrates.
During Q4 2019, a third crusher was
installed and is expected to allow for
increased future annual plant
throughput up to 850,000 tonnes.
CAML plans to transition to cut and fill
stoping at Sasa from the current
sub-level caving method, which is
expected to lead to improved reserve
grades for both zinc and lead and
increased metal production over the
life of the mine.
Sasa currently has reserves and
resources to support an 18-year
mine life.
Sasa 2019 ore extraction
817,714t
(2018: 803,101t)
´ Processing
Capital and operational cost
control at both operations.
Sasa on-site 2019 costs
of only $40.3 per tonne
(2018: $38.8 per tonne).
Kounrad is one of the lowest
cost copper producers globally.
Maintaining low costs at both of
our operations underpins our
profitability, allowing us to look
after our stakeholders and to
reward shareholders with
attractive dividends.
Sasa C1 zinc equivalent
cash cost
$0.47/lb
(2018: $0.46/lb)
Kounrad C1 copper
cash cost
$0.52/lb
(2018: $0.54/lb)
DELIVERING VALUE FOR ALL OF OUR STAKEHOLDERS
We have an economically robust business that underpins our ability to generate
profits and dividends for our shareholders and ensure that our successes are
felt by our other important stakeholders.
Investors
2019 EPS 29.36 cents
(2018: 31.33 cents)
Dividend full year 2019
6.5p
(2018: 14.5p)
Communities
Employees
Sasa 698 (2018: 684)
Kounrad 323 (2018: 340)
Total number of CAML employees
and contractors
1,230
Sasa social contributions 2019
Kounrad social contributions 2019
$0.3m
(2018: $0.3m)
Governments
$0.3m
(2018: $0.3m)
Tax paid in North Macedonia
since November 2017 acquisition
Tax paid in Kazakhstan
since 2012
$36.5m
Suppliers
$143.0m
Sasa % local procurement 1
Kounrad % local procurement2
59%
1
Locally includes North Macedonia
73%
2
Locally includes Karaganda region
SUSTAINABILITY UNDERPINS
OUR BUSINESS MODEL
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Strategic ReportFinancial StatementsGovernance
MARKET OVERVIEW
PRODUCING THE METALS
ESSENTIAL FOR MODERN LIVING
Modern society is increasingly dependent on new technology and, as the
world moves away from fossil fuels towards renewable energy, these two
factors will bring increased demand for certain metals, such as copper.
copper is an essential component of electric motors, wiring and
electronics and, as such, will be a major component of electric vehicles.
Zinc is an essential metal in today’s society given its use in coating steel
and preventing corrosion. In this manner it prolongs the life of metal
products, reducing the need for replacement.
With sustainability now taking centre stage in the corporate
world, it is important to recognise the mining industry for the
positives that it brings to society. Nearly every mineral and
metal in use in modern life is the product of some form of
mining. Demand for metals is growing and, as world population
increases and countries develop and as technology advances,
the need for these commodities will continue to rise.
Population growth and economic development, as reflected by
rising GDP per capita, have historically been key drivers of
global demand for commodities.
WHY CAN’T WE RELY 100% ON RECYCLING?
If we were to recycle all the freely available metals in the
world today, we would only be able to generate a very small
percentage of the metals needed by society. This is for three
key reasons:
´ Growing global population
´ Metals remain in use for many years therefore
are unavailable for recycling
´ Low quality scrap recycling can do more harm
than good for the environment
WHY DO WE NEED BASE METALS?
These are the basic building materials for much of the
world around us, and are widely used in construction,
manufacturing, transportation, energy transmission and
storage, all of which foster economic growth and
development. There is currently no affordable substitute
for the metals that CAML produces.
On average, over 30% of copper supply annually is from
recycled sources and around 30% of zinc. The lead industry is
already at the leading edge of metal recycling, with this
‘secondary lead’ providing a significant percentage of lead
demand annually. Lead has one of the highest recycling rates
of modern metals globally, and it is estimated that almost 75%
of all lead used in the USA and Europe is produced through
recycling processes.
Sustainable development is development that
meets the needs of the present without
compromising the ability of future generations
to meet their own needs.
BRUNDTLAND REPORT, 1987
ZINC
USAGE
Chemicals
6%
Other
10%
LEAD
USAGE
Alloys
2%
Pigments
5%
Other
13%
COPPER
USAGE
Industrial
12%
Transport
13%
Equipment
31%
Batteries
80%
Infrastructure
16%
Construction
28%
Brass and
bronze
17%
Galvanising
50%
Zinc alloys
17%
Around 50% of global zinc is used for
galvanising, whereby a protective coating
of zinc is applied to steel or iron.
Galvanising protects the steel or iron by
preventing corrosive substances from
reaching the metals and by corroding first.
steel and iron that are not adequately
galvanised will rust and weaken over time,
resulting in premature replacement.
long-term durability provided by
galvanising is achieved at a relatively low
environmental burden, with several studies
demonstrating high economic and
environmental costs associated with
repeated maintenance and replacement
of steel structures.
one of the less well-known uses for zinc is
in nutritional supplements. It is estimated
that almost 0.5 million undernourished
children are at risk of dying each year
from zinc deficiencies. taking zinc
regularly can treat stomach upsets,
improve immunity, blood sugar levels and
the function of the eyes, heart and skin.
lead is an essential ingredient in the
lead-acid storage batteries used in motor
vehicles and over 80% of global lead
demand is for batteries. lead batteries
are also very efficient at storing energy
generated by clean, green power sources
such as wind and solar.
About 60% of all copper demand is
for electrics such as wires, cables and
connectors as it is an excellent conductor
of electricity. Approximately 20% of
copper is used in construction for
applications such as plumbing and
copper tubes.
currently, a billion vehicles worldwide use
a lead-acid battery to start their engines,
with such transportation of people and
goods fostering economic growth and
development around the world.
Hybrid and fully electric vehicles also
require lead-acid batteries in conjunction
with other battery technologies such
as lithium-ion.
lead batteries are also critical for
fuel-saving technologies such as
start-stop technology and powering
exhaust-free industrial vehicles such
as fork-lift trucks.
copper plays a key role in information
and communications technologies.
Going forward, the need for copper in
the electric vehicle revolution is expected
to generate significant new demand as
the world strives to reduce carbon
emissions and arrest global warming.
Where an internal combustion car uses
approximately 22 kilogrammes of copper,
the average electric vehicle contains
almost four times that amount. In
addition, each charging station also uses
approximately 0.7 kilogrammes of copper.
copper has unique properties known to
kill many germs on contact so many
hospitals are moving to use copper door
handles and taps for their antibacterial
properties. such developments are
important for our health with the rise of
antibiotic resistant superbugs. the human
body also needs traces of copper, as it
plays an essential role in generating red
blood cells, maintaining the immune
system and helping the body to absorb iron.
If it’s not grown, it’s mined.
sources: IcMM, IcsG, IlZsG, IlA, World Bank
14
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
15
Strategic ReportFinancial StatementsGovernance MARKET OVERVIEW contInued
during 2019, Kazakhstan and north Macedonia continued to be stable jurisdictions for the mining
industry. us - china trade tensions continued to be the dominant factor restricting, higher global
growth, which is a vital driver for base metals demand and prices.
NORTH MACEDONIA
despite the name change to north Macedonia in
February 2019, which was a longstanding dispute
with Greece that blocked the country from
joining the eu and nAto, the eu leaders in
october 2019 were unable to give north
Macedonia a date to start eu membership
negotiations. on 17 March 2020, north
Macedonia became 30th member of nAto after
the spanish senate ratified its accession.
According to the IMF, north Macedonia’s real Gdp
is expected to have grown by 3.2% in 2019 and
inflation, which is largely driven by euro area
inflation and energy prices, was low.
Global mine output rose by 118,000 tonnes or
0.9% in 2019, due to the ramp-up of key zinc
mines, according to the International lead and
Zinc study Group (‘IlZsG'). For 2020, the IlZsG
forecasts global mine growth of 4.7% due to
significant ramp-ups and mine restarts.
As a result of the growing availability of
concentrate, treatment charges have risen
significantly. chinese smelters have increased
production back up to 100% of capacity after
environmental restrictions were eased, which
has increased the availability of refined metal and
capped the zinc price. IlZsG reported a 2019 global
refined zinc deficit of 189,000 tonnes, a contrast
to the 522,000 tonne shortfall seen in 2018. the
annual deficit continues to suggest a rather tight
refined zinc market, but supply/demand dynamics
are currently uncertain for 2020 due to coVId-19.
KAZAKHSTAN
nursultan nazarbayev’s resignation was arguably
the most significant political development in
central Asia in recent memory. new president
Kassym-Jomart tokayev continued to implement
the country’s strategic goals of making
Kazakhstan an open society and one of the
world’s most competitive nations.
According to the national Bank of Kazakhstan,
Kazakhstan’s Gdp is expected to have grown by
4.5% during 2019. Inflation was 5.4%.
the global economic downturn and the us-china
trade wars led to an overall underperformance
in global copper consumption growth during
2019, although the price improved in Q4 2019
due to perceived progress in the ‘phase one’
trade negotiations.
16
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
While total global stocks of refined lead metal
remained at historical lows throughout 2019,
the market balance switched from a deficit of
53,000 tonnes in 2018 to surplus of 9,000
tonnes in 2019. the IlZsG currently forecasts a
refined market surplus of 55,000 tonnes in
2020, although market outlook is increasingly
uncertain due to coVId-19.
In 2020 lead supply/demand is expected to be
impacted by weak demand for refined metal
from automotive industry, although supply
disruptions are expected to be higher than usual.
during 2019, lead treatment charges trended
higher due to an increase in the availability of
global recycled supply in china and the ability
of top submerged lance (‘tsl’) smelters to
substitute up to 50% of concentrate with
secondary lead. the H2 2019 temporary closure
of nyrstar’s port pirie resulted in the availability
of additional lead concentrate which supported
the treatment charge increases.
continued tightness in the global refined lead
market coupled with the already low inventory
levels is expected to lend support to the
metal’s price during 2020.
While the coVId-19 pandemic brings significant
market uncertainty, the International copper
study Group (‘IcsG) has forecast that refined
copper usage in 2020-21 will increase year
on year by 1.5%, owing in part to sustained
economic growth in the united states. the IcsG
calculated that the global refined copper market
was in a deficit of 320,000 tonnes last year.
Its forecast for 2020 remains a surplus of
280,000 tonnes, although that surplus is
expected to fall to 100,000 tonnes in 2021.
As in prior years, the copper price will continue
to be affected by material speculative positions.
ZINC
1 JAn 2019
$2,467/t
-7.9%
31 dec 2019
$2,272/t
Commodity market $/t
Average
$2,509/t
LEAD
1 JAn 2019
$2,021/t
-4.7%
31 dec 2019
$1,927/t
Commodity market $/t
Average
$2,005/t
COPPER
1 JAn 2019
$5,965/t
+3.5%
31 dec 2019
$6,174/t
Commodity market $/t
Average
$6,023/t
FINANCIAL MARKETS AND CAML SHARE PRICE
since the company’s Ipo in september 2010, cAMl’s share price has significantly
outperformed the Ftse AIM All share/Basic Resources Index, primarily due to
cAMl’s strong operational performance, low production costs and typically high
dividend yield.
during 2019, the cAMl share price closed at £2.20, which represents a 1.4% increase
(31 december 2018: £2.17). the Ftse AIM All share/Basic Resources Index performed
in a similar manner and gained 1.8% during 2019 (see second graph).
cAMl’s commodity diversification meant that weaknesses in zinc and lead prices
throughout the year were to some extent offset by the copper price, although the
average prices received for the commodities that cAMl produces were lower than
those achieved in 2018.
the cAMl share price performance was also likely affected by investor concerns
regarding the liquidity of small cap stocks in general and the economic uncertainty
caused by protracted Brexit negotiations and the associated volatile exchange rates
for sterling. In december 2019, both the economy and the cAMl share price
responded favourably to the uK General election result.
the graphs below show cAMl’s share price performance against the Ftse AIM All
share/Basic Resources Index.
CAML versus AIM Basic Resources (IPO – 2019)
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CAML
FTSE AIM All Share/Basic Resources Index (Rebased)
CAML versus AIM Basic Resources (2019)
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CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
17
Strategic ReportFinancial StatementsGovernance
OPERATIONAL REVIEW
PRODUCING THREE
BASE METALS
SUSTAINABLY
SCOTT YELLAND, CHIEF OPERATING OFFICER
In my first full year as cAMl’s coo,
I am pleased that we have delivered
production in line with guidance at
sasa and above target at Kounrad.
costs at both operations remained
very low by industry standards and
capital expenditure at the sites was
also well controlled.
Sasa 2019
zinc production
23,369t
For more on Sasa see page 20
Sasa 2019
lead production
29,201t
For more on Sasa see page 20
Kounrad 2019
copper production
13,771t
For more on Kounrad see page 26
SASA
NORTH MACEDONIA
KOUNRAD
KAZAKHSTAN
during the year, sasa’s operational performance was strong and
production of 23,369 tonnes of zinc and 29,201 tonnes of lead
in concentrates was delivered, which was at the top end of
guidance for both metals. At $0.47 per pound, sasa’s c1 zinc
equivalent cost of production has remained low by industry
standards and, despite sector-wide headwinds for treatment
charges, the mine’s site-based costs should remain competitive.
the Kounrad operation performed well and, in 2019, produced
13,771 tonnes of high-quality copper cathode, which was above
the guidance range. the operation continued to transition
leaching activities from the eastern dumps to the Western
dumps as planned and, during the year, 68% of production was
generated from the Western dumps. By 2023, it is expected
that all copper will be leached from the Western dumps.
Kounrad’s 2019 cost of copper production at $0.52 per pound
remains amongst the lowest in the world.
18
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
19
Strategic ReportFinancial StatementsGovernance OPERATIONAL REVIEW contInued
2019 ZINC RECOVERY
86.5%
2019 LEAD RECOVERY
94.5%
HOW WE PRODUCE ZINC AND LEAD
OLEG TELNOI, GENERAL DIRECTOR – SASA
SASA
noRtH MAcedonIA
2019 has been another productive year
at sasa, with strong metal output and
cost control. during the year, we
identified areas for improvement on-site
to optimise production, including installing
and commissioning our new crusher, and
we completed our life of Mine study,
making a decision in principle to transition
to a cut and fill stoping method.
MINE
Sub-level caving
underground mine
with ore
transported to
surface by shaft
(70%) and by
truck (30%)
CRUSH AND
SCREEN
Jaw and cone
crushers
MILL
Rod mills, spiral
classifiers and ball
mills. Ore milled to
c.74 microns
FROTH
FLOTATION
Two concentrates
produced –
lead containing
silver, and zinc
REMOVE
MOISTURE
Thickened and
pressed to
de-water
STORAGE
Saleable
concentrate
products stored in
sheds awaiting
loading
TO MARKET
Concentrate
trucked to
smelters
ZINC AND LEAD PRODUCTION
In 2019, sasa mined 817,714 tonnes of ore and processed 820,491
tonnes of ore. the average head grades for the year were 3.29%
zinc and 3.77% lead, resulting in a combined grade of 7.06%.
Metallurgical recoveries for zinc and lead averaged 86.5% and
94.5% respectively.
Sasa annual production
)
t
k
(
n
o
i
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c
u
d
o
r
p
l
a
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e
M
70
60
50
40
30
20
10
0
900
800
700
600
500
400
300
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100
0
)
t
k
(
t
u
p
h
g
u
o
r
h
t
t
n
a
P
l
2010
2011
2012
2013
2014
2015
2016
2017
2018 2019
Zn production
Pb production
Throughput
sasa produces a zinc concentrate and a separate lead concentrate
that contains silver. total 2019 production was 47,104 tonnes of
zinc concentrate at an average grade of 49.6% and 40,366 tonnes
of lead concentrate at an average grade of 72.3%.
sasa typically receives from smelters approximately 84% of the
value of its zinc in concentrate and approximately 95% of the
value of its lead in concentrate. Accordingly, total payable
production for 2019 was 19,601 tonnes of zinc and 27,741 tonnes
of lead. Given the multiple daily dispatches of concentrate, payable
base metal in concentrate sales for the year are very similar at
19,697 tonnes of zinc and 27,875 tonnes of lead.
Production statistics
units
2019
2018
2017*
Hosting an analyst visit at sasa
ore mined
plant feed
Zinc grade
Zinc recovery
lead grade
lead recovery
Zinc concentrate
- Grade
- contained zinc
lead concentrate
- Grade
- contained lead
817,714
803,101
t
792,068
t 820,491 804,749 793,332
3.18
85.5
3.98
94.6
43,676
49.4
21,585
40,757
73.3
29,881
3.29
86.5
3.77
94.5
47,104
49.6
23,369
40,366
72.3
29,201
3.31
84.6
3.90
93.6
46,128
48.9
22,532
40,317
72.9
29,388
%
%
%
%
t (dry)
%
t
t (dry)
%
t
* CAML acquired Sasa in November 2017
MINING
the 817,714 tonnes of ore that were mined in 2019 were extracted
from between the XIVb and 830 metre levels, using the sub level
caving mining method. the underground operations during the year
performed well, consistently producing over 2,250 tonnes of ore
per day, which is hoisted and trucked to surface for processing.
development during the year totalled 3,182 metres in ore and 2,070
metres in waste. of the development in waste, 601 metres were on
the lower 750 metre level, which provides access for the drilling
team to continue to explore the down-dip extensions of the
svinja Reka orebody.
during 2019, sasa installed internet stations underground, allowing
for increased monitoring of and communication with machines and
will in 2020 introduce the use of telemetry in order to better
monitor availability and utilisation.
20
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
21
during 2019, sasa sold 346,258 ounces of payable silver to osisko
Gold Royalties, in accordance with its streaming agreement.
In the Golema Reka shaft area during Q4 2019, major repairs to
wear and tear caused by abrasion at the main bunker were
successfully completed over a vertical distance of 40 metres.
Strategic ReportFinancial StatementsGovernance
OPERATIONAL REVIEW contInued
A full audit of sasa’s underground mobile fleet has been
undertaken with regards to overall availability, utilisation, suitability
and cost. the analysis indicated that the ageing underground fleet
is becoming less cost effective to run. A decision was made
during Q4 2019 to undergo a phased process of replacement
of the current underground mobile equipment with a new
optimised fleet.
the initial component of this replacement process will include the
purchase of six new units in 2020, and nine additional units will
also be purchased in 2021, 2022 and 2023 (three per year).
PROCESSING
the sasa processing facility has continued to perform well with
availability of 94.7% (2018: 95.3%) enabling throughput of 820,491
tonnes (2018: 804,749 tonnes) of ore against guidance of between
800,000 tonnes and 820,000 tonnes.
the lead recovery for 2019 was slightly higher than that
achieved in 2018 at 94.5%. this improvement is largely
attributed to the sasa processing team’s efforts to maintain
optimum process conditions.
Zinc recoveries were a significant improvement on those of 2018,
reaching on average 86.5%. the recovery improvement is
attributed to the installation of the stirred media detritor (‘sMd’)
mill, the additional technical support from the newly
commissioned metallurgical laboratory and some minor process
improvements within the flotation plant.
the processing team continues to innovate in order to continuously
improve sasa’s metallurgical performance to enhance recoveries
and concentrate quality. the new on-site metallurgical testing
facility was commissioned in early 2019 and has already proven to
be a valuable resource enabling the team to swiftly investigate
opportunities to optimise the sasa flowsheet. It is intended to
further enhance the technical capability of the facility in 2020 to
undertake additional process improvement studies.
sasa’s crushing facilities have been significantly improved during
the year, initially with the installation of a new, higher capacity,
secondary cone crusher. the feeding arrangements to this robust
secondary crusher will be re-engineered in H1 2020, enabling the
crusher to be choke-fed thus improving product quality, liner wear
life and energy consumption. In december 2019, a third stage of
crushing was installed providing dual benefits of improving the
facility’s mechanical reliability plus allowing a finer product size to
be generated thus allowing the grinding circuit to reach a capacity
of 850,000 tonnes per year.
In early 2020, sasa’s metallurgical team began submitting to an
external laboratory monthly samples collected from various
processing plant streams for mineralogical microscope analysis.
the insight obtained from this routine analysis together with
support from the on-site laboratory will enable the team to
work towards superior lead and zinc concentrate products
going forward.
2020 PRODUCTION GUIDANCE
the 2020 production guidance for sasa has been increased to a
mining and processing rate of between 825,000 and 850,000
tonnes, resulting in metal output of between 23,000 and 25,000
tonnes of zinc and between 30,000 and 32,000 tonnes of lead
in concentrate.
TSF4
Much of 2019 was spent lining the new storage facility, tsF4, in
accordance with north Macedonian standards. In H2 2019,
construction was completed, and the facility was successfully
commissioned in trial mode, in accordance with north Macedonian
laws. the facility has a capacity of six to seven years assuming
current mining methods and potentially to the end of the current
life of the operation once sasa transitions to cut and fill stoping.
LIFE OF MINE REVIEW
during 2019, the cAMl operations team, supported by external
consultants where appropriate, materially completed its life of
Mine review, the purpose of which was two-fold. Firstly, it was to
identify areas for improvement that could be implemented on-site
to optimise productivity, and many such initiatives have been
actioned during the year.
underground at sasa
sasa laboratory
22
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
2019 Exploration drilling
in Kozja Reka
KR 001
KR 002
Level 1064
Level 990
Level 910
Level 830
Level 750
LEGEND
MINED
INDICATED
INFERRED
POTENTIAL AREAS
FOR EXPLORATION
TUNNELS AND SHAFTS
FAULT LINES
0
5
1
1
0
0
9
0
0
6
Svinja Reka
(MINING ACTIVITY 2019)
Kozja Reka
Golema Reka
Svinja Reka
(CAPITAL DEVELOPMENT 2019)
Golema Reka
SHAFT
the second part of the rationale for the life of Mine study was to
ascertain whether the operation should continue utilising the
current sub-level caving mining methodology at the svinja Reka
orebody, or whether a change to cut and fill stoping would be more
appropriate. cut and fill mining is a more selective form of ore
extraction, whereby voids created by mining are typically filled
using a paste comprised, in part, of tailings.
Regarding sasa’s mining method, pre-feasibility studies have been
undertaken and, on this basis, the cAMl Board has decided in
principle to transition to cut and fill stoping at svinja Reka. there
are several reasons for this:
´ cut and fill is generally regarded as a safer mining method than
sub-level caving
´ cut and fill is a more flexible mining method better suited to the
geometry of the three veins which comprise the svinja Reka
orebody and is therefore expected to result in higher recovery
and reduced dilution of ore. this should lead to
– higher zinc and lead reserve grades
– increased metal production over the life of the mine
´ It is currently estimated that over 40% of sasa’s tailings
production would be placed underground as this forms part of
the ‘paste’ fill of the mined voids
– underground storage of tailings is widely viewed as a more
environmentally acceptable solution to traditional surface
tailings dams
– In sasa’s case, this approach could also mean that the
construction of future downstream tailings storage facilities
is not required, thereby saving significant capital expenditure
over the life of the mine, and avoiding potential land
purchases. the construction of tsF4 was completed during
2019 with a capacity of six to seven years using the current
sub-level mining method, and capital expenditure for tsF4
totalled $16 million (pre and post cAMl ownership)
sasa long section
´ Recent geotechnical studies at sasa have demonstrated that
geological stresses will increase with depth and additional
pillars of ore would need to be left in-situ if sasa continues
its current sub-level caving mining method. the need for
increased supporting pillars, resulting in lower recovery of
ore, would be eliminated due to the use of backfill within
voids in the cut and fill mining method
´ It has always been assumed that long-term production from
the Golema Reka resource area would be undertaken using
the cut and fill mining method. therefore, construction of a
paste plant, which would have been required in the future,
has simply been accelerated
cAMl will now complete detailed engineering studies and
update the mineral resource estimate and ore reserve for
svinja Reka. It is anticipated that this work will be completed
during H2 2020.
While detailed capital and operating cost expectations have yet
to be finalised, the capital expenditure required to construct a
paste plant should be spread over two years from 2021 onwards
and is expected to be more than offset by the savings in not
constructing further downstream tailings facilities over the life
of the mine. cAMl does not expect to incur any material capital
expenditure for this transition during 2020.
EXPLORATION
during 2019, cAMl undertook diamond drilling at both svinja
Reka, the location of current sasa mining operations, and Kozja
Reka, which was mined between 1966 and 1989, and from
where 3.2 million tonnes of ore at a combined zinc and lead
grade of 10.5% was extracted. A total of 4,538 metres were
drilled at svinja Reka, with the aim of verifying previous
exploration programmes and converting a portion of the
Inferred Mineral Resources into the Indicated category.
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
23
Strategic ReportFinancial StatementsGovernance OPERATIONAL REVIEW contInued
during the year a total of 812,235 tonnes of material was removed from the ore Reserve model, equating to 32,571 tonnes of zinc and
37,282 tonnes of lead. Following the completion of the svinja Reka infill drilling programme between the 830 and 750 levels and
interpretation of the results, a total of 818,545 tonnes of Inferred Resources were converted to Indicated Resources.
A total of 1,368 metres were drilled at Kozja Reka to explore the potential mineralisation below the 830 level. the drilling programme
will continue in 2020, and, while mineralisation has been intersected, it is not expected that the findings of this initial programme
will as yet form part of a Mineral Resource estimate as additional work would be required.
there were no exploration activities at Golema Reka during 2019.
SASA MINERAL RESOURCES AND ORE RESERVES
An updated Mineral Resource estimate (‘MRe’) for svinja Reka deposit was completed by Jordan Angelov, the Mine technical services
Manager. Jordan Angelov is a Member of the Australian Institute of Geoscientists and has some twenty years’ experience in the exploration,
definition and mining of precious and base metal Mineral Resources, and has sufficient experience relevant to the style of mineralisation
and type of deposit under consideration, and to the type of activity which he is undertaking to qualify as a ‘competent person’ as defined
by JoRc and as required by the June 2009 edition of the AIM note for Mining and oil & Gas companies. He has reviewed, and consents to,
the inclusion in the Annual Report of the matters based on their information in the form and context in which it appears and confirms that
this information is accurate and not false or misleading.
Mineral Resource Estimate for Svinja Reka and Golema Reka prepared in accordance with the JORC Code (2012 edition)
Classification
Deposit
tonnage (mt)
pb grade (%)
pb metal (kt)
Zn grade (%)
Zn metal (kt)
Ag grade (g/t)
Ag metal (koz)
Indicated Mineral
Resources
Inferred Mineral
Resources
svinja Reka
Golema Reka
Total Indicated
svinja Reka
Golema Reka
Total Inferred
Total Indicated and Inferred Resources
12.3
1.3
13.6
2.0
6.3
8.3
21.9
4.76
3.80
4.66
3.16
3.50
3.38
4.17
587
48
635
63
217
280
915
3.70
1.61
3.50
2.33
1.40
1.60
2.80
456
20
476
47
86
133
609
24
13
23
16
12
13
19
9,498
528
10,026
1,011
2,444
3,455
13,471
notes:
• Mineral Resources have an effective date of 1 January 2020. the competent person for the declaration of Mineral Resources is Jordan Angelov, Msc. MAIG. the Mineral Resource estimate
was prepared by the sasa Geology team
• All Indicated Mineral Resources are reported within the exploitation licence, approximately 600kt of the Inferred resources reported at svinja Reka exist outside of the exploitation licence.
• Mineral Resources are reported as undiluted. no mining recovery has been applied in the statement.
• tonnages are reported in metric units, grades in percent (%) or grams per tonne (g/t), and the contained metal in metric units. tonnages, grades, and contained metal totals are rounded
appropriately.
• Rounding, as required by reporting guidelines, may result in apparent summation differences between tonnes, grade and contained metal content.
sasa Mine’s technical services team also updated the svinja Reka ore Reserve estimate to reflect depletion due to extraction since the
previous estimate dated 1 January 2019. the competent person who has reviewed the ore Reserves is scott Yelland – c.eng, FIMMM,
Msc , who is a full-time employee and chief operating officer of central Asia Metals. He is a mining engineer with over 36 years’
experience in the mining and metals industry, including operational experience in underground zinc and lead mines, and as such qualifies
as a competent person as defined in the JoRc code (2012).
Sasa Ore Reserves prepared in accordance with JORC Code (2012 edition)
Classification
probable
Deposit
svinja Reka
total ore Reserves
svinja Reka
tonnage (mt)
pb grade (%)
pb metal (kt)
Zn grade (%)
Zn metal (kt)
Ag grade (g/t)
Ag metal (koz)
8.9
8.9
3.91
3.91
348
348
3.08
3.08
274
274
20.1
20.1
5,733
5,733
notes:
• All figures are rounded to reflect the relative accuracy of the estimate and have been used to derive sub-totals, totals and weighted averages. such calculations inherently involve a
degree of rounding and consequently introduce a margin of error. Where these occur, sasa does not consider them to be material.
• the concession is wholly owned by and exploration is operated by Rudnik sAsA dooel, a wholly-owned subsidiary of cAMl.
• the loM plan (with effective date 01 January 2017) has been depleted based on ore production to 31 december 2019. the depleted loM plan maintains a production rate of 780 ktpa from
2019 to 2028 (10 years), after which production ramps down over the final four years (till 2032). the loM plan will be updated based on the operation review (currently in progress) and the
updated Mineral Resource estimate.
• the metal prices used to assess the ore Reserve estimate in the financial model are based on a consensus Market Forecast from January 2019.
• the standard adopted in respect of the reporting of Mineral Resources and ore Reserves for the project, following the completion of required technical studies, is in accordance with the
guidelines of the 2012 edition of the Australasian code for Reporting of exploration Results, Mineral Resources and ore Reserves (the ‘JoRc code’).
24
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AnnuAl RepoRt And Accounts 2019
sasa tsF4
25
Strategic ReportFinancial StatementsGovernance OPERATIONAL REVIEW contInued
PAVEL SEMENCHENKO, GENERAL DIRECTOR – KOUNRAD
KOUNRAD
KAZAKHstAn
the Kounrad team were proud to exceed
targets in terms of copper production for
2019. leaching activities have been
performing well in the Western dumps,
from where we expect to produce 75%
of our 2020 copper.
COPPER CATHODE PURITY
99.998%
HOW WE PRODUCE COPPER
IRRIGATION
Irrigation of
dumps
LEACHING
Leaching of
copper into PLS
solution
EXTRACTION
Extraction of
copper from PLS
STRIPPING
Stripping of
copper from
organic solution
ELECTRO-
WINNING
Electro-winning
of copper from
electrolyte
COPPER
CATHODE
Production of
copper cathode
2019 CATHODE PRODUCTION
during the year, the sX-eW plant produced 13,771 tonnes of copper
cathode, a slight reduction from the previous year of 14,049
tonnes. total Kounrad copper production since operations
commenced in April 2012 is now 96,245 tonnes, averaging over
1,040 tonnes per month since start-up.
during 2019, copper was leached from the eastern and Western
dumps, with both areas performing in line with forecasts. this
combined approach will continue into 2020, with approximately
75% of copper production expected to be leached from the
Western dumps. From the end of 2020 onwards, the contribution
from the eastern dumps will decline to less than 20% of total
output. It should also be noted that production of copper from the
eastern dumps during the winter period will cease as of March
2020, with future winter production being generated solely from
the Western dumps.
Kounrad quarterly copper production
RESOURCES MAP
ESTIMATED REMAINING COPPER TO BE RECOVERED
Western
Dumps
Original
pit
Eastern
Dumps
c. 150,000t
c.10,000t
Kounrad
village
Plant
)
t
k
(
n
o
i
t
c
u
d
o
r
p
r
e
p
p
o
c
y
l
r
e
t
r
a
u
Q
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
90
80
70
60
50
40
30
20
10
0
)
t
k
(
n
o
i
t
c
u
d
o
r
p
r
e
p
p
o
c
e
v
i
t
a
u
m
u
C
l
2012
2013
2014
2015
2016
2017
2018
2019
Kounrad team
LEACHING OPERATIONS
Both the eastern and Western dumps were simultaneously
leached during 2019. As well as leaching copper from the few
remaining un-leached cells in the eastern dumps, the team also
focused on irrigating previously leached blocks in order to
maximise the recovery of copper. this technique was implemented
on various blocks that had been allowed to rest for periods of, in
some cases, almost two years. during this rest period bacterial
and chemical activity continued to solubilise copper mineralisation
and this approach worked extremely well, resulting in total 2019
output from the eastern dumps of 4,449 tonnes. this takes the
total quantity of copper recovered from this area since operations
commenced to 72,376 tonnes or c.90% of that initially forecast at
the time of the Ipo. the average area under irrigation at the
eastern dumps during the year was 27 hectares.
At the Western dumps, the focus of irrigation remained on parts of
dumps 16 and 22 within the initial leach area (‘IlA’). during 2019,
9,323 tonnes of copper were recovered, contributing to 68% of
the total Kounrad copper production. the average area under
irrigation on the Western dumps was 35 hectares of fresh,
previously un-leached material.
With both dump areas simultaneously under active irrigation, the
volume of raffinate pumped around the site averaged 1,329 cubic
metres per hour (‘m3/hr’). versus 1,332 m3/hr in 2018. during the
summer period, a proportion of the off-flow solutions from the
eastern dumps were recycled across to the Western dumps with
the aim of maintaining broadly stable pregnant leach solution
(‘pls’) grades to the sX plant. this technique operated successfully
and will be continued in 2020, as and when appropriate.
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Strategic ReportFinancial StatementsGovernance
leach solutions flowing out from the Western dumps contain
significantly higher levels of soluble iron compared to the eastern
dumps (~21 grammes per litre (‘gpl’) versus ~15 gpl). this is related
to the higher sulphide content of the material in the Western
dumps and is a positive indicator of strong bacterial and chemical
leaching reactions within the dumps that assist the recovery of
copper from non-oxidised copper mineral species. this also
means that, as forecast, no additional acid needs to be added to
the raffinate solution applied at the Western dumps (although
there is a possibility that this may change with the adoption of
the Ils circuit).
Whilst there were no major capital programmes at Kounrad
during 2019, there has been and will continue to be an ongoing
programme of relatively minor works at the Western dumps.
during the year capital was expended on maintaining and
extending the irrigation pipe network, an 850 metre extension of
the interceptor trench around the edge of dump 21 and preparing
the topography of dump areas for future irrigation. In addition,
modifications to the e-W-e main transfer pipelines were
completed, through the replacement of 2,420 metres of 350mm
diameter line with 450mm diameter pipe, which resulted in a 17%
improvement to solution flow rates. A study is now underway
examining the costs of implementing the Ils circuit in 2021/2022,
with the total cost expected to be less than $2.0 million.
OPERATIONAL REVIEW contInued
With the planned switch to almost all leaching being conducted
at the Western dumps by 2024, engineering studies are underway
to implement a split irrigation and solution collection system to
allow the operation an Intermediate leach system (‘Ils’), which
should result in an increase in the copper grade of the pls. the
main purpose of this is to optimise the grade of pls entering the
sX facility at the maximum solution flow rate. It is likely this circuit
will be constructed during 2021/2022 and be operational from
2023 onwards.
Application rates of solution to the dumps were maintained at
approximately 2.4 litres per square metre per hour (‘l/m2/hr’)
throughout the year. direct field experience and recent detailed
analysis of data has shown that maintaining this rate below 3l/m2/
hr is a key parameter for optimum leaching operations.
cAMl’s external metallurgical consultant, pcMets, continued with
its valuable technical oversight of the operation, making two visits
to Kounrad during the year. With two and a half years of direct field
data for analysis, it has been possible to confirm that leaching of
the Western dumps is materially in line with our original
expectations, developed through the column and mini-plant tests
undertaken in 2013/2014. However, during this latter phase of the
leaching cycle, pls grades would be lower and this is why the
adoption of the Ils is being planned. Additionally, as the Western
dumps contain a higher proportion of ‘sulphide and mixed’ copper
species the use of ‘rest’ periods, as successfully proven at the
east, will be an important aspect of operating schedules.
2
C E N T R A L A S I A M E T A L S P L C
B U I L D I N G A S U S T A I N A B L E B U S I N E S S
KOUNRAD SECTION
Kounrad
mine
2
5
20
13
WESTERN
DUMPS
EASTERN
DUMPS
7
6
9-10
SX-EW plant
21a
1a
15
Kounrad
village
16
22
the Kounrad site
SX-EW PLANT
the sX-eW plant continued to operate efficiently during 2019 and
the overall operational availability throughout the year improved
slightly to 99.6% from 99.5% last year.
the main focus for the operations team has been on
continued efficient plant operations and the tight control
of all operating costs.
With the average Western dumps copper grade of around 0.1%,
the average pls grade for the year was 2.16gpl, almost the same
as 2018. the volume of pls treated through the sX circuit
averaged 985m3/hr, again comparable to that of 993m3/hr
achieved in 2018.
While the increased levels of iron in the Western dumps generally
has a positive impact on leaching as previously mentioned, the
impact of this increased iron typically causes a reduction in the
current efficiency of the plating process. this has resulted in a
year-on-year increase in power consumed per tonne of copper
plated of around 7%. With two eW sections operating, this higher
level of iron has no detrimental impact in achieving planned
production targets.
COPPER SALES
throughout the year, the quality of cAMl’s copper cathode product
has once again been maintained at high levels both chemically and
visually and there have been no negative quality claims.
throughout the year regular in-house and independent
metallurgical analyses have consistently been reported at around
99.998% copper purity. the company continues to sell the
majority of its copper production through its off-take
arrangements with traxys, the terms of which are fixed until
october 2022.
2020 PRODUCTION GUIDANCE
the 2020 guidance for Kounrad’s copper cathode production
remains the same as 2019 at 12,500t to 13,500t, which reflects
the transition to producing more copper from the Western dumps.
Aerial view of the Kounrad area
drilling boreholes at Kounrad
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Strategic ReportFinancial StatementsGovernance SUSTAINABILITY
NICK SHIRLEY, SUSTAINABILITY DIRECTOR
DELIVERING VALUE
THROUGH
RESPONSIBLE
STEWARDSHIP
our primary strategic objective is to
ensure that sustainability is integrated
and embedded in every aspect of our
business. our goal is to create long-term
value for all our stakeholders and
therefore we take our responsibility for
ensuring sustainable operations at cAMl
very seriously.
OVERVIEW
In addition to the overview of sustainability-
related activities provided below, we are soon to
publish our first standalone sustainability Report
for 2019 (available on our website at:
www.centralasiametals.com). We see this as an
important step in the company’s development
and are pleased to be able to increase our level
of disclosure on sustainability efforts, challenges
and achievements.
cAMl has robust sustainability risk management
systems in place and a strong framework to
promote the ethical behaviour and strong
corporate governance that are crucial for the
effective running of our operations and the
sustainability of our business.
sustainability, which is fully integrated into our
day-to-day operations, is an essential element of
our strategy and is led from the top, by our Board.
cAMl has a sustainability committee, chaired
by non-executive director dr Gillian davidson,
and further details of its composition and
activities can be found on page 70.
We operate in full compliance in all material
aspects with the laws and regulations of our host
countries and are working towards compliance
with best-practice international standards
where possible. We adhere to IFc performance
standards at both operations, are Iso9001,
14001 and oHsAs18001 certified at sasa and
look to comply with Iso at Kounrad.
We have a number of policies in place which
apply to all employees as well as consultants,
agents, suppliers and representatives; these
include the code of conduct, Anti-Bribery and
Whistleblowing policies and are available on the
cAMl website at: www.centralasiametals.com.
MAINTAINING HEALTH, SAFETY
AND WELLBEING
We aim to provide a safe and healthy working
environment for our people and determinedly work
towards the goal of zero harm in the workplace.
We have fully integrated health and safety
management systems at both sites and use
employee feedback for continual improvement
and development of working conditions. safety
has been a specific focus in 2019 and the
company has successfully implemented a
number of initiatives which have led to a 88%
reduction in lost-time injuries in 2019.
We believe that a healthy workforce is paramount
in achieving high levels of productivity and
have various programmes to promote wellbeing
SAFETY (‘LTIFR’)
0.42
2018: 3.76
SIGNIFICANT SPILLS AT
EITHER OPERATION
Zero
2019 CAML CARBON
EMISSION INTENSITY
3.46 tCO2-e
per tonne of copper
equivalent production.
2018: 3.19
RECYCLED WATER
USED AT SASA
PROCESSING PLANT
(% OF TOTAL WATER)
47%
2018: 0%
2019 TAXES PAID IN
KAZAKHSTAN AND
NORTH MACEDONIA
$35.1m
2018: $44.1m
and monitor the health of our employees.
Wherever possible, we look to eliminate
occupational health risks brought about by
our operations and commit to minimising
and mitigating issues through the provision
of the most appropriate ppe and healthcare.
All employees undergo annual medicals,
specifically oriented to their occupation and
undertaken by external medical specialists.
FOCUSING ON OUR PEOPLE
We recognise that a motivated, dedicated and
skilled workforce is key to our success. We work
hard to promote our company culture and
provide a positive, stimulating and productive
workplace where the development of employees
is encouraged, all people are treated fairly, human
rights are upheld, the cultural values and customs
of our employees and local stakeholders are
respected and equal opportunities are supported.
training is integral to the ongoing development of
our employees. We recognise the importance of
diversity, specifically when considering the
breadth of thought, approach and opinion that
can be fostered by a diverse group. We
encourage meaningful workforce engagement
and prioritise local recruitment at our operations,
with 99% of sasa employees being from the
local municipality and 100% at Kounrad.
CARING FOR THE ENVIRONMENT
We take our environmental responsibilities
seriously and have comprehensive environmental
management systems. central to cAMl’s
environmental work is the monitoring,
measurement, analysis and evaluation of water,
air quality, soils, biodiversity, hazardous material
handling, waste generation and recycling,
greenhouse gas (‘GHG’) emissions and
energy efficiency.
We recognise that GHG emissions are a major
contributor to climate change and place strong
focus on their control. energy efficiency audits
have been undertaken at both operations and
consideration is being given to determine how
further energy-saving measures can be identified.
We are committed to the responsible and
efficient use of water and recently introduced a
strategy to significantly increase the percentage
of contact and recycled waters used in the
flotation plant at sasa.
We prioritise responsible tailings management at
sasa and have published complete disclosure in
accordance with the church of england pensions
Board request (see: https://www.
centralasiametals.com/sustainability/tailings/).
UNLOCKING VALUE FOR OUR COMMUNITIES
our licence to operate is largely dependent on the
continued support of our local communities and
host countries. We look to develop and maintain
constructive, professional relationships with all
our stakeholders and are committed to making a
positive contribution and creating shared value.
cAMl aims to integrate with and provide real
benefits to local communities and host countries
through the provision of employment, the
payment of taxes and supporting social and
economic development in the surrounding areas,
both through social investment and local
procurement. $0.6 million was spent on social
projects in 2019 and each operation contributes
0.25% of its revenue on an annual basis.
We have an economically robust business that
underpins our ability to generate profits and
dividends for our shareholders and ensures
that our successes are also felt by our other
important stakeholders. cAMl is proud of the value
that it brings to the host countries of operation and
works hard to be a good corporate citizen.
promoting local economic development is an
important way of providing benefits to society
and we aim to support local businesses where
possible. this is reflected in our preferential
procurement practices which resulted in 59%
of goods at sasa being acquired on a national
level and 11% on a local level, and 73% of all
procurement at Kounrad from local suppliers.
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Kounrad Foundation helps the local high school in Kazakhstan
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Strategic ReportFinancial StatementsGovernance SUSTAINABILITY contInued
OUR SUSTAINABILITY
FRAMEWORK -
MATERIAL TOPICS
driving benefits to
all our stakeholders
through our strategy.
DELIVERING VALUE
THROUGH
STEWARDSHIP
MAINTAINING
HEALTH, SAFETY
AND WELLBEING
FOCUSING ON
OUR PEOPLE
CARING FOR THE
ENVIRONMENT
UNLOCKING
VALUE FOR OUR
COMMUNITIES
sustainability is an important part of the
business, and we seek to create value
for all of our stakeholders. Having a high
standard of sustainability also enhances
our reputation and our ability to do
business in north Macedonia and
Kazakhstan. this approach is supported
by our Board and also helps us to attract
and retain talented employees.
In 2019, we conducted a desk-based
materiality assessment to identify the
issues which are most important to our
business. the strategic framework
shown here is the outcome of our
assessment, and is used to drive our
sustainability strategy and priorities
moving forward.
We adhere to the highest standards of
corporate and sustainability governance.
We also recognise that through business
success, we are able to generate and
distribute economic value.
the health, safety and wellbeing of our
employees is of the upmost priority.
We adhere to the highest standards and
ensure that safety measures are taken to
mitigate risk.
We are aware of the importance of our
operations on our people’s lives and we
are committed to making a positive
impact on these individuals.
We are committed to preventing,
mitigating and controlling the impacts
of our activities on the environment.
We recognise that as a business, we
have a responsibility to the health of
the environment.
our focus on customers and communities
aims to provide the highest product quality
and drive social value in the communities
we operate in.
MATERIAL TOPICS
´ corporate governance
and business ethics
´ sustainability management
MATERIAL TOPICS
´ safety
´ occupational health and wellbeing
MATERIAL TOPICS
´ employee retention
and development
´ diversity and inclusion
MATERIAL TOPICS
´ energy usage and climate change
´ Air quality and pollution
´ Water usage
´ Waste management
´ Rehabilitation and biodiversity
MATERIAL TOPICS
´ community engagement
and development
´ social investment
´ economic value added
´ supply chain
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Strategic ReportFinancial StatementsGovernance STAKEHOLDER ENGAGEMENT
SECTION 172
STATEMENT
the Board of directors has always
been mindful of the duties of
directors under s172 of the
companies Act 2006.
Why they matter
to us
All directors act in a way they consider, in good faith, to be most
likely to promote the success of the company for the benefit of
its members. In doing so, they each have regard to a range of
matters when making decisions for the long-term success of
the company. Key decisions and matters that are of strategic
importance to the company are appropriately influenced by the
matters set out in s172.
How the Board
and Company
engage with
them
We promote low cost, sustainable and ethical metal production
to benefit our employees, investors, communities and
governments. through continually engaging formally and
informally with our key stakeholders, we have been able to
develop a clear understanding of their needs, assess their
perspectives and monitor their impact on our strategic
ambition. As part of the Board’s decision-making process, the
Board and its committees consider the potential impact of
decisions on relevant stakeholders whilst also having regard to
a number of broader factors, including the impact of the
company’s operations on the community and environment,
responsible business practices and the likely consequences of
decisions in the long term. examples of this include the
long-term planning for the operation of the Group’s key assets
in Kazakhstan and north Macedonia to ensure that this
continues to take account of the interests and views of our
stakeholder groups. By careful consideration of these factors,
we find that the interests of stakeholders can converge in a
direction that we believe to be in the overall interests of the
Group as a whole. examples also include remuneration in the
Group which takes account of the views of employees and their
representatives and, at a senior level, the views of investors
such as in the re-design of the company’s long-term incentive
plan. each of these matters is important over the long term and
help shape the success of the Group in achieving its long-term
strategic aims in the interests of all stakeholders.
Illustrations of how s172 factors have been applied by the Board
can be found throughout the strategic Report. the table to the
right sets out our key stakeholder groups and how we engaged
with them during the year.
Employees
Investors
Communities and governments
Suppliers
Our employees are our most important
asset. They want to work in an
environment where they are safe
and respected, and have the opportunity
to learn, reach their potential and develop
successful careers in a Company they
can be proud of.
´ our approach to employee engagement
is channelled through our strategic
narrative; the management team
and the Board; and employee
representatives. see ‘focusing on
our people’ on page 31 for further
details of this.
´ Health and safety of our employees is of
paramount importance to the company.
All reports of lost time Injuries (‘ltIs')
are reported to the Board.
´ All employees have access to the
independent whistleblowing hotline.
´ there are various informal meetings of
staff with the chief executive officer
and senior leaders, which are often
reported to the Board.
´ More details of our engagement with
employees can be found in the
separate sustainability Report to be
available on the company’s website at
www.centralasiametals.com and the
Report of the Board’s long-standing
sustainability committee on page 70.
Our shareholders play an important role in
supporting our Company. We recognise
the importance of the activities and
outcomes of stewardship and regularly
engage with investors on our financial
performance, strategy and business
model and our Environmental, Social and
Governance (‘ESG’) performance.
Building trust and partnership with the
communities and governments that host
our operations is very important to us
while minimising any adverse impacts on
the natural environment.
We have established long-term
partnerships that complement our
in-house expertise, and have built a
network of specialised partners within
the industry and beyond.
´ We have an active engagement
´ We continually monitor, measure,
´ We have an open, constructive
programme with institutional investors.
´ our Annual General Meeting (‘AGM')
provides an opportunity for investors to
meet and engage with the Board.
´ shareholder consultations on
remuneration-related matters take
place ahead of changes to relevant
policies or share plans.
´ the Board maintains a dialogue with
investors on the governance of
the company.
´ More details on our engagement with
investors can be found in the
chairman’s statement on pages 4 to 5;
the letter from the chairman on pages
48 to 49; the Board Report on page 56
to 57; and Remuneration committee
Report on page 62.
analyse and evaluate water, air quality,
soils, biodiversity, hazardous material
handling, waste generation and
recycling, greenhouse gas emissions
and energy efficiency.
´ We maintain formal and informal
contact with national and local
government bodies on regular basis.
´ We continue to provide support to
communities and governments through
the provision of employment, the
payment of taxes and supporting social
and economic development in the
surrounding areas, both through social
investment and local procurement.
´ More details on our engagement with
communities and governments can be
found in the chairman’s statement on
page 5; in our separate sustainability
Report to be available on the company’s
website; and sustainability committee
Report on page 70 to 71.
and effective relationship with all
suppliers through regular meetings
which provide both parties the ability to
feedback on successes and challenges.
´ the company’s whistleblowing hotline
is available to suppliers to allow them to
raise any concerns anonymously and all
issues are investigated and resolved as
appropriate.
´ We publish our Modern slavery
statement, Anti-Bribery,
Whistleblowing and trade sanctions
policies on the company’s website.
34
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
35
Strategic ReportFinancial StatementsGovernance FINANCIAL REVIEW
GAVIN FERRAR, CHIEF FINANCIAL OFFICER
DELIVERING
SHAREHOLDER
VALUE
cAMl has reported another strong set
of financial results, which demonstrate
consistent operational performance
and effective cost control. the Group
generated an eBItdA margin of 60%,
which is broadly consistent with the prior
year notwithstanding a period of weak
commodity prices. the company has
continued to deleverage, having repaid
debt of $38.4 million during the year.
OVERVIEW
the Group generated 2019 eBItdA of $108.6
million (2018: $125.3 million), representing a
decrease of 13% from the prior year due to the
decline in commodity prices. the eBItdA margin
however remained broadly stable at 60%
(2018: 61%), which reflects the Group’s ability
to maintain low costs across the operations
as well as a reduction in corporate
administrative expenses.
eps from continuing operations was 29.36 cents
(2018: 31.33 cents), only 6% lower than the
previous year, reflecting well controlled
operational and corporate costs.
the company generated $69.8 million (2018
adjusted: $73.8 million) of free cash flow. during
2019, debt repayments were $38.4 million (2018:
$38.5 million), ending the year with net debt of
$80.2 million (2018: $110.3 million).
sasa’s 2019 eBItdA was $59.6 million (2018:
$71.2 million), with a margin of 60% (2018: 64%).
Zinc and lead prices declined during 2019,
although continued cost control has ensured that
this mine continues to operate at approximately
the 25th percentile of global producers on a c1
zinc equivalent cash cost basis.
Kounrad’s 2019 eBItdA was $61.7 million (2018:
$66.8 million), with a margin of 76% (2018: 72%).
eBItdA margin increased despite the decline in
copper price, due to effective cost control and a
weakening of the local currency during the year.
this enabled the project to continue producing
copper at costs well within the lowest
industry quartile.
GOING CONCERN
the Group meets its day to day working capital
requirements through its profitable and cash
generative operations at Kounrad and sasa. the
Group manages liquidity risk by maintaining
adequate committed borrowing facilities and the
Group has substantial cash balances as at
31 december 2019. the price of copper, zinc and
lead have been impacted in 2020 by concerns
over the outbreak of the coVId-19 pandemic and
this will impact on Group revenue for the year
ended 31 december 2020. Whilst there has been
little impact of coVId-19 to the Group’s
operations at present, owing to the volatility of
the commodity price environment, uncertainty
regarding the future impact on operations and
the uncertainty surrounding implementation of
government policies to manage the outbreak it is
difficult to determine and quantify the financial
impact there may be on the business going
forward. the cAMl Board has considered and
debated a range of substantial possible scenarios
The Company has
returned $176.4m
to shareholders
since the 2010
IPO listing.
GAVIN FERRAR, CHIEF
FINANCIAL OFFICER
2019 EBITDA MARGIN
60%
2018: 61%
2019 EPS
29.36c
2018: 31.33c
2019 FREE CASH FLOW
$69.8m
2018: $73.8m (adjusted)
on the Group’s operations, financial position and
forecasts covering a period of at least the next 12
months considering potential impacts associated
with a) operational disruption that may be caused
by restrictions applied by governments, illness
amongst the workforce and disruption to supply
chain and offtake arrangements; b) market
volatility in respect of commodity prices; c)
availability of existing credit facilities. Further
information on these forecasts is included in note
2 of the financial statements.
After review of these forecasts the directors
have a reasonable expectation that the Group has
adequate resources to continue in operational
existence for the foreseeable future. Accordingly,
the directors continue to adopt the going
concern basis in preparing the consolidated
financial statements. However, at the date of
approval of these financial statements, the
potential future impact of coVId-19 indicate the
existence of a material uncertainty which may
cast significant doubt about the Group’s ability to
continue as a going concern.
INCOME STATEMENT
profit before tax for the year was $67.8 million
(2018: $72.7 million), a decrease of 7%. this was
primarily as a result of decreased revenue due
to falling commodity prices as low costs of
production were maintained.
Revenue
the Group generated 2019 gross revenue of
$180.8 million (2018: $204.2 million), which is
reported after deduction of treatment charges
but before deductions of off-taker’s fees,
penalties, assay adjustments and silver
purchases from the silver stream. net revenue
under IFRs post these deductions was $171.7
million (2018: $194.4 million).
Sasa
operationally, sasa performed strongly with a
total of 19,697 tonnes (2018: 18,792 tonnes) of
payable zinc in concentrate and 27,875 tonnes
(2018: 27,878 tonnes) of payable lead in
concentrate sold during the year.
the zinc price received declined by 11% to an
average of $2,497 per tonne (2018: $2,819 per
tonne) and, for lead, the price declined by 8% to
an average of $2,001 per tonne (2018: $2,170 per
tonne), leading to a reduction in gross revenue
generated from the mine. Revenue also declined
due to higher treatment charges during the year
which increased by $4.1 million to $13.6 million
(2018: $9.5 million), which reflects the change in
market conditions for zinc concentrates in
particular. this trend is expected to continue
into 2020 with a further significant increase in
treatment charges expected for zinc and lead.
After deduction of treatment charges, sasa
generated gross revenue of $99.1 million (2018:
$111.5 million).
Zinc and lead concentrate sales agreements have
been arranged with traxys through to
31 december 2022 for 100% of sasa production.
sasa has an existing silver streaming agreement
with osisko Gold Royalties whereby sasa
receives approximately $5 per ounce from its
silver production for the life of the mine.
Kounrad
A total of 13,100 tonnes (2018: 13,695 tonnes) of
copper cathode from Kounrad was sold as part of
the company’s off-take arrangements with traxys
which has been fixed through to october 2022.
the commitment is for a minimum of 95% of
Kounrad’s annual production. A further 500 tonnes
(2018: 386 tonnes) were sold locally. total
Kounrad copper sales were 13,600 tonnes
(2018: 14,081 tonnes).
Kounrad revenue declined due to an 8% decrease
in the average copper price received, which was
$6,011 per tonne in 2019 (2018: $6,518 per
tonne), coupled with lower copper production and
sales. this generated gross revenue for Kounrad
of $81.7 million (2018: $92.6 million). during 2019
the off-taker’s fee for Kounrad was $2.4 million
(2018: $2.5 million).
COST OF SALES
Group 2019 cost of sales was $73.1 million
(2018: $76.4 million), consisting $52.8 million
(2018: $53.3 million) of sasa-related costs
and $20.3 million of Kounrad-related costs (2018:
$23.1 million). this includes depreciation and
amortisation charges during the period
of $29.5 million (2018: $33.4 million), which
reduced as a result of certain assets being fully
depreciated at the end of last year.
Sasa
sasa’s cost of sales for the year was lower
than the previous year at $52.8 million
(2018: $53.3 million). these costs reflect a lower
depreciation and amortisation charge as explained
above of $25.1 million (2018: $27.7 million), and
lower concession fees amounting to $2.6 million
(2018: $2.8 million). this tax is calculated at the
rate of 2% on the value of metal recovered
during the year.
Kounrad
Kounrad cost of sales for the year was
$20.3 million (2018: $23.1 million). the decrease
compared with 2018 was partly due to a reduction
in mineral extraction tax paid (‘Met’). Met is
charged by the Kazakhstan authorities at the
36
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
37
Strategic ReportFinancial StatementsGovernance FINANCIAL REVIEW contInued
31 DEC 2019 NET DEBT
$80.2m
2018: $110.3m
2019 DEBT REPAID
$38.4m
2018: $38.5m
31 DEC 2019 CASH
$32.6m
2018: $39.0m
rate of 5.7% (2018: 5.7%) on the value of metal
recovered during the year. Met for the year was
$4.7 million (2018: $5.2 million) and a reduction
resulted from the lower average copper price
received and reduced copper sales during the year.
during the year, the Kazakhstan tenge
significantly depreciated against the us dollar,
which resulted in a benefit for the cost base.
the average exchange rate for the year was 383
KZt/usd (2018: 345 KZt/usd), with the
Kazakhstan tenge being worth on average 10%
less in us dollar terms in 2019 compared to
2018. certain production related costs have risen
such as additional costs incurred for increased
reagents such as escaid, and increased coal
consumption due to a colder than usual Q2 2019.
Kounrad also agreed an average pay rise of 6%
for its employees.
Kounrad depreciation and amortisation charges
were $4.4 million (2018: $6.3 million) and
reduced primarily due to the tenge devaluation.
C1 CASH COST OF PRODUCTION
c1 cash cost of production is a standard metric
used in the mining industry to allow comparison
across the sector. In line with the Wood
Mackenzie approach, cAMl calculates c1 cash
cost by including all direct costs of production
at sasa and Kounrad (power, production labour
and materials) as well as local administrative
expenses and realisation charges such as
freight and treatment charges. Royalties and
depreciation and amortisation charges are
excluded from the c1 cash cost.
C1 cash cost
sasa zinc equivalent c1 cash cost,
$/lb
sasa RoM unit cost, $/t
Kounrad copper c1 cash cost, $/lb
cu equivalent production, t
cu equivalent c1 costs, $/lb
Fully inclusive, $/lb
2019
2018
0.47
40.3
0.52
0.46
38.8
0.54
31,233 31,459
0.87
1.64
0.94
1.50
Sasa
sasa’s c1 cash cost of zinc equivalent production
for 2019 was $0.47 per pound (2018: $0.46 per
pound) which is at the lower end of the second
quartile of the zinc industry cost curve. this
broadly similar c1 cash cost figure reflects higher
treatment charges during the year compared to
2018 against higher zinc production compared to
2018. certain production related costs have
increased compared to 2018, such as an increase
in payroll costs due to an agreed average 5%
pay-rise for employees. this is reflected in
on-site costs that amount to $40.3 per tonne of
ore mined (2018: $38.8 per tonne). the 2018
on-site costs have been updated to include sasa
related costs incurred by other Group entities.
Kounrad
Kounrad’s 2019 c1 cash cost of production
remains firmly in the lowest quartile of the
industry cost curve for copper production at
$0.52 per pound (2018: $0.54 per pound). the
decrease in c1 cash cost is largely due to tight
cost control and as a result of the devaluation
of the Kazakhstan tenge. Approximately 70%
of the c1 cash cost base in Kazakhstan is
denominated in tenge. the average c1 cash
cost since production commenced in 2012 is
$0.55 per pound.
Group
cAMl reports its Group c1 cash cost on a copper
equivalent basis incorporating the production
costs at sasa. the Group’s 2019 c1 copper
equivalent cash cost was $0.94 per pound (2018:
$0.87 per pound). this number is calculated
based on sasa’s annual zinc and lead production,
which equates to 17,462 copper equivalent
tonnes (2018: 17,410 copper equivalent tonnes),
based on 2019 average commodity prices
achieved, added to Kounrad’s copper production
of 13,771 tonnes (2018: 14,049 tonnes).
the Group c1 cash cost on a copper equivalent
basis has increased largely as a result of higher
production costs at sasa, including treatment
charges, and lower copper equivalent production
units as a result of lower copper production.
cAMl also reports a fully inclusive cost that
includes capital expenditure, local taxes including
Met and concession fees, interest on loans and
corporate overheads associated with the sasa
and Kounrad projects. the Group’s fully inclusive
copper equivalent unit cost for the year was
lower than 2018 at $1.50 per pound (2018: $1.64
per pound). this was primarily due to lower
capital expenditure of $11.0 million (2018: $16.7
million) as a result of reduced costs on the
construction of sasa’s tsF4.
the Group also incurred lower finance costs
given the reducing debt balance and lower
share-based payment charges recognised
within corporate overheads.
ADMINISTRATIVE EXPENSES
during the year, administrative expenses were lower at $18.3
million (2018: $24.0 million), largely due to a reduced share-based
payment charge of $1.1 million (2018: $4.9 million). options
granted in 2019 had a change in the vesting date and vesting
performance conditions compared to previous year grants, plus
there was a one-off issue awarded upon the successful acquisition
of sasa, which vested on issue amounting to $1.9 million in the
previous year.
years. capital expenditure for tsF4 totalled $16.0 million (pre and
post cAMl ownership). the costs of tsF4 will be transferred out of
asset under construction during 2020 following receipt of the final
operating permits.
due to a change in accounting policy following the adoption of
IFRs 16 leases, a further $0.9 million has been capitalised in
respect of finance leases, which primarily relate to the leasing of
office space in london.
FINANCE COSTS
the Group incurred lower finance costs of $11.2 million
(2018: $15.0 million) given the reducing debt balance.
DISCONTINUED OPERATIONS
the Group continues to report the results of the shuak and copper
Bay entities within discontinued operations. these assets were
fully written off in prior years. In February 2020, the Group
reduced its effective interest in Ken shuak llp from 80% to 10%.
the Group will not be required to contribute towards future costs
of the project.
BALANCE SHEET
during the year, there were additions to property, plant and
equipment of $12.1 million (2018: $15.0 million). the additions
include $1.8 million at Kounrad, primarily sustaining capital
expenditure (2018: $1.4 million), $7.5 million sasa sustaining capital
expenditure (2018: $6.8 million), and costs associated with the
construction of tsF4 amounting to $1.9 million (2018: $6.6 million).
tsF4 was completed during 2019 with a capacity of six to seven
A full audit of sasa’s underground mobile fleet was undertaken and a
decision was made during Q4 2019 to undergo a phased process of
replacing the current underground mobile plant with a new optimised
fleet. the initial component of this replacement process will include
the purchase of six new units in 2020, and three additional units
will also be purchased each year in 2021, 2022 and 2023.
As at 31 december 2019, current trade and other receivables were
$6.3 million (31 december 2018: $10.1 million) and
non-current trade and other receivables were $3.4 million
(31 december 2018: $2.1 million). current trade and other
receivables as at 31 december 2019, include trade receivables
from the off-take sales of $1.5 million (2018: $3.7 million) and $2.2
million in relation to prepayments (2018: $1.5 million). As at
31 december 2019, a total of $3.1 million (2018: $2.8 million) of
VAt receivable was still owed to the Group by the Kazakhstan
authorities. Recovery is still expected through the local sales of
cathode to offset these liabilities and a decision has been taken
not to write off this balance.
Cash flow
160
140
120
100
m
$
80
60
40
20
0
105.1
(14.8)
(9.4)
(11.0)
39.0
(38.4)
(32.2)
(6.5)
0.8
32.6
Cash at
1 January
2019
Generated
from
operations
Income
tax paid
(net)
Interest
paid
Capex
Repayment
of borrowings
Dividends
Deferred
consideration
Other
Cash at
31 December
2019
38
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
39
Strategic ReportFinancial StatementsGovernance FINANCIAL REVIEW contInued
NON-IFRS FINANCIAL MEASURES
As at 31 december 2019, current trade and other payables were
$12.3 million (31 december 2018: $20.9 million). the prior year
balance included $6.5 million in relation to deferred consideration
payable for the sasa acquisition which was settled during 2019.
In April 2019, a settlement agreement with the previous owners of
cMK Resources limited was finalised in respect of the $5.9 million
withholding tax liability in north Macedonia paid in the prior year.
the liability related to activities of cMK europe prior to cAMl’s
ownership. the settlement amounted to $5.5 million and
accordingly, during 2019, cAMl paid only the balancing
$6.5 million due in respect of the $12.0 million deferred
consideration owed to the previous owners.
during 2019, instalments of $20.2 million (2018: $25.7 million)
were paid towards the Group’s 2019 corporate income tax liability
of which $3.9 million was a non-cash payment offset against VAt
receivable. the Group also received refunds of $1.4 million for
corporate income tax overpaid in the prior year.
As at 31 december 2019, current and non-current
borrowings were $39.3 million and $69.5 million respectively
(2018: $38.4 million and $106.5 million). the reduction of
$36.1 million reflects debt repaid during the year of $38.4 million,
drawdowns on overdrafts of $0.9 million and finance charges of
$1.4 million unwinding directly attributable fees. the debt financing
agreement with traxys europe s.A. has a final maturity date of
4 november 2022. the monthly repayment schedule is $3.2 million
and interest is payable at lIBoR plus 4.75% and reduced to lIBoR
plus 4.00% with effect from 27 March 2020. security is provided
over the shares in cAMl Kazakhstan BV, certain bank accounts
and the offtake agreements between traxys and each operation.
the debt is subject to financial covenants which include the
monitoring of gearing, debt service ratios, and leverage ratios
with which the company has complied.
on 31 december 2019, the Group had cash of $32.6 million
(31 december 2018: $39.0 million) including restricted cash
of $4.0 million (31 december 2018: $4.4 million).
CASH FLOWS
the strong operational performance of sasa and Kounrad and
the associated low costs of production resulted in robust cash
flows for the Group during the year, with cash generated from
operations of $105.1 million (2018: $130.1 million).
$13.3 million of Kazakhstan corporate income tax was paid during
2019 (2018: $14.7 million). payments made during 2019 included
$12.5 million towards the 2019 corporate income tax liability
and the final $0.8 million of 2018 corporate income tax paid in
April 2019.
DIVIDEND
the final dividend for the year ended 31 december 2018 of
8.0 pence per ordinary share was paid to shareholders on
20 May 2019 amounting to $18.2 million. on 17 september 2019,
the company announced an interim dividend for the year ended
31 december 2019 of 6.5 pence per ordinary share and this
was paid to shareholders on 25 october 2019 amounting to
$14.0 million.
Dividend
200
180
160
140
120
m
$
100
80
60
40
20
0
9.0p
10.7p
2012
2013
6.5p
14.5p
2018
2019”
16.5p
15.5p
12.5p
12.5p
2014
Cumulative shareholder returns
2016
2015
2017
In light of coVId-19, the cAMl Board has taken the decision not to
recommend a 2019 final dividend. this is due to the currently
unquantifiable impact of the pandemic, and the Board’s current
priority is to preserve the company’s cash balances. total dividends
for the year therefore relate solely to the interim dividend and
amount to 6.5 pence. the total amount returned to shareholders in
dividends and share buy-backs since the 2010 Ipo listing remains
unchanged since the H1 2019 results at $176.4 million.
taking into account capital expenditure, cAMl’s free cash flow
for 2019 was $69.8 million. (2018 adjusted: $73.8 million). during
the year, $32.2 million (2018: $39.6 million) was returned to
shareholders as the final 2018 dividend and 2019 interim dividend.
GAVIN FERRAR
cHIeF FInAncIAl oFFIceR
during the year, Group debt of $38.4 million was repaid
(2018: $38.5 million) plus interest paid totalling $9.4 million
(2018: $14.5 million). $3.0 million of north Macedonia corporate
income tax was paid during the year (2018: $11.1 million) in addition
to a $3.9 million non-cash payment offset against VAt receivable.
payments made during 2019 included $2.2 million towards the
2019 corporate income tax liability and $0.8 million of 2018
corporate income tax paid in April 2019. the Group also received
refunds of $1.4 million for north Macedonia corporate income
tax overpaid in the prior year.
40
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
NET DEBT
net debt is calculated as the total of the borrowings held with
traxys europe s.A. and bank overdrafts less the cash and cash
equivalents held at the end of the year. this balance does not
include the restricted cash balance of $4.0 million.
2019
$’000
2018
$’000
Borrowings
cash and cash equivalents
51,937
46,585
EBITDA
31 Dec 19
$’000
108,768
(28,566)
31 dec 18
$’000
144,949
(34,649)
80,202
110,300
the following non-IFRs alternative performance financial
measures are used in this report:
EBITDA
eBItdA is a valuable indicator of the Group’s ability to generate
liquidity and is frequently used by investors and analysts for
valuation purposes. It is also a non-IFRs financial measure which
is reconciled as follows:
profit for the year
plus/(less):
Income tax expense
depreciation and amortisation
Foreign exchange (gain)/loss
other income
other expenses
Finance income
Finance costs
(profit)/loss from discontinued
operations
EBITDA
15,911
30,080
(377)
(212)
481
(336)
11,153
18,822
33,342
3,879
(359)
1,030
(264)
14,999
(53)
7,274
108,584
125,308
GROSS REVENUE
Gross revenue is presented as the total revenue received from
sales of all commodities after deducting the directly attributable
treatment charges associated with the sale of zinc, lead and silver.
this figure is presented as it reflects the total revenue received
from the smelters in respect of the zinc and lead concentrate.
FREE CASH FLOW
Free cash flow is a non-IFRs financial measure of the cash from
operations less the capital expenditure and is presented as follows:
net cash generated from operations
less: purchase of property,
plant and equipment
less: purchase of intangible assets
Free cash flow
Add: sasa withholding tax paid
related to period prior to ownership
Free cash flow adjusted
2019
$’000
2018
$’000
80,853
83,788
(11,042)
(21)
69,790
(15,019)
(907)
67,862
5,900
73,762
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
41
Strategic ReportFinancial StatementsGovernance RISK MANAGEMENT
IDENTIFYING AND
MANAGING RISKS
during 2019, the Board reviewed the
approach to risk from the perspective
of its reporting and management.
previously, individual site risk committees were primarily made up
of local management. these were disbanded and a single risk
committee was formed whose membership includes executive
directors and senior Management.
this new Risk committee reports to the Audit committee for all
risk management activities, in contrast to previously reporting to
separate Board committees depending on the type of risk.
Whilst the Board of directors has ultimate accountability for risk
management, the Audit committee acts as the Board level risk
committee and can report to the Board those areas of risk
management which it assesses necessary to be elevated to the
Board for further consideration.
the Audit committee gives direction to the Risk committee and
reviews the higher level processes and policies escalated to it.
Whilst the Risk committee is responsible for development of risk
management with the Group’s Risk Manager, the Audit committee
retains the ability to amend any such aspects of management’s
risk management activities.
the Risk committee is made up of executive directors and senior
Management. the Group’s General counsel acts as the Group’s
Risk Manager and chairs the Risk committee. the Risk committee
is responsible for the development and implementation of risk
management by directing the Group’s Risk Manager and senior
Management. the Risk committee is responsible for reviewing the
principal risks of the business and advising senior Management on
the mitigation activities of such risks.
senior Management is responsible for the day-to-day
implementation of the risk management process and have a
number of tools to assist in the process. each site has a risk
management coordinator on site who is able to assist with risk
management, and can call also upon the assistance of the Group
Risk Manager.
RISK MANAGEMENT PROCESS
OUR RISK MANAGEMENT FRAMEWORK
COMMUNICATION AND CONSULTATION
there is continual consultation with the relevant parties
throughout the process to ensure consistency and
appropriate decision-making is being made across the
Group towards risk management.
BOARD OF DIRECTORS
AUDIT COMMITTEE
IDENTIFICATION
Risks are identified by the Risk Managers,
risk management coordinators, General
directors and site senior Management.
ANALYSIS
An understanding of the risk is gained
through investigation of causes and
estimation of likelihood and potential
consequences.
this continues and repeats in response to
the monitoring and review process.
EVALUATION
the results of the analysis are used to
determine the level of the risk.
this continues and repeats in response to
the monitoring and review process.
MITIGATION
An agreed risk treatment plan is put into
place to modify, manage, or prevent the risk’s
likelihood of occurrence or its consequence.
this includes regular analysing and evaluating
the desired level of risk.
MONITORING/REVIEW
Regular supervision and observation is
conducted to monitor changes in a risk’s
status to ensure that the desired risk level
is achieved.
this includes regularly analysing and
evaluating the risk.
RISK COMMITTEE
SUSTAINABILITY COMMITTEE
SENIOR MANAGEMENT
SUSTAINABILITY DEPARTMENT
RISK APPETITE
the company assesses each risk and the requirement for
mitigation, taking into account the appetite for the impact of the
risks on the strategic objectives of the business.
High safety standards are the Group’s paramount objective and, as
such, there is no appetite to accept risks which would materially
impact the safety standards of the business .
the company generally has a greater appetite for risks arising
from non-sustainability related areas of the business. For instance,
to date the Board and management have been generally willing to
accept the risk that fluctuations in metal prices could have on
revenue generation.
h
g
H
i
d
o
o
h
i
l
e
k
i
L
w
o
l
low
01
02
03
08
04
05
06
07
Consequence
High
01
Commodity prices
05
Mining operations
02
Treatment charges
06
Permitting
03
Leaching operations
07
Tailings facility
04
Political risk
08
Supply and logistics
Arrows indicate
movement
42
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
43
Strategic ReportFinancial StatementsGovernance PRINCIPAL RISKS AND UNCERTAINTIES
operating in the mining sector brings with it inherent risk in
the extraction and processing of natural resources. the risks
and uncertainties described are material risk factors which
could impact cAMl’s ability to meet its strategic objectives.
OPERATIONAL RISKS
Leaching operations
Mining operations
Tailings storage facilities
KPIs
KPIs
KPIs
Responsibility
´ Technical Director
´ COO
Risk and impact
´ The nature of in-situ leaching means that
grades and flows of copper-bearing solution
from dumps vary and the potential impact
on the environment is increased. Should the
flow and/or grade drop, this could lead to a
reduction in copper cathode produced.
´ Geological challenges and technical
incidents may also reduce quality or volume
of solutions recovered and conversely lead
to loss of solution to the external
environment.
Mitigation
´ Extensive studies on the Kounrad dumps
have been completed to Kazakh and
international standards to ascertain the
material contained within. The results of
operations have shown a good correlation
to the initial study work undertaken which
gives management confidence for future
operations.
´ In relation to the environment, significant
studies into the geology and hydrogeology
of the Kounrad site have been undertaken.
Should solution be lost to the ground, there
is an extensive array of boreholes
surrounding the dumps to identify issues
and from which solution can be extracted.
Risk movement
´ Unchanged.
´ The production of copper-bearing solution
is performing in line with technical
expectations.
Responsibility
´ COO
Risk and impact
´ Underground mining operations are by their
very nature dangerous working environments
and are challenging to operate. Loss of life is a
significant risk.
´ Generally, the orebody from which metal is
extracted can vary and, as such, knowledge
and experience is required to efficiently and
effectively extract the ore.
´ The extraction of ore is a complex process
and unless managed effectively and
efficiently could mean that operational
targets are not delivered.
Mitigation
´ The Sasa workforce comprises experienced
operators led by a strong management
team. External consultants are utilised
where needed to complement in-house
knowledge and skills.
´ We have a significant focus on health and
safety and during 2019 trained and
equipped a mine rescue team.
Risk movement
´ Greater knowledge of the asset over time
along with personnel recruitment practices
and studies conducted has improved mining
operations, leading to decreased risk.
´ During 2019, additional experienced
personnel were recruited in the technical
services department, mine development
and geology departments to ensure the
resources are exploited as effectively
as possible. The Life of Mine project
has comprised important work streams
that have better informed the team
regarding suitable extraction methods
for the long term.
Strategic goals key:
Responsibility
´ COO
´ Sustainability Director
Risk and impact
´ The Sasa operations currently require tailings
storage facilities to manage the waste
generated by the process. Tailings storage
facilities which are not constructed or
managed correctly can fail, leading to
potentially significant damage to persons,
property, the environment, and the
Company’s reputation.
Mitigation
´ The existing tailings storage facilities as,
well as the new TSF4, are of a ‘downstream’
construction type which is generally
regarded as the safest design option.
´ Regular internal monitoring of all aspects of
the operation and stability of the tailings
storage facilities, including movement and
water levels, is undertaken. The data is
regularly reviewed by external parties.
´ During 2019, Golder Associates performed
an independent stability review of TSF 3.2
and did not identify any significant issues.
Risk movement
´ Unchanged.
´ Work is being undertaken to implement
warning systems for the local community
in the event of a tailings storage
facility failure.
Safe and efficient operations
Maintain low production costs
Maintain high sustainability standards
Increase shareholder value
COMMERCIAL RISKS
Treatment charges
KPIs
Responsibility
´ CFO
Risk and impact
´ An increase in zinc and/or lead treatment
charges could have a material impact on
Sasa’s profitability.
Mitigation
´ The markets for zinc and lead concentrates
are global in nature but with significant local
supply/demand dynamics and are generally
set around benchmark prices established
by larger market players. Sasa sells its
concentrates to smelters in Bulgaria and
Poland due in large part to transportation
cost advantages, but could transport
worldwide should there be a local cost
disparity. Ultimately the risk is difficult to
mitigate as changes in the concentrates
markets are outside of CAML's control. The
team works hard to ensure that Sasa’s
concentrates remain of high quality so as to
be as marketable and therefore as
attractive as possible.
Risk movement
´ During 2019, zinc treatment charges in
Permitting
KPIs
Responsibility
´ General Counsel
´ General Directors
´ Sustainability Director
Risk and impact
´ Operating mining projects requires a
significant number of permits, licences and
approvals in order to operate in compliance
with local law. The loss of an authority to
operate may have a significant effect on
continuing operations. Further, not having the
current approvals to operate does not comply
with our objective to maintain high
sustainability standards.
Mitigation
´ The Group employs managers who are
experienced in operating mining projects
and who understand the regulatory
requirements of the countries of operation.
´ During 2019, a central registry of required
approvals was compiled which improves
visibility on upcoming renewals to ensure
that a permit or licence does not lapse
inadvertently.
particular increased significantly, resulting
in an upward movement of risk.
Risk movement
´ Reduced in the case of TSF4, unchanged in
other areas of the business.
´ The construction of TSF4 required a
significant number of permits, the majority
of which have now been received.
Supply and logistics
KPIs
Responsibility
´ COO
´ General Directors
Risk and impact
´ The Group relies on a number of key
suppliers (and affiliates) and several crucial
inputs, particularly electricity and water.
Any impact on the supply chain may have
a significant impact on operations. At
Kounrad, whilst there is limited electrical
generation capacity to prevent damage to
equipment in the event of a loss of power,
the site is dependent on grid power in order
to plate copper. The site is also dependent
upon a number of reagents which are key
to producing good quality copper cathode.
Sasa is reliant on grid power to maintain
operations, and on key suppliers to maintain
operations.
Mitigation
´ In procurement processes, the team is
cognisant of a Company’s ability to maintain
supplies and, where possible, looks for
alternatives. In relation to power, supply has
historically been reliably supplied to both
sites and, as such, it has been determined
that secondary connections are not
justified. At Kounrad, a second water supply
was installed in 2017 to ensure long-term
water availability.
Risk movement
´ The consequences have reduced as during
2019, it was determined that concentrate
delivery logistics could be strengthened as,
historically, there was little buffer if trucks
were unable to transport concentrate.
Therefore the decision was taken to build
concentrate storage facilities on site.
´ We also improved our take on on-boarding
procedures and due diligence when it comes
to new suppliers. Further work was done to
improve our processes in relation to
compliance with sanction laws and regulations.
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Strategic ReportFinancial StatementsGovernance
PRINCIPAL RISKS AND UNCERTAINTIES contInued
EXTERNAL RISKS
Commodity prices
Political risk
KPIs
KPIs
Responsibility
´ CFO
Risk and impact
´ A major decrease in commodity prices
would have a significant impact on the
revenue of the Group. The copper market
has shown resilience during 2019 despite
negative global economic indicators,
however zinc and lead prices decreased
during the course of 2019.
Mitigation
´ The Board has determined that, whilst
CAML cost structures allow the Company
to take spot metal prices, mitigation plans
should be put in place to ensure the
fundamentals of the business. To this end,
management are putting in place a hedging
facility in order to hedge zinc and lead if
deemed appropriate in the future.
Risk movement
´ Stable to slight increase.
´ The general decrease in metal prices for
zinc and lead during 2019 means that the
profitability and cash flow of the Group
has decreased.
Responsibility
´ CEO
´ General Directors
Risk and impact
´ Governance of developing countries is
ever-changing as industries, including
mining, develop and expand. Investment
into emerging markets is affected by
evolving taxation laws and regulations
relating to tax.
´ Environmental constraints as they relate to
permitting and licensing are taken into
account as countries develop.
Mitigation
´ In order to minimise the impact on the
business to changes in policies, legislation
and regulations, the Group makes a
determined effort to engage with all levels
of government. The aim of this interaction is
to get insight into any potential change in
general laws, taxation, and regulations
which may impact the business and to
encourage a two-way dialogue so that
CAML views can be understood and taken
into account.
Risk movement
´ Stable to slight increase.
´ During 2019, the first President of the
Republic of Kazakhstan, Nursultan
Nazarbayev announced his resignation.
Nazarbayev had been president since 1991.
The transition of power to the Head of the
Senate occurred in line with the country’s
laws and was considered to be smooth
following which the new president,
Kassym-Jomart Tokayev, then called a
presidential election, which he won. Given
that this represented the first leadership
change in Kazakhstan’s history, there was
some uncertainty regarding the perception
of stability for a short time.
´ In 2019, North Macedonia’s name was
changed amongst divided opinion. The
rationale for the name change is seen to be
politically motivated to aid in the accession
to NATO and the EU. However, the EU
rejected North Macedonia’s first steps
towards joining the union, prior to
parliamentary elections in 2020.
CHANGES IN RISK FROM 2018
several risks which were disclosed in the previous year have been
consolidated into other risks where their impacts and mitigation
strategies are aligned and are therefore disclosed in composite
form. For instance, ‘health and safety’ risks have been covered
within leaching and mining operation risks as the primary concerns
related to operational risks within each type of extraction. ‘tax’ has
been included within political risk as taxation treaties and changes
in law are seen to be largely either politically motivated or
implemented through political means. ‘external incidents’ along
with ‘critical operational equipment’ have, where relevant, been
restated within the more comprehensive ‘supply and logistics’ risk
as they relate to the timely access and availability of relevant
commercial goods and services.
the others were reviewed and are no longer considered material
to the business and therefore have been excluded from the list.
In the case of ‘key personnel’, recruitment of additional staff in
2018 and 2019 has led to a larger and more robust team of
senior Management, decreasing the risk that staff exits would
affect operations.
In respect of ‘labour/community relations’, since acquiring sasa
in late 2017, cAMl has now been present in the region and
communities for over two full years. during this time, relationships
with workers and union delegates have strengthened.
In respect of financial ‘liquidity’ this is no longer considered a
material risk as debt has been consolidated and gross debt
reduced significantly since the acquisition.
COVID-19
A significant emerging risk to the business is the worldwide
impact of the coVId-19 pandemic. the management teams at the
cAMl sites are reviewing the potential impact to the welfare of
the workforce and the business and are mitigating those areas as
well as possible. the health, safety, and wellbeing of the employees
and contractors comes first and will be prioritised over all other
aspects of the business. there has been little impact to the
operations at present, however it is difficult to determine what
impact there may be on the business going forward whilst so
much uncertainty regarding the coVId-19 pandemic remains. the
cAMl Board has made the decision not to recommended a final
2019 dividend and the senior management team is examining all
2020 budgeted capital expenditures in order to preserve cash
during this uncertain time.
Sustainability
Mining operations can have both an ecological and social impact
on the environment in which they operate. over the past 12–18
months, spurred on by a number of high-profile incidents in the
industry, the focus on environment, sustainability, and governance
has increased significantly. Investors are placing an increased
focus on these areas which impacts investment choices. should
the company not give significant attention to this area it may have
a material impact on cAMl's ability to attract investment. Whilst
the company has always placed a great deal of importance on its
intentions with the environment and the communities in which it
operates, in 2019 there was an increased focus on these areas.
the company has prepared its first sustainability Report to
demonstrate its achievements and efforts in this regard.
‘Foreign exchange and inflation’ has also been mitigated such that
it is no longer deemed a material risk. this is primarily due to the
company’s usd-based currency profile.
the potential for fire at the sX plant will always be a risk to the
business, however, management consider that the risk, taking into
account the original design features of the sX facility along with
risk mitigation measures taken since construction is not a material
risk when comparing to other material risks of the company. the
risk of ‘transactions and ventures’ has also been reduced as no
acquisition has taken place in the last year and no future
acquisition can be confirmed at this time.
Tailings Storage Facilities
tailings storage facilities used in mining operations have faced
increased scrutiny in recent times, particularly following high
profile failures in recent years. Following the sasa acquisition,
external experts have been engaged to review the tailings storage
facilities in order to give management and the Board comfort. the
external experts have not raised any significant issues, and gave
useful advice so as to ensure that management of the tsFs
continues to be of a high standard.
the strategic Report on pages 1 to 47 was approved by the Board
of directors on 31 March 2020 and was signed on its behalf by
Finally, following further drilling, ‘Mineral Resources’ are no longer
deemed a significant risk.
EMERGING RISKS
Political
the cAMl team has noted an increase in the political risk
associated with taxation in line with a trend in developing
countries. cAMl has good working relationships with government
bodies, allowing us to have constructive discussions with them in
order to ensure that any taxation increases on operations are fair
and proportionate. notwithstanding mitigation plans in place,
cAMl considers this area to be currently one of increasing
business risk.
GAVIN FERRAR
cHIeF FInAncIAl oFFIceR
31 March 2020
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Strategic ReportFinancial StatementsGovernance INTRODUCTION TO CORPORATE GOVERNANCE
LETTER FROM THE CHAIRMAN
Whilst the importance of
good governance has always
been recognised within
CAML, the way it is
communicated to our
stakeholders has become of
increasing importance as the
Group has grown. This has
been a key area in which we
have sought to improve over
the past year.
NICK CLARKE, CHAIRMAN
dear shareholder,
As I observed in my chairman’s statement earlier in this report, it
is almost ten years since cAMl listed on the AIM market of the
london stock exchange. during this time, the past year has been
the most active in governance terms. As I have confirmed in my
reports in previous years, we have always considered good
governance to be of fundamental importance to building and
sustaining stakeholder value in cAMl over the long term. We view
the way the business is run to be critical to its success. And we
see our style of leadership as key in setting the tone from the top.
these beliefs have always been at the core of the way in which we
have managed the cAMl business.
Whilst the importance of good governance has always been
recognised within cAMl, the way it is communicated to our
stakeholders has become of increasing importance as the Group
has grown. this has been a key area in which we have sought to
improve over the past year. We are proud of our work in this area
and want to share this with our stakeholders. In seeking to achieve
this aim, we have also identified and acted upon areas for further
development. Indeed, we continue to view good governance as a
journey of ongoing improvement rather than a static destination.
this reflects our desire for continuous development in this area as
well as in our business more generally.
the appointment of nigel Robinson as chief executive in 2018 has
allowed me to transition away from my previous executive
responsibilities. this has enabled me to focus more fully, not only
on governance matters in the Group, but also on how these are
communicated externally. We are pleased throughout this Annual
Report to provide increased transparency on what this means in
practice in cAMl and I hope readers find this informative.
Amongst the developments over the past year commented on
later in this report, I particularly want to highlight the following:
1. 2019 was our first full year of reporting against the Quoted
companies Alliance corporate Governance code (the ‘QcA
code’). Further details of how we apply the QcA code are
commented on throughout the Governance Report as
summarised in the table on page 51. For readers who may not
be familiar with the principles of the QcA code, we have
included these on relevant pages of this Governance Report.
our website also has a principle by principle guide to our work in
these areas.
2. 2019 was also the first year in which we undertook a
governance roadshow of our major shareholders. this was
undertaken by Robert cathery our Remuneration committee
chairman and myself as chairman with the assistance of our
company secretary and director of corporate Relations. this
roadshow was both to update investors in developments in the
Group’s governance and to seek feedback from them. We found
the process invaluable and its results were reported to and
discussed by both the Remuneration committee and the full
Board, helping inform our deliberations and decisions during the
year.
3. our Remuneration committee commenced the transition
of the Group’s long-term Incentive plan (“ltIp”) with the
introduction of a new three-year vesting structure
implemented for the awards granted in 2019. this transition
will continue in 2020 with the grant of ltIp awards with
new tailored performance conditions taking account of the
feedback received from shareholders. the development of the
ltIp is further commented on in the Remuneration committee
Report commencing on page 62, and I would like to thank Bob
cathery as that committee’s chairman for all his work in this.
9. We conducted a follow up to the evaluation of the Board last
year to determine progress against the areas identified last
year and sought fresh feedback from directors this year.
the results of this review are more fully set out in the report
of the nomination committee on page 61. I was reassured by
the progress recognised and encouraged by the desire for
ongoing development.
10. We refreshed the terms of reference of each of our
committees – Audit, nomination, Remuneration and
sustainability which are now publicly available on the
company’s website.
I very much hope that the increased transparency of our reporting
this year will provide an insight to shareholders and other readers
into the extensive work our Board and its committees undertake
in our corporate governance. As well as nigel and Gavin as
executive directors, david, Bob, Gillian and myself as Board and
committee chairs are committed to clear reporting of the work
that we do on behalf of shareholders and other stakeholders. We
are all available to shareholders should they have any questions or
wish to discuss matters. With my colleagues, I look forward to
continuing this dialogue as part of our commitment to building
sustainable value for our stakeholders over the long term.
NICK CLARKE
non-eXecutIVe cHAIRMAn
31 March 2020
4. We re-named as our sustainability committee what had
previously been our corporate social Responsibility committee.
We believe this better reflects its wider remit and underlying
role, and re-emphasises the importance we continue to place in
this area. Indeed, this committee was originally established in
2012, before many companies much larger than us had really
focused on such responsibilities. I would like to thank Roger
davey for his sterling work as the committee’s chairman over
the past four years.
5. As part of the ongoing succession planning for the Board, our
nomination committee commenced a recruitment process for
an additional Independent non-executive director. this resulted
in the successful appointment of dr Gillian davidson. Gillian has
been appointed the new chair of our sustainability committee,
a role to which she brings extensive valuable experience.
Gillian’s appointment is commented on more fully in the
nomination committee Report commencing on page 60
and I would like to welcome her to the Board.
6. In completion of another aspect of our succession planning, by
the beginning of 2020, I transitioned my remaining executive
responsibilities to our chief executive officer, nigel Robinson
and our chief Financial officer, Gavin Ferrar. Whilst I remain
committed to cAMl in my role of non-executive chairman,
it is right and proper that the day-to-day management of the
business should be handled by nigel and Gavin. I now focus on
leading the Board in our support and oversight of nigel and
Gavin in the management of the business.
7. the Board and nomination committee have continued to plan
for succession of the Board. Whilst the other directors do not
believe length of tenure to be affecting their strongly
independent approach to their roles, nigel Hurst-Brown and
Bob cathery have both indicated their willingness to be part of
the progressive succession in the long-term interests of Board
development. they have, though, at the request of the rest of
the Board including myself, agreed to stay on the Board in their
current roles while the Group navigates through the current
period of global economic uncertainty. during this period I, and
the rest of the Board, believe it is appropriate we maintain the
current Board membership of experienced and focused
directors. I have also particularly asked Bob to remain in
his role until the new ltIp structure is fully bedded in.
8. our Audit committee conducted a tender of our Group Auditor.
Whilst, as an AIM-quoted company, we are not required to
undertake such tenders, we considered it good practice to do
so after twelve years since the appointment of the incumbent
firm. After a comprehensive tender process in which several
audit firms including the incumbent firm participated, Bdo
were appointed as new Auditors to the Group. this is more fully
reported on in the report of the Audit committee commencing
on page 58 and I would like to thank david swan as that
committee’s chairman for all his work in that area.
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Strategic ReportFinancial StatementsGovernanceQCA Code Principle: ´Maintain the board as a well-functioning, balanced team led by the chair INTRODUCTION TO CORPORATE GOVERNANCE contInued
OUR APPROACH TO GOVERNANCE
cAMl draws from the principles of the QcA code for guidance in structuring its governance
framework. the Board is supported by four committees, specifically the Audit, Remuneration,
nomination and sustainability committees. these standing committees focus on the four
areas of the Group’s operation which the Board views as having key importance to the Group’s
shareholders and other stakeholders.
KEY ISSUES AND
ACTIVITIES IN 2019
our governance arrangements are summarised below:
Stakeholders
SEE PAGE 57
Diversity
SEE PAGE 60
Independence
SEE PAGE 56
Culture
SEE PAGE 56
Risk and internal
control
SEE PAGE 59
Effectiveness review
SEE PAGE 61
Board
A strong independent representation on the Board with five Independent
non-executive directors. the Board of directors leads the company in making key
decisions about strategy, financial planning, investments and its directors.
Audit Committee
An Audit committee consisting of three Independent non-executive directors led by
david swan as its chairman. the Audit committee assists the Board in its oversight of
the company’s financial reporting, internal control and risk management.
Remuneration Committee
A Remuneration committee led by Robert cathery comprised solely of independent
non-executive directors. the Remuneration committee determines the remuneration
of our executive directors, oversees the remuneration of our senior management and
approves awards under the company’s long-term Incentive plan.
Nomination Committee
A nomination committee chaired by nick clarke. the members of this committee
are our other six non-executive directors. the nomination committee makes
recommendations to the Board in relation to director appointments, reviews the
composition and structure of the Board, evaluates the balance of skills, knowledge
and experience of the directors and assists the Board with succession planning.
Sustainability Committee
Although not a QcA code requirement, we also have a sustainability committee,
chaired by our newest Board member, dr Gillian davidson. this committee comprises
executive and non-executive directors and closely involves members of the senior
management team. the sustainability committee enables us to maintain our strong
focus on our people, their health and safety, environmental matters and the
communities in which we operate.
´ the Board’s committees support the Board in ensuring the relevant level of focus on
their specific areas of responsibility and each have their own terms of reference which
provide the necessary authorities for them to operate as they consider appropriate.
´ each committee reports to the Board through its respective chair, providing invaluable
contributions to the Board’s effectiveness through their work.
´ on the following pages are further details of each of our individual directors and separate
reports of our Board, and its Audit, nomination, sustainability and Remuneration
committees. these are intended to provide an insight into the robust governance
structure of the company and the value that we continue to place on good corporate
governance processes.
these arrangements form part of our ongoing commitment to shareholders and other
stakeholders to sustainably increase and preserve shareholder value through the long-term
success of the business.
THE QCA CORPORATE GOVERNANCE CODE
cAMl complies with the Quoted companies Alliance corporate Governance code for small and mid-sized companies and has
incorporated a set of robust principles based on its guidelines into our corporate governance procedures. the directors believe this
reinforces the strong corporate governance systems and processes that are vital in building a successful business, maximising value
and maintaining the high standards that we set for ourselves. our QcA code disclosures within this Annual Report are summarised in
the table below. In addition, full details of how we have applied each of the ten principles of the QcA code can be found on our website
at https://www.centralasiametals.com/corporate-governance.
Principle
Disclosure within this report
1
2
3
4
5
6
7
8
9
establish a strategy and business model which promotes long-term value for shareholders
seek to understand and meet shareholder needs and expectations
take into account wider stakeholder and social responsibilities and their
implications for long-term success
embed effective risk management, considering both opportunities and threats,
throughout the organisation
Maintain the board as a well-functioning, balanced team led by the chair
ensure that, between them, the directors have the necessary up-to-date
experience, skills and capabilities
evaluate board performance based on clear and relevant objectives, seeking
continuous improvement
promote a corporate culture that is based on ethical values and behaviours
Maintain governance structures and processes that are fit for purpose and
support good decision making by the board
10
communicate how the company is governed and is performing by maintaining
dialogue with shareholders and other relevant stakeholders
SEE PAGE 54
SEE PAGE 56-57
SEE PAGE 30-33, 70-71
SEE PAGE 42-47, 59
SEE PAGE 48-49
SEE PAGE 54, 56
SEE PAGE 61
SEE PAGE 56, 70-71
SEE PAGE 50
SEE PAGE 56-57
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Strategic ReportFinancial StatementsGovernanceQCA Code Principle: ´Maintain governance structures and processes that are fit for purpose and support good decision making by the board BOARD OF DIRECTORS
Committees
A
Audit
N Nomination
R
S
Remuneration
Sustainability Committee
Chair of Committee
Appointed
Skills and
experience
NICK CLARKE, CHAIRMAN
NIGEL ROBINSON,
CHIEF EXECUTIVE OFFICER
GAVIN FERRAR,
CHIEF FINANCIAL OFFICER
NIGEL HURST-BROWN,
DEPUTY CHAIRMAN
ROBERT CATHERY,
NON-EXECUTIVE DIRECTOR
ROGER DAVEY,
NON-EXECUTIVE DIRECTOR
DAVID SWAN,
NON-EXECUTIVE DIRECTOR
NURLAN ZHAKUPOV,
NON-EXECUTIVE DIRECTOR
DR GILLIAN DAVIDSON,
NON-EXECUTIVE DIRECTOR
N
S
S
A
N
R
N
R
A
N
S
A
N
R
N
S
N
S
April 2009
April 2009
June 2016
december 2006
september 2007
december 2015
June 2014
october 2011
december 2019
nick has over 40 years of
mining experience, including
16 years spent within senior
management positions in
production and technical
services in south Africa,
Ghana and saudi Arabia. nick
served as managing director
of oriel Resources until its
acquisition by oAo Mechel for
$1.5 billion in 2008. In
addition, nick was managing
director at Wardell Armstrong
International, where he
managed numerous
multidisciplinary consulting
projects in the resource
sector. In 2013, nick was
named ceo of the year at the
Mining Journal outstanding
achievements awards. He
joined cAMl in 2009 as chief
executive officer prior to the
company’s Ipo in 2010, and
assumed the role of chairman
in June 2016.
nigel started his career as a
Royal naval officer in the
Fleet Air Arm where he
served an eight-year short
career commission. upon
leaving the Royal navy, he
qualified as a chartered
Accountant with KpMG in the
north West of england, where
he stayed for a further three
years before leaving the
profession to work in
commerce. He initially joined
one of KpMG’s clients, British
Aerospace, working in the
internal audit department
before relocating to london
where he worked for six years
in management with British
Airways. In 2002 he left to
become more involved in
smaller enterprises and joined
cAMl in 2007 as Group
Financial controller. prior to
his appointment as ceo in
April 2018, he had been the
cFo of the Group since he
joined the Board in April 2009
and was instrumental in
growing the business.
nigel was previously chairman
of lloyds Investment
Managers between 1986 and
1990 before becoming a
director of Mercury Asset
Management and later a
managing director of Merrill
lynch Investment Managers.
nigel is a Fellow of the
Institute of chartered
Accountants in england
and Wales.
Gavin has been involved in the
mining sector for over 24
years. His career in the
industry began with Anglo
American in its new Mining
Business division where he
worked in a target generation
and due diligence team and
subsequently managed
projects from greenfields
exploration through to a
feasibility study on a gold
project. He then spent 11
years in the london
investment banking sector
focusing on debt and
derivative financing for mining
clients of Barclays capital and
equity and debt investments
for Investec. After leaving the
banking sector he advised a
variety of private mining
investors and junior
companies on project
development and funding
before joining the company
in June 2014 as Business
development director.
He was appointed cFo on
16 April 2018 and Gavin
continues to serve as the
Business development
director for the company.
Gavin holds post-graduate
degrees in geology from
the university of the
Witwatersrand, Johannesburg
and from the university of
natal. He also holds an MBA in
finance from Imperial college,
london.
Education/
qualifications
nick graduated in 1974 from
the camborne school of
Mines, AcsM. He is a charted
engineer and a Member of the
Institute of Materials and
Mining, IoM3.
nigel has an engineering
degree from lancaster
university and is a member
of the Institute of chartered
Accountants in england
& Wales.
External
appointments
nick joined the Board of
caledonia Mining as a
non-executive director in
september 2019.
treasurer (pro bono) of the
Fleet Air Arm officer’s
Association.
nigel is currently chief
executive of Hotchkis and
Wiley ltd. He is also a director
of Borders & southern
petroleum.
Robert became a member of
the london stock exchange in
1967 and was managing
director and Head of oil and
Gas at canaccord europe.
during his career in the city of
london, he was a director of
Vickers da costa and
schroders securities and
Head of corporate sales at
sG securities (london)
limited. He is a co-founder of
salamander energy and has
previously served as a
non-executive director of that
company. He has also served
as non-executive director of
pharos energy plc (formerly
soco International plc). He is
a founder shareholder of
the company.
Roger has over 40 years’
operational experience at
senior management and
director level in the
international mining industry
covering financing, feasibility
studies, construction,
development, commissioning
and operational management
of both underground and
surface mining operations in
gold and base metals.
previous positions include
senior mining engineer at nM
Rothschild (london) in the
Mining and Metals project
finance team (1997 to 2010;
director, vice-president and
general manager of Minorco
(AngloGold) subsidiaries in
Argentina (1994 to 1997), for
the development of the cerro
Vanguardia, open pit
gold-silver mine in patagonia;
operations director of
Greenwich Resources plc,
london (1984 to 1992);
production manager for Blue
circle Industries in chile (1979
to 1984); and various
production roles from
graduate trainee to mine
manager, in Gold Fields of
south Africa (1971 to 1978).
Roger holds a Master of
science in Mineral production
Management from the Royal
school of Mines, Imperial
college, london and a Master
of science in Water Resource
Management and Water
environment from
Bournemouth university.
He is an Associate of the
camborne school of Mines
(‘AcsM’), a chartered
engineer, a european engineer
and a Member of the Institute
of Materials, Minerals and
Mining (‘IMMM’).
Roger is also a non-executive
director of Atalaya Mining,
where he serves as chairman,
and of tharisa and Highfield
Resources.
david has extensive
commercial experience
across the natural resources
sector internationally in
Australia, europe, central Asia,
Africa, and the united states.
He has had experience as a
director of companies listed
on the Australian, canadian
and uK stock exchanges.
david has been involved with
numerous corporate
transactions, including Ipos,
Rtos, mergers and
acquisitions, and project
funding. operational
experience has included
exploration, mine start-up,
open cast, and underground
mining operations.
nurlan is a Kazakh national
and currently works in the
capacity of country Adviser
Kazakhstan and central Asia
for Rothschild & co Global
Advisory team. He has
extensive experience in
capital markets and has held
positions at uBs and RBs.
Most recently, he was ceo of
spK Astana, a Kazakh regional
development institution. He
has previously held a number
of positions in the Kazakhstan
resource sector for
Kazatomprom, tau-Ken
samruk (the national mining
company), chambishi Metals
and enRc.
Gillian has over 20 years of
sustainability experience in
the extractives and natural
resources sectors. Gillian was,
until 2017, Head of Mining &
Metals at the World economic
Forum, leading global and
regional initiatives for
responsible and sustainable
development. prior to this,
she was director of social
Responsibility at teck
Resources. Gillian previously
served on the board of lydian
International limited and has
held senior roles in mining
companies, government,
academia and consultancy.
david holds a Bachelor of
commerce from the
university of WA and is a
Fellow of the Institute of
chartered Accountants in
Australia and new Zealand
(‘IcAAnZ') and a Member of
the Institute of chartered
Accountants in england and
Wales (‘IcAeW').
nurlan holds bachelor’s and
master’s degrees in
economics from the Moscow
state Institute for
International Relations.
Gillian holds an MA (Hons)
in Geography from the
university of Glasgow, a phd
in development economics
and economic Geography
from the university of
liverpool and is an alumnus of
the Governor
General of canada’s
leadership conference.
david is a non-executive
director of sunrise Resources.
He is an independent
non-executive director
of Zerde national
Infocommunication Holding.
Gillian is an independent
sustainability advisor and
currently serves as a
non-executive director on the
board of new Gold Inc. she is
also chair of International
Women in Mining.
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CENTRAL ASIA METALS PLC
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53
Strategic ReportFinancial StatementsGovernance BOARD REPORT
the Board is comprised of a diverse group of experienced directors, both from the uK and abroad, each with a wealth of expertise and a
depth of knowledge. Many have worked across a variety of jurisdictions and have extensive business and financial experience in the
sector in which the Group operates. this ensures that each member of the Board is able to fully contribute to the effectiveness of the
Board as a whole and in doing so, have collective responsibility for, and participation in, its decision making. We believe this leads to
better performance, sustainable growth and value in the business for its shareholders and other stakeholders in the long term.
KEY STRENGTHS
the diagram below shows the range of our Board’s key strengths. In addition, further detailed biographies of each of our directors are
shown on pages 52 to 53:
Natural
Resources
Sustainability
Financial
Governance,
Risk and
Controls
People
Strategy
International
Capital
Markets
Nick Clarke
Nigel Robinson
Gavin Ferrar
Nigel Hurst-Brown
Robert Cathery
Roger Davey
Dr Gillian Davidson
David Swan
Nurlan Zhakupov
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
THE ROLE OF OUR BOARD
In leading the company, the Board defines the purpose of the company and makes key decisions in relation to strategic matters to
deliver this. the Board is also responsible for making key decisions about financial planning, review of financial performance, setting the
cultural tone for the Group, review of operational matters, the governance framework, investments and director appointments. In doing
so, the Board draws on each director’s unique skillset and wide range of experience in the mining industry, financial and operational
aspects of businesses, public markets and of different geographies around the world.
our Board normally meets at least five times a year and at other times where required for arising matters. currently, due to the
restrictions on travel and gatherings in the context of coVId-19, the Board is meeting by video-conference and doing so for regular
updates every two weeks to be able to closely monitor and consider developments in the Group and more widely during this period. As
well as the executive directors, senior management are invited to attend and present at meetings of the Board and its committees
where appropriate.
All directors devote ample time in order to discharge their duties both at and outside of Board meetings. Board and committee
meetings normally take place over the course of a whole day in london. A special two-day meeting was held in July 2019 to give
additional focus to strategic matters in the Group and was attended by operational management from both sasa and Kounrad. In
addition, non-executive as well as executive directors visit the Group’s operations when opportunities to do so arise.
the Board is well briefed in advance of meetings and receives high-quality, comprehensive reports to ensure matters can be given
thorough consideration. there is an appropriate balance of influence within the Board which, as a result, is not dominated by one person
or group of individuals. the Independent non-executive directors constructively challenge the executive directors and the resulting
Board debates are always robust and sometimes lively. the open and direct forum for discussion ensures the deliberations during
meetings lead to decisions reached by the Board collectively in alignment with the core values of the company.
ATTENDANCE AT BOARD MEETINGS
the attendance of current Board and committee members at the scheduled meetings and calls, as compared with the number of
meetings held during 2019 is shown below.
Board
(five meetings)
Audit
(five meetings)
Remuneration
(eight meetings)
Nomination
(one meeting)4
Sustainability
(three meetings)
1
1
1
1
2
1
Director
Nick Clarke
Nigel Robinson
Gavin Ferrar
Nigel Hurst-Brown
Robert Cathery
Roger Davey
David Swan
Nurlan Zhakupov
Dr Gillian Davidson3
Meetings attended
non attendance
non-committee member invited to attend some or all of a meeting
1 denotes chair status.
2 nick clarke was unavoidably unable to attend two sustainability committee meetings due to the meetings being moved (with the agreement of the committee chairman) to a time
when Mr clarke 1. was due to be overseas on other company business and 2. was not available.
3 Appointed to the Board, and as a member of the nomination committee and chair of the sustainability committee, on 2 december 2019.
4
the members of the nomination committee also met informally during the year to consider specific matters.
directors do not attend meetings (or parts of meetings) of the Remuneration committee when the committee is deciding matters in relation to such directors’ Remuneration.
All directors on the Board at that time attended the AGM.
BOARD COMPOSITION
We have a well-balanced Board, constituted as follows:
BOARD COMPOSITION
non-executive chairman: nick clarke.
1
1
two executive directors: nigel Robinson and Gavin Ferrar.
1
six non-executive directors:
Five are considered fully independent: nigel Hurst-Brown,
Robert cathery, Roger davey and david swan. this also includes
our newest Board member, Gillian davidson who joined the Board
in december 2019.
one is based in Kazakhstan: nurlan Zhakupov. nurlan Zhakupov has
received share awards from the company and is therefore not
considered to be fully independent.
4
non-executive chairman
executive director
2
Independent non-executive
director (male)
Independent non-executive
director (female)
non-Independent non-executive
director
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Strategic ReportFinancial StatementsGovernanceQCA Code Principle: ´Establish a strategy and business model which promotes long-term value for shareholders
BOARD REPORT contInued
BOARD INDEPENDENCE
In line with the QcA code, the Board has considered the
independence of each non-executive director, including
assessment of their character, judgement, any business and other
relationships which could significantly interfere with their ability
to effectively discharge their duties. As part of this assessment,
we also consider length of tenure. the Board considers that
length of tenure alone is not necessarily a compromise to
independence and is satisfied that the independence of none
of the non-executive directors has been compromised by this.
As such, after taking account of all of these factors, the Board
continues to consider nigel Hurst-Brown, Robert cathery, Roger
davey and david swan to be independent directors. dr Gillian
davidson, who was appointed at the end of 2019, is also
considered to be fully independent. the Board believes the
addition of dr Gillian davidson as a new Independent
non-executive director along with our existing independent
Board members, our other non-executive director, nurlan
Zhakupov, and our executive directors provides an excellent
balance of views, skills, personal qualities and depth of experience
within the Board.
SUPPORT TO DIRECTORS
All directors on the Board have access to, and the support of, the
company secretary who acts as secretary to the Board and its
committees, reporting directly to their chairs, advising on, and
assisting on compliance with, relevant governance regulations and
procedures. In addition, all directors have unrestricted access to
the company’s external advisers. Resources and training for their
own personal development are also made available to directors on
an ongoing basis ensuring they have the necessary knowledge and
skills to fulfil their roles effectively.
the role of the company’s Auditors is explained in more detail in
the Audit committee Report on pages 58 to 59.
THE BOARD AND CULTURE
of course, commitment to good corporate governance in the
boardroom is just one part of setting and maintaining an
appropriate culture that aligns with our strategic goals and values.
the Board, and its committees set the tone for, and promote a
healthy culture of openness, honesty, engagement and respect
throughout the Group and with all of its stakeholders. the Board
welcomes an open dialogue with these stakeholders be they
investors, employees, governmental authorities or local
communities. decisions made by the Board collectively, supported
by management, are taken in the context of this shared sense of
purpose that comes with the continuous focus on culture
throughout the Group’s operations. We highlight the importance
of communication and the flow of information throughout the
Group to ensure consistency in our procedures. We also maintain
strong internal policies including those relating to anti-bribery,
share-dealing, sanctions and whistleblowing which are
implemented by our teams.
SHAREHOLDER ENGAGEMENT
As mentioned above, we have embedded into our culture as a
Group that maintaining a continual, open and active dialogue with
our shareholders and other stakeholders plays an essential part in
understanding their views and ensuring the long-term success of
the company. Whilst most engagement with the company’s
institutional investors is through the executive directors and the
director of corporate Relations, valuable feedback from
shareholders is also communicated to, and discussed with, the
other Board members. the Board as a whole recognises that the
views of our investors should be considered as an important part
of the Board’s deliberations and decision-making processes as the
Board has a duty to safeguard the interests of all stakeholders. the
other directors are also available to meet with investors where
requested and all shareholders also have the opportunity to attend
and ask questions at the company’s Annual General Meeting.
Where appropriate, as I mention in my chairman’s letter on page
48, we engage with our key shareholders on specific governance
matters. details of this, and our other stakeholder engagement
activities during 2019, are set out in the table to the right.
Material information in relation to the company is made publicly
available via the london stock exchange’s Regulatory news
service (‘Rns’). presentations on our full year and interim results
are given to analysts and investors shortly after publication.
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AnnuAl RepoRt And Accounts 2019
STAKEHOLDER ENGAGEMENT ACTIVITIES
Q1
Q2
Q3
Q4
´ preparations for Annual Report, presentation of annual
results and Annual General Meeting
´ executive director attendance at two global mining investor
conferences
— Mining Indaba, cape town
— BMo Global Metals and Mining conference, Miami
Q1
Q2
Q3
Q4
ceo speaks at global mining investor conference, BMo
´ Q1 2019 operations update (10 April 2019)
´ 2018 results announcement (10 April 2019) and london
roadshow attended by executive directors and director of
corporate Relations
´ Annual Report publication
´ Annual General Meeting
´ Governance roadshow by chairman of Remuneration
committee and company secretary
Q1
Q2
Q3
Q4
ceo opens Kind Heart centre for disabled children in Balkhash, Kazakhstan
H1 2019 operations update (10 July 2019)
´ 2019 interim results announcement (17 september 2019)
and london roadshow attended by executive directors and
director of corporate Relations
´ chairman visits Kind Heart centre for disabled children
and opens new playground in Balkhash, Kazakhstan
´ esG roadshow by chairman and director of corporate
Relations
´ executive directors attend community events around the
annual Miner’s day celebrations in local town, Makedonska
Kamenica, north Macedonia
´ Investor roadshow to new York and toronto with ceo
and director of corporate Relations
the president of north Macedonia and senior ministers are welcomed to the
sasa mine in August 2019
Q1
Q2
Q3
Q4
´ Q3 2019 operations update (8 october 2019)
´ site visit to sasa, north Macedonia by chairman of
sustainability committee
´ Investor roadshows to paris, Madrid and Zurich with ceo and
director of corporate Relations
´ chairman, ceo and cFo attended Mines and Money london
conference
´ chairman, ceo and cFo attended Minex eurasia 2019
conference
cAMl attend the Mines and Money outstanding Achievement Awards dinner
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
57
Strategic ReportFinancial StatementsGovernanceQCA Code Principles: ´Ensure that, between them, the directors have the necessary up-to-date experience, skills and capabilities ´Communicate how the company is governed and is performing by maintaining dialogue with shareholders and other relevant stakeholdersQCA Code Principle: ´Seek to understand and meet shareholder needs and expectations AUDIT COMMITTEE REPORT
DAVID SWAN, CHAIRMAN OF THE AUDIT COMMITTEE
MEMBERS
Chairman – David Swan
Roger Davey
Nigel Hurst-Brown
ACHIEVEMENTS IN 2019
´ Examined and recommended to the Board for approval the
Group’s half year and annual results, including the report from the
CFO and from the Auditors.
´ Considered the independence and tenure of auditors in light of
best practice trends in corporate governance and led the tender
process including the selection, evaluation, and remuneration of
the external auditors throughout the audit cycle.
´ The Audit Committee has been assigned the responsibility for risk
management and has commenced evaluation of the effectiveness
of the risk management framework.
´ Ongoing review of the adequacy of the internal control
mechanisms in place.
´ Reviewed the Delegation of Authority procedure and the Treasury
and Risk Management Policy.
´ Met with Auditors and with management in order to agree items
for the audit of accounts including: preliminary planning report,
final audit plan, review of audit scope, and review of reporting
timetables.
OBJECTIVES FOR 2020
´ Risk management – having set up a separate Risk Committee,
the Audit Committee is to oversee the setting and implementation
of robust policies and procedures relating to risk management.
´ New Auditor – the Audit Committee will be working with the
newly appointed Auditor on areas of focus and the furtherance
of the audit plan.
´ Asset retirement obligation – the Audit Committee will, in
cooperation with the Sustainability Committee and external
advisers obtain an updated external assessment of the
environmental decommissioning plan and cost.
´ The Audit Committee closely monitors the publications and
trends emerging from the FRC. This is soon to be replaced by
the Audit Reporting and Governance Authority (AGA) and the
Audit Committee will keep up to date with new developments
as they evolve.
dear shareholder,
the primary role of the Audit committee has been to assist the
Board in the fulfilment of its responsibilities as they relate to
external audit, financial reporting, and internal control. In the
current period, the Audit committeee has also been assigned the
responsibility for having the Risk committee report to it. this is an
evolving and continually improving area of our business. In the
current public health situation and it has been very gratifying to
witness how swiftly the management of coVId-19 risk has been
implemented.
SIGNIFICANT ISSUES CONSIDERED BY THE COMMITTEE IN
RELATION TO THE 2019 FINANCIAL STATEMENTS
´ the committee assessed management’s determination of
cash-generating units and review of impairment triggers as at
31 december 2019. the committee considered the key
judgments made by management in relation to discount rates,
commodity price forecasts, operating and capital expenditure,
and the mineral reserves and resources estimates. the
committee reviewed disclosures related to impairment tests in
note 19 of the financial statements.
´ the committee assessed management’s cash flow forecasts,
potential risks as they may apply to the Group, resulting stress
tests and the underlying assumptions which have been
approved by the Board in relation to the uncertainty created by
the coVId-19 pandemic. In doing so, the committee was
mindful of the regulatory guidance issued in recent days and
weeks in this area. the committee reviewed disclosures
related to the going concern basis of preparation in note 2 of
the financial statements.
FINANCIAL REPORTING
the Audit committee safeguards the integrity of the financial
statements by ensuring that they are balanced and duly
considered, fair, and understandable to shareholders as well as
compliant with regulatory requirements. throughout the year and
alongside ordinary business, the Audit committee considered
issues relating to the appropriateness of key accounting policies
and key judgements and estimates. the Audit committee
considered new issues relating to the Group’s financial statements,
within the areas of accounting standards, taxation and tax risks,
materiality thresholds, and engaged in valuation of assets by
reviewing impairment assessments.
EXTERNAL AUDITORS/INDEPENDENCE OF THE AUDITOR
the Audit committee reviewed the position of the incumbent
auditors as their tenure had extended from the early years of the
company’s existence and the decision was made to run a tender
process, as follows.
´ Management reporting – each month, the Group’s financial
performance and strength is monitored against the budget and
is reported to the Board formally once a quarter.
´ Monitoring – the Audit committee engages in regular
monitoring of internal controls through internal review
and external audit by both auditors and other consultants,
as required.
during the year, the Audit committee was handed full responsibilty
for overseeing the Group’s risk management. the Risk committee,
comprising executive management, reports into the Audit
committee. the Audit committee oversees the Risk Management
committee, ensuring that risk management is addressed in an
orderly and systematic way. the Audit committee is then
responsible for taking its recommendations to the Board.
RISK MANAGEMENT
the Risk committee reports into the Audit committee. It is the
Audit committee’s responsibility to review those risks which are
both high in consequence and likelihood of occurrence. the Audit
committee will consider the Risk committee’s management of
these risks and report its conclusions to the Board of directors.
Audit committee representatives work closely with Risk
committee members to monitor progress towards an efficient
and effective management of the risks which are relevant to the
Group’s business. Where applicable, the Audit committee will
ensure the annual audit plan appropriately tests the compliance of
risk mitigation procedures.
WHISTLEBLOWING
the Group has an independently managed whistleblowing
programme in operation, which extends to all employees across
sites, allowing them to voice concerns confidentially on a wide
range of matters. our principles of transparency including
“speaking out” have been incorporated into and reinforced by the
recently implemented code of conduct. the rollout of the code
affords tighter controls in our supply chains and reinforces our
objective of maintaining a business which is free of bribery
and corruption.
DAVID SWAN
cHAIRMAn oF tHe AudIt coMMIttee
31 March 2020
AUDIT TENDER PROCESS
STEP 1
A review of potential audit firms was conducted.
STEP 2
three firms were sent a formal request to tender.
STEP 3
the three proposals were evaluated against the criteria areas.
STEP 4
the Audit committee discussed the results of the review with
senior Management.
STEP 5
A recommendation was made to the Board to appoint a new
Auditor.
Following a review of potential audit firms, three firms were sent a
formal request to tender. the bid documents were to cover the
criteria areas of experience, capabilities in our operating markets,
audit quality, and value for money. the three proposals were all
evaluated against the criteria areas and following review and
discussion within the Audit committee and with senior
Management, the recommendation was made to the Board to
appoint Bdo to audit the Group for the full year period ended
31 december 2019.
COMMITTEE FUNCTION
the members of the Audit committee have the appropriate
experience and skill sets to support the company’s governance
systems, oversee internal controls, and review the presentation of
the financial statements.
the committee is made up of david swan as the committee
chairman, along with Roger davey, and nigel Hurst-Brown. david
swan is a qualified chartered accountant bringing a breadth of
financial expertise to the role. Roger davey is a mining engineer
possessing wide sector-specific knowledge relevant to the
business and nigel Hurst-Brown has extensive finance and capital
markets experience.
INTERNAL CONTROL
the committee is responsible for oversight of the effectiveness
of the company’s systems of internal controls. the key areas
which the committee assists the Board in monitoring and
review include:
´ Budgeting – budgets for each upcoming financial year are
reviewed by the Audit committee before they are recommended
to the Board in full. the budgets as well as the annual budgeting
process itself is reviewed by the Audit committee.
´ long-term forecasts – the Audit committee ensures
long-term forecasts and the underlying assumptions and are
properly reported to the Board.
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Strategic ReportFinancial StatementsGovernanceQCA Code Principle: ´Embed effective risk management, considering both opportunities and threats, throughout the organisation NOMINATION COMMITTEE REPORT
NICK CLARKE, CHAIRMAN OF THE NOMINATION COMMITTEE
MEMBERS
Chairman – Nick Clarke
Nigel Hurst-Brown, Robert Cathery, Roger Davey,
Gillian Davidson, David Swan, Nurlan Zhakupov
ACHIEVEMENTS IN 2019
´ Appointment of new Non-Executive Director, Dr Gillian Davidson.
´ Focused on succession planning for longer serving Non-Executive
Directors.
´ Implemented the action points arising from our first internal
effectiveness review carried out in 2018.
OBJECTIVES FOR 2020
´ Continue the progressive refreshment of the Board.
´ Ongoing development of succession planning.
´ Continue the self-evaluation cycle and address any issues
identified from this process.
dear shareholder,
2019 was the committee’s first full year in operation since it was
established in July 2018. the nomination committee is responsible
for the review of the composition and balance of the Board and its
committees. In carrying out this duty, the committee makes
recommendations to the Board in relation to the appointment and
reappointment of directors and the memberships of the Board’s
committees. the nomination committee is also responsible for
the continuous refreshment of, and proactive succession planning
for, the Board.
the diagram below shows the selection process for the
appointment of new Board members as followed by the
nomination committee and concluding in the appointment
of dr Gillian davidson to the Board at the end of 2019.
After a new director is appointed, they receive an induction
to familiarise themselves with the company and its business.
All directors have unrestricted access to, and receive regular
updates from, management to keep them abreast of the
latest developments.
SELECTION PROCESS FOR THE
APPOINTMENT OF NEW BOARD MEMBERS
STEP 1
Appropriate process was agreed for the recruitment
utilising the assistance of the noMAd in identifying and initiating
contact with potential candidates.
STEP 2
A specification for candidates was prepared setting out the
agreed key skills and character profile being sought to fit with
the current balance, membership and dynamics of the Board.
STEP 3
A longlist of candidates meeting the specification
was identified.
STEP 4
A shortlist of candidates was then selected
by the nomination committee.
STEP 5
Following interviews carried out by representatives of
the nomination committee, the preferred candidate was
recommended to the Board by the nomination committee.
the preferred candidate also met with the ceo and cFo
prior to Board approval for the appointment to be made.
BOARD DIVERSITY
In making recommendations for appointment, the nomination
committee considers suitably qualified candidates of any ethnic
background or gender. It also considers having a diversity of
personal attributes as well as skills on the Board to be another
important factor when selecting potential candidates. Roles are
awarded on merit using objective criteria. on the Board we have
nationals of three countries other than the uK and now have a
gender mix. the key strengths of our Board members are set out
in the chart on page 54. We feel that the appointment of dr Gillian
davidson with her specialist background in sustainability matters
enables us to have the appropriate balance of skills on the Board, in
particular with regard to emerging trends and key areas of focus in
the sector in which we operate.
SUCCESSION PLANNING
the nomination committee assesses the developing needs of the company, not just in relation to the periodic refreshment of the
Board but also to ensure contingency plans are in place for unexpected changes in addition to those being planned for the longer term.
Given the current global economic conditions and the Board needing to act as a highly experienced and focused unit to navigate through
these, the nomination committee has recommended and the Board intends that the current directors should remain in position at
present. this will be kept under review as conditions change.
EFFECTIVENESS REVIEW
In line with the QcA code, and following on from our first internal effectiveness review carried out last year, the committee, led by me
as chairman, completed a further internal evaluation of the effectiveness of the Board as a unit, its committees and of the individual
directors. In doing so, we have also taken into account the outcomes of last year’s review. the areas of focus arising from the 2018
evaluation and actions taken in response to these are shown in the table below:
Areas of focus arising from outcomes of 2018 evaluation
Action in 2019 in response to outcomes of 2018 evaluation
continued development of long-term strategy
Business development and strategy updates given to every main
Board meeting by management to ensure focus on this area is
maintained.
A two-day meeting involving operational management
and including a specific strategy review
In July we held a highly successful two-day meeting in london
involving operational management.
Risk management monitoring processes were enhanced during
2019 with the introduction of a Risk Management committee
designated to oversee this area. Further details are set out in the
report of the Audit committee on page 59.
this is an area of ongoing development for the Board. In 2019,
supported by the nomination committee there was increased
focus and review of succession planning, in particular in relation
to the longer serving non-executive directors as well as the
appointment of dr Gillian davidson.
the report on the responses received was reviewed and discussed
by the Board. the responses in relation to my performance as
chairman were provided to nigel Hurst-Brown as deputy
chairman to discuss with the other non-executive directors.
As a result of the assessment, areas identified for focus over the
coming year included:
´ continued development of clear long-term strategy;
´ continued enhancement of activities in relation to stakeholders;
´ ongoing development of risk management; and
´ succession planning for the Board over the coming years.
NICK CLARKE
cHAIRMAn oF tHe noMInAtIon coMMIttee
31 March 2020
ongoing monitoring of risk management
succession planning for the Board over the coming years
the 2019 internal evaluation process was again facilitated by the
company secretary and followed a similar format to that of the
prior year. this involved the completion of a confidential
questionnaire by each director covering the categories set out
below. the assessment of my performance as chairman of the
Board was led by nigel Hurst-Brown as deputy chairman. In line
with the QcA code, the Board’s review of performance was based
on clear and relevant objectives, seeking continuous improvement.
the questionnaire was structured to encourage thorough
feedback which was then reported to the Board, on an
unattributed basis, covering the following areas:
´ strategy
´ shareholders
´ stakeholders
´ Risk Management
´ Board dynamics
´ succession planning
´ Individual directors
´ the chairman
´ Audit committee
´ Remuneration committee
´ sustainability committee
´ nomination committee
´ Any other matters directors wished to raise
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Strategic ReportFinancial StatementsGovernanceQCA Code Principle: ´Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
REMUNERATION COMMITTEE REPORT
ROBERT CATHERY, CHAIR MAN OF THE REMUNERATION COMMITTEE
MEMBERS
Chairman – Robert Cathery
Nigel Hurst-Brown, David Swan
ACHIEVEMENTS IN 2019
´ Completing transition to new Long-Term Incentive Plan structure.
´ Increased transparency of reporting in executive remuneration.
´ Incorporated investor views into executive remuneration.
´ Improved the balance between objectives related to the business
and linked to shareholder returns.
OBJECTIVES FOR 2020
´ Continue to ensure the balance between long-and short-term
incentives aligns with the Group’s growth strategy.
´ Continue to engage with shareholders on remuneration matters.
´ Develop short-and long-term incentive targets appropriate to the
economic environment.
dear shareholder,
the role of the committee is to decide the remuneration of the
executive directors and the chairman, to oversee wider
remuneration, and to determine participation and award levels
under the Group’s long-term Incentive plan. the past year has
been a particularly busy year for this committee. Indeed, in 2019,
we had eight Remuneration committee meetings as well as
numerous informal discussions between meetings.
In this report, I aim to give you an insight into our activities in the
year which are driven by our aim to incentivise management in the
interests of our shareholders and other stakeholders over the long
term. I cover three key areas of our work:
´ the restructuring of our long-term incentives which we have
substantially changed since my report last year.
´ the reporting format which we have newly adopted this year as
part of cAMl’s overall aim of increasing transparency in our
governance work.
´ other elements of the remuneration of our executive directors.
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LONG-TERM INCENTIVE PLAN
Background
the committee has been operating the current ltIp since 2011.
the ltIp has helped incentivise the executive directors and senior
managers and we believe that this has been reflected in the total
shareholder returns (‘tsR’), which combine share price changes
and dividends. obviously, tsR in the course of this year have been
severely impacted by the global economic situation.
ltIp awards, up to and including 2018, were granted on the basis of
one third of the grant amount vesting per annum, commencing
around one year after the date of grant, subject to the
achievement of business and operational performance conditions
in the year of grant. normally, such awards to executive directors
were equivalent in face value at grant to 100% of their salary.
Although that structure had served cAMl well, as we entered
2019, we felt that this approach did not sufficiently align the cAMl
team’s remuneration with the company’s shareholders and we
should move towards more typical awards for public company
long-term incentives. Accordingly, as I anticipated in last year’s
Annual Report, we transitioned the structure of ltIp in 2019 and
put in place arrangements to ensure this continued to act as an
effective incentive for the management team.
2019 LTIP
For the ltIp awards granted in 2019, we made three key changes:
´ Awards would vest only after three years rather than at the rate
of one third per annum.
´ Awards were made subject to a performance target of the
compound annual growth rate of absolute tsR measured over
three years on sliding scales up to a maximum of 20%, thereby
seeking to address alignment with shareholders.
´ the award level was increased from 100% of salary to 150% of
salary to compensate management’s transition from awards
vesting annually to vesting after three years.
We believe these were good first steps in the development of the
ltIp during the year, whilst recognising there would be more work
to do.
Governance roadshow
As mentioned by nick clarke in his chairman’s letter on page 5, he
and I led a governance roadshow during 2019. this was partly to
explain more fully to shareholders our governance arrangements,
and partly to seek their feedback on how they would like to see
these continue to be developed.
during this roadshow, we found universal support from shareholders
for us having moved to the three-year vesting period for the 2019
awards onwards. In relation to performance conditions, most
shareholders indicated they would prefer relative tsR as opposed to
absolute tsR as a performance metric, and many shareholders
expressed a preference for the introduction of longer-term business
and operational targets as well.
2020 LTIP awards
taking account of feedback received from shareholders, we were
close to finalising the next stage of development for our 2020
awards. When these awards were granted, they were to be on
performance conditions incorporating relative tsR, operational and
sustainability targets. However, the current global economic
turmoil resulting from the coVId-19 crisis has led us to the
difficult decision to defer finalisation of the 2020 ltIp awards until
the general economic outlook is clearer and we can determine
targets that are meaningful and will act as a genuine incentive over
the long term. the overall structure of the awards is though,
intended to remain similar to those issued in 2019.
Conclusion
We hope that shareholders will find the increased transparency of
our reporting this year to be helpful, and that they are supportive
of the changes we have made in executive remuneration,
particularly in relation to the ltIp.
We are grateful for the feedback from shareholders during the course
of 2019. this has been shared with the Remuneration committee
as well as the Board and has helped inform our work. I always
welcome such engagement and am happy to answer any questions
or receive any further feedback that shareholders may have.
Other elements of remuneration
As well as maintaining the same level of ltIp awards, there
have been no significant changes in the other elements of the
remuneration of executive directors.
ROBERT CATHERY
cHAIRMAn oF tHe ReMuneRAtIon coMMIttee
31 March 2020
nigel Robinson and Gavin Ferrar have been awarded inflationary
increases in salary with effect from 1 January 2020 in line with
increases in staff pay across the Group as a whole. As a result,
nigel Robinson’s salary as ceo is now £365,000 per annum (2019:
£350,000) and Gavin Ferrar’s salary as cFo is now £300,000 per
annum (2019: £285,000).
the maximum possible 2020 bonus for executive directors
remains at the same level as 2019 at 100% of salary. details of the
annual bonus for 2019 and 2020 are shown on page 67.
nick clarke has transitioned from executive chairman to
non-executive chairman with effect from 1 January 2020. As a
result, he is now paid fees of £175,000 per annum plus, for 2020
only, an additional £10,000 as he relinquishes the executive
benefit package. nick will no longer receive an annual bonus (2019:
up to 100% of salary) or new ltIp awards (2019: 150% of salary).
Increased transparency in reporting
this report aims to give shareholders insight into our
considerations and reasoning in arriving at the current
remuneration structure.
Following this letter is a table summarising our remuneration
policy. Whilst variations are possible, this is the policy that we
followed in 2019 and are following in 2020. We intend to continue
with this approach going forward unless the Remuneration
committee considers variations are justified. We also include an
implementation report giving more detail on how the policy has
been applied both for 2019 and for 2020.
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Strategic ReportFinancial StatementsGovernance REMUNERATION COMMITTEE REPORT contInued
DIRECTORS’ REMUNERATION POLICY
As an AIM quoted company following the QcA code, cAMl is not required to have a binding remuneration policy for its directors.
nonetheless both the Board and the Remuneration committee believe that transparency of the policy under which directors’
remuneration is structured is beneficial to shareholders. Accordingly, this remuneration policy is set out in the table below. It is subject
to variation where the Remuneration committee considers appropriate though no variations were made in 2019 and none are intended
in 2020.
Remuneration Policy table
element and purpose
Base salary
this is the core element of pay and reflects the individual’s role and responsibilities within the Group with some adjustment to reflect
their capability and contribution.
Policy and operation
Base salaries are determined each year by the committee.
salary levels are reviewed by reference to public companies in the sector of a similar size and complexity.
the committee also has regard to other relevant factors including corporate and individual performance and
any changes in an individual’s role and responsibilities.
Base salary is paid monthly in cash.
changes to base salaries normally take effect from 1 January.
Level
the Remuneration committee will apply the factors set out in the section above in considering any salary
adjustments during the duration of this policy. Increases in base salaries for executive directors will be generally
guided by any increases for the broader employee population, but on occasion may need to recognise, for
example, an increase in the scale, scope or responsibility of the role. no increase will be made if it would take an
executive director’s salary above the level the committee considers is justified by these factors.
Performance measures n/A
Benefits
to provide benefits valued by recipients.
Policy and operation
the Group provides benefits to all employees, including the executive directors. the executive directors
receive private medical cover and insurance benefits. the Remuneration committee reserves discretion to
introduce new benefits where it concludes that it is in the interests of cAMl to do so, having regard to the
particular circumstances and market practice.
Level
Where appropriate, the company may meet certain costs relating to executive director relocations and (if
appropriate) expatriate benefits.
the Remuneration committee sets such benefits within overall market practice and ensures that the overall
costs do not increase by more than the Remuneration committee considers to be appropriate in all the
circumstances.
Performance measures n/A
Pension
to provide retirement benefits.
Policy and operation
executive directors receive pension contributions to company or personal pension arrangements or the
equivalent amount can be paid as a cash supplement in lieu of pension contributions (reduced for the impact
of employers’ national Insurance contributions).
Level
the amount of employer’s contribution is approximately 6% of base salary per annum which is aligned with
other employees.
Performance measures n/A
element and purpose
Annual Bonus Plan
to motivate employees and incentivise delivery of performance over a one-year operating cycle, focusing on the short/medium-term
elements of our strategic aims.
Policy and operation
Annual Bonus plan levels and the appropriateness of measures are reviewed annually to ensure they
continue to support the Group’s strategy.
Annual Bonus plan outcomes are calculated following the determination of achievement against
performance measures and targets.
Level
the normal maximum of Annual Bonus plan outcome for an executive director is 100% of base salary
per annum.
Performance measures
the performance measures applied may be financial or non-financial, corporate, divisional or individual and in
such proportions as the Remuneration committee considers appropriate. they are typically a blend of
corporate targets such as production, cost control and sustainability achievements as well as individual KpIs.
once set, performance measures and targets will generally remain unchanged for the year, except to reflect
events (such as major transactions) where the committee considers it necessary in its judgement to make
appropriate adjustments to the targets applying before such event.
the Annual Bonus plan remains a discretionary arrangement and the Remuneration committee retains a
standard power to apply its judgement to adjust the outcome of the Annual Bonus plan for any performance
measure (from zero to any cap) should it consider that to be appropriate.
Long-term incentives
to motivate and incentivise delivery of sustained performance over the long term, and to promote alignment with shareholders’
interests, the Group operates a long-term Incentive plan.
Policy and operation
Awards under the ltIp are typically granted as options which vest to the extent that performance conditions
are satisfied over a period of at least three years.
Awards are normally granted at nominal cost ($0.01) per share although can be granted at nil-cost under
the rules.
under the ltIp rules, vested awards may also be settled in cash (although this will typically be the case only if
decided appropriate by the committee in particular circumstances).
If appropriate, dividend entitlements will accrue until the end of the holding period in respect of
performance-vested shares and be delivered as additional vesting shares.
Level
the normal level under the ltIp is for awards over shares worth 150% of base salary in a financial year. this
excludes any dividend equivalent accruals.
Performance measures
the Remuneration committee may set such performance measures on ltIp awards as it considers
appropriate (whether financial or non-financial, and whether corporate, divisional or individual).
once set, performance measures and targets will generally remain unaltered unless events occur which, in
the Remuneration committee’s opinion, make it appropriate to alter the performance conditions in such
manner as the committee thinks fit. performance conditions would only be altered this way for factors that
could not be foreseen at the time of grant of the awards and significantly distort the operation of the
intended performance conditions (positively or negatively). performance may be measured over such
periods as the Remuneration committee selects at grant, which will not normally be less than, but may be
more than, three financial years.
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Strategic ReportFinancial StatementsGovernance REMUNERATION COMMITTEE REPORT contInued
element and purpose
Chairman and other Non-Executive Director fees
to enable the company to recruit and retain a chairman and non-executive directors of the highest calibre, at the appropriate cost.
Policy and operation
the fees paid to the chairman and the fees of the other non-executive directors aim to be competitive with
other listed companies of equivalent size and complexity, and to take account of the time commitment of the
directors.
the fees payable to the non-executive directors are determined by the Board. the fees payable to the
chairman are determined by the Remuneration committee.
All fees will be subject to periodic review. For non-executive directors, the fee structures may involve
separate fees for chairing, for membership of Board committees or for acting as deputy chairman or senior
Independent director, or for performing specific services.
no benefits are normally envisaged for the non-executive directors but the company reserves the right to
provide benefits (including travel and office support).
Fees are paid monthly in cash.
Level
Share awards
the chairman and non-executive directors are paid fees comparable in relation to other companies taking
account of their respective roles, responsibilities and time commitment. Any increases made will be
appropriately disclosed.
share awards will not normally be granted to non-executive directors. If exceptional share awards are
granted to non-executive directors, those non-executive directors shall not normally be counted amongst
the independent directors under the Quoted companies Alliance (‘QcA') code.
Performance measures n/A
Changes from previous
policy
no material changes.
IMPLEMENTATION REPORT
Directors’ remuneration
the table below sets out the total remuneration in respect of qualifying services for both executive and non-executive directors for the
financial year 2019:
Executive Directors:
nick clarke1
nigel Robinson
Gavin Ferrar
Non-Executive Directors:
nigel Hurst-Brown
Robert cathery
nurlan Zhakupov
david swan
Roger davey
dr Gillian davidson2
Kenges Rakishev3
2019
Basic salary/
fees $’000
2019
Annual bonus
$’000
2019
pension
$’000
2019
Benefits
in kind
$’000
318
446
363
127
102
95
102
101
8
–
298
418
340
–
–
–
–
–
–
–
19
27
22
–
–
–
–
–
–
–
13
13
–
–
–
–
–
–
–
–
2019
Total
$’000
648
904
725
127
102
95
102
101
8
–
2018
total
$’000
808
807
665
133
107
100
107
107
–
40
Directors’ aggregate emoluments
1,662
1,056
68
26
2,812
2,874
1 nick clarke was executive chairman during the year. on 1 January 2020 he became non-executive chairman.
2 dr Gillian davidson joined the Board on 2 december 2019.
3 Kenges Rakishev retired from the Board on 23 May 2018.
the benefits receivable by executive directors include private medical and dental insurance.
the aggregate emoluments of the highest paid director totalled $904,000 (2018: $808,000). no director has a service agreement
with the company that is terminable on more than six months’ notice. details of executive director service agreements are set out on
the Remuneration policy table on page 68.
Salaries for Executive Directors for 2020
the executive directors have each signed a service agreement with the company. under the terms of these service agreements, the
executive directors are entitled to a salary (which is denominated in pounds sterling) as set out below.
nigel Robinson (chief executive officer)
Gavin Ferrar (chief Financial officer)
Annual bonus measures
the table below sets out the performance measures and weightings between these:
Metric
Production
production across all operations
Financial/Operational
c1 cash cost and unit cost of mined ore
Safety
LTIFR measures
Personal performance
Individual assessment
2020
Salary
£’000
365
300
2019
salary
£’000
350
285
2019
Weighting
2020
Weighting
40%
40%
20%
20%
20%
20%
20%
20%
executive directors can earn up to a maximum bonus potential of 100% of salary based on these measures. In 2019, each executive
director earned 91% (2018: 80%) of the maximum bonus potential.
Directors’ option awards
nick clarke
nigel Robinson
Gavin Ferrar
nurlan Zhakupov
Total
As at 1
Jan 2019
number1
1,453,397
782,278
657,745
243,570
Granted/
awarded
number
167,710
234,794
191,189
–
dividends
number
78,271
48,037
39,235
16,615
3,136,990
593,693
182,518
lapsed
number
exercised
number
As at
31 dec 2019
number1
exercisable at 31
dec 2019
number1
–
–
–
–
–
–
–
–
–
–
1,699,378
1,065,109
888,169
260,185
1,257,841
640,880
481,685
253,343
3,912,841
2,633,749
1 this includes the number of shares covered by such awards increased in terms of the relevant plan rules by the value of dividends as if these were reinvested in company shares at
the dates of payment.
the options in the table above have been granted to the executive directors under the central Asia Metals employee share plan 2011:
´ options granted in 2019 are subject to a performance target. the performance target relates to the level of absolute total
shareholder return compound annual growth rate of the value of the company’s shares over the performance period of three
financial years ending 31 december 2021. Awards do not vest until the third year from the date of grant.
´ For the options granted in 2018, the performance conditions to which these awards were subject were substantially met to the
extent of 80% of the total. the awards therefore vest in tranches of one-third per annum commencing on 31 March on the first,
second and third years after grant.
´ Additional options were also granted to the executive directors in 2018 in connection with the acquisition of sasa by the Group and
are not subject to performance conditions other than continued service. the additional awards granted in 2018 therefore vest at the
rate of one-third per annum commencing on 31 March 2019.
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Strategic ReportFinancial StatementsGovernance
REMUNERATION COMMITTEE REPORT contInued
DIRECTORS’ INTERESTS
the directors of the company who were in office during the year
and up to the date of signing the financial statements and their
interest in the issued share capital of the company during the
year were as follows:
Shares held
as at
31 Dec 2019
shares held
as at
31 dec 2018
director
nick clarke (chairman)1
nigel Robinson (chief executive officer)1
Gavin Ferrar (chief Financial officer)
nigel Hurst-Brown (deputy chairman)
Robert cathery2
Roger davey
dr Gillian davidson
david swan
nurlan Zhakupov
1,342,887
646,715
–
909,065
2,105,254
–
–
3,000
–
1,342,887
646,715
–
909,065
2,105,254
–
–
3,000
–
total directors’ interests
5,006,921
5,006,921
1
these shares are held jointly with the company’s eBt under a joint share ownership
plan. All share awards were made prior to the 2010 Ipo and vested upon its successful
completion.
2 250,000 (2018: 250,000) shares held by elizabeth cathery, the wife of Robert
cathery; 1,355,254 (2018: 1,355,254) shares held by Robert cathery; and 500,000
(2018: 500,000) shares held by Robert and elizabeth cathery are included in the
above amounts.
2020 LTIP KPIs
the plans and performance measures for the ltIp grants planned
to be made in 2020 are commented upon on page 63.
Non-Executive Director remuneration
the non-executive directors, including the chairman, have each
signed a letter of appointment. under the terms of these letters,
the non-executive directors are entitled to an annual fee (which is
denominated in pounds sterling) as set out below.
2020 and
2019 Fee
£’000*
nick clarke (non-executive chairman)1
nigel Hurst-Brown (deputy chairman)
Robert cathery2
Roger davey
Gillian davidson3
david swan4
nurlan Zhakupov
175
100
80
75
80
80
75
*
the amounts as set out in the table above are paid in £ and reported in us$ on
page 66.
2
1 nick clarke has transitioned from executive chairman to non-executive chairman
with effect from 1 January 2020. As a result, he is now paid fees of £175,000 per
annum plus, for 2020 only, an additional £10,000 as he relinquishes the executive
benefit package.
this comprises a base fee of £75,000 and £5,000 committee chair fee for the role of
chairman of the Remuneration committee.
this comprises a base fee of £75,000 and £5,000 committee chair fee for the role of
chair of the sustainability committee.
this comprises a base fee of £75,000 and £5,000 committee chair fee for the role of
chairman of the Audit committee.
3
4
Further details on the non-executive director and non-executive
chairman letters of appointment are set out under ‘service
contracts’ to the right.
SERVICE CONTRACTS
Executive Directors
the committee’s policy is that each executive director’s service
agreement should be of indefinite duration, subject
to termination by the company or the individual on six months’
notice. the service agreements of both executive directors
comply with that policy. In addition, the company has the
discretion to pay them in lieu of their notice period or
to place them on gardening leave. In the event of a change
of control of the company as defined in the service
agreements, the executive directors shall be entitled to
receive a compensation payment of 12 months’ basic salary.
other fixed elements of the executive directors’ remuneration
comprise private medical insurance and company pension
contributions. the service agreements also contain customary
post-termination restrictions.
the date of each executive director’s service agreement is:
name
nigel Robinson
Gavin Ferrar
date of service contract
24 september 2010
4 december 2017
the service agreements of the executive directors are available
for inspection at the company’s registered office during normal
business hours and at the company’s AGM, including the 15
minutes preceding the meeting.
Chairman and Non-Executive Directors
each non-executive director appointment is subject to periodic
renewal, in terms of the company’s Articles of Association, at the
AGM. For non-executive directors, other than the chairman,
these engagements can be terminated by either party on one
months’ notice. For the chairman, the appointment is subject
to termination by the company or the individual on
six months’ notice.
the chairman and non-executive directors are not entitled to any
pension benefits and are not entitled to any payment in
compensation for early termination of their appointment beyond
the notice periods referred to above.
the letters of appointment of the non-executive directors are
available for inspection at the company’s registered office during
normal business hours and at the company’s AGM, including the
15 minutes preceding the meeting.
TERMINATION POLICY SUMMARY
It is appropriate for the committee to consider treatment on a termination having regard for all of the relevant facts and circumstances
available at that time. this policy applies both to any negotiations linked to notice periods on a termination (see ‘service contracts’ on
page 68) and any treatments that the committee may choose to apply under the discretions available to it under the terms of the
Annual Bonus plan and the ltIp.
the potential treatments on termination under these plans are summarised in the table below.
Incentives
Annual Bonus
plan
ltIp
If a leaver is deemed to be a ‘good leaver’,
e.g. leaving through disability or otherwise
at the discretion of the committee
the committee has the discretion to determine the
annual bonus which will typically be limited to the period
actually worked.
Receive a prorated award subject to the application of the
performance conditions at the end of the normal vesting
period
the committee retains standard discretions to vary time
prorating, release any holding period, or accelerate
vesting to the date of cessation (determining the
performance conditions at that time) for a good leaver.
If a leaver is leaving for other reasons
no awards made.
All awards will normally lapse.
other exceptional cases,
e.g. change in control
the committee has the
discretion to determine
the annual bonus.
Receive a prorated
award subject to the
application of the
performance conditions
at the date of the event,
subject to standard
committee discretions
to vary time prorating.
CONSIDERATION OF SHAREHOLDERS’ VIEWS
the Remuneration committee takes into account the approval
levels of remuneration-related matters at our AGM in determining
that the current directors’ remuneration policy remains
appropriate for the company, and considers any specific
representations made by our shareholders on pay matters.
the Remuneration committee also seeks to build an active and
productive dialogue with investors on developments on the
remuneration aspects of corporate governance generally and
any changes to the company’s executive pay arrangements
in particular.
during 2019, the chairman and Remuneration committee
chairman engaged with shareholders on governance matters
through a governance roadshow. the feedback from this roadshow
was reported as appropriate to the Board and Remuneration
committee and was taken into account in their deliberations.
the company has the power to enter into settlement agreements
with directors and to pay compensation to settle potential legal
claims. In addition, and consistent with market practice, in the
event of the termination of an executive director, the company
may pay a contribution towards that individual’s legal fees and fees
for outplacement services as part of a negotiated settlement. Any
such fees will be disclosed as part of the detail of termination
arrangements. For the avoidance of doubt, the policy does not
include an explicit cap on the cost of termination payments.
EXTERNAL APPOINTMENTS
the company’s policy is to permit an executive director to serve
as a non-executive director elsewhere when this does not conflict
with the individual’s duties to the company and, where an
executive director takes such a role, they will be entitled to retain
any fees which they earn from that appointment.
STATEMENT OF CONSIDERATION OF EMPLOYMENT
CONDITIONS ELSEWHERE IN THE GROUP
pay and employment conditions generally in the Group are taken
into account when setting executive directors’ remuneration.
the committee receives regular updates on overall pay and
conditions in the Group.
the same reward principles guide reward decisions for all Group
employees, including executive directors, although remuneration
packages differ to take into account appropriate factors in
different areas of the business:
Annual bonus – the majority of Group employees participate in an
Annual Bonus plan, although the quantum and balance of
corporate to individual objectives varies by level.
ltIp – key Group employees participate in the ltIp currently based
on the same performance conditions as those for executive
directors, although the committee reserves the discretion to vary
the performance conditions for awards made to employees below
Board level.
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Strategic ReportFinancial StatementsGovernance SUSTAINABILITY COMMITTEE REPORT
dear shareholder,
I joined the committee as chair at the end of 2019 and am pleased
to be building on the achievements to date under Roger davey’s
leadership. I look forward to sharing my experience and expertise
in this area as we build on our pledge to enhance and develop our
performance as a sustainable business and, in doing so, progress
with our new initiatives and enhanced reporting disclosures in the
coming year.
the Board established the corporate social Responsibility
committee in 2012 in recognition of the importance of these
activities. cAMl’s long-standing commitment in this area supports
our view that we consider, as an international and expanding
company, these areas to be fundamental in the operation of an
ethical and sustainable business. to reflect the ever-increasing
focus on sustainability matters throughout the Group, we changed
the committee’s name to the sustainability committee in late
2019. Following an esG roadshow undertaken by nick clarke and
our director of corporate Relations, we took on board feedback
from our major shareholders and committed to shortly publishing
our first sustainability Report. this is an important milestone for us
as a business and demonstrates our openness to disclosing our
achievements, experiences and challenges in the sustainability
field. the report is structured around a desk-based materiality
assessment which identified key sustainability topics for us as a
business, and we give granularity on these areas in this
forthcoming document. cAMl’s sustainability Report will be
available on the company’s website: www.centralasiametals.com.
THE ROLE OF OUR SUSTAINABILITY COMMITTEE
the committee met three times during 2019. At every meeting
the committee receives and reviews regular reports for both sasa
and Kounrad in relation to health and safety, environmental and
social matters. the committee is responsible for the review of the
Group’s corporate esG performance, in particular in relation to
governance. this includes overseeing diversity in the Group as a
key part of company sustainability. the committee also reviews
and makes recommendations to the Board in relation to the
Group’s local community projects where we place a strong focus
on health and education in partnership with local organisations.
the committee also receives presentations from members of
operational management as appropriate. the sustainability
committee liaises closely with the sustainability director to
ensure that the Board is updated on matters from every meeting.
We are proud of the Group’s achievements to date in terms of
corporate social responsibility, particularly in relation to our
ongoing partnership with the communities in which we work and
of our efforts to minimise the impact to the environment in which
we operate. cAMl continues to believe that the health and safety
of our employees and contractors, preserving the environment
and supporting vibrant and sustainable communities are extremely
important matters. A more detailed summary of sustainability
matters in the Group is given in on pages 30 to 33 and, as
mentioned above, in our separate sustainability Report.
GILLIAN DAVIDSON, CHAIR OF THE SUSTAINABILITY COMMITTEE
MEMBERS
Chair – Dr Gillian Davidson
Nick Clarke, Nigel Robinson, Roger Davey, Nurlan Zhakupov
ACHIEVEMENTS IN 2019
´ Updated the Committee’s name and mandate to focus on
sustainability matters throughout the Group
´ Produced a separate Sustainability Report for the 2019 financial
year to enhance reporting and disclosure in this area of critical
importance
´ Reviewed the scope and responsibilities of the Committee and
put in place formal terms of reference
´ Full disclosure on tailings storage facilities in line with the
Church of England Pensions Board ‘Investor Mining and Tailings
Safety Initiative’
´ The appointment of a new Committee Chair, an industry leader in
sustainability, with significant experience in the extractives and
natural resources sectors
OBJECTIVES FOR 2020
´ Further develop reporting on sustainability matters, building on
the enhancements to disclosures made during 2019
´ Further develop CAML’s sustainability strategy and targets
´ Move to electronic communications where possible
´ Maintain ongoing stakeholder engagement
ENVIRONMENTAL IMPACT
As part of cAMl’s commitment to reducing the impact of its
activities on the environment, shareholders can help us by
choosing to receive future communications in electronic format
by visiting our Registrar computershare’s website at www.
investorcentre.co.uk/ecomms and providing an email address.
these core areas will remain the focus of the sustainability
committee and across the Group as a whole as we continuously
strengthen our processes in order to conduct our business in the
most ethical and sustainable way possible.
SCOPE AND TERMS OF REFERENCE
We have adopted formal terms of reference defining the scope
and responsibilities of the sustainability committee. these have
been closely aligned with that of the Audit committee to ensure
both committees are able to operate together as efficiently as
possible, each covering their relevant areas of responsibility to
minimise overlap in their duties. this enables the sustainability
committee to focus on the health and safety, environmental, social
and corresponding governance aspects of its remit. the
committee’s terms of reference can be found on the Group’s
website together with the Group’s sustainability policy.
STAKEHOLDER ENGAGEMENT
the sustainability committee supports the Board as it seeks to
build good relationships with stakeholders including workforce,
local communities, investors, supply chain and customers, nGos
and governments and continuously aims to understand their
needs, interests and expectations. the directors meet with
shareholders and stakeholders, including workforce
representatives, community leaders and government officials
where appropriate. details of stakeholder engagement activities
can be found on page 57.
THE FUTURE FOR SUSTAINABILITY
I am enthusiastic about building on the strong sustainability
foundations embedded into the business by the committee’s
previous chairman, Roger davey, our sustainability director, nick
shirley, and the Board. I thank Roger davey for his efforts leading
this important part of our business to date, and look forward to
creating in the future an even stronger and more integrated focus
on sustainability for our business, and for our communities and the
environment in which we live.
DR GILLIAN DAVIDSON
cHAIR oF tHe sustAInABIlIt Y coMMIttee
31 March 2020
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Strategic ReportFinancial StatementsGovernanceQCA Code Principles: ´Take into account wider stakeholder and social responsibilities and their implications for long-term success ´Promote a corporate culture that is based on ethical values and behaviours DIRECTORS’ REPORT
the directors present their report and the audited consolidated
financial statements for the year ended 31 december 2019.
details of significant events since the balance sheet date are
contained in note 37 to the financial statements.
PRINCIPAL ACTIVITIES
central Asia Metals plc (‘cAMl’ or the ‘company’) is the holding
company for a group of companies (the ‘Group’). cAMl owns
100% of the Kounrad sX-eW copper project in Kazakhstan and
100% of the sasa zinc-lead mine in north Macedonia. the
company also owns 80% of the shuak copper exploration
property in northern Kazakhstan.
cAMl is domiciled and incorporated in the uK with the registration
number 5559627 and the registered office is: Masters House, 107
Hammersmith Road, london, W14 0QH.
REVIEW OF BUSINESS
A review of the current and future development of the Group’s
business is given in the strategic Report on pages 1 to 47
which forms part of, and by reference is incorporated in, this
directors’ Report.
Financial risk management has been assessed within note 3 to the
financial statements.
DIVIDENDS
the final 2018 dividend of 8 pence per ordinary share of $0.01
each (‘share’) was paid on 20 May 2019 and a 2019 interim
dividend of 6.5 pence per share was paid on 25 october 2019.
the company’s dividend policy is to return to shareholders a target
range of between 30% and 50% of free cash flow, defined as net
cash generated from operating activities less capital expenditure.
Given the current period of uncertainty, the company has decided
not to recommend a 2019 final dividend. the situation regarding
coVId-19 and its potential impact on the global economy and
cAMl’s operations remains uncertain and is rapidly changing. the
company believes that, currently, preserving cash is the most
prudent approach. total dividends for the year therefore relate
solely to the interim dividend and amount to 6.5 pence per share.
DIRECTORS AND DIRECTORS' INTERESTS
the directors of the company who were in office during the
year and up to the date of signing the financial statements
were as follows:
nick clarke (chairman)
nigel Robinson (chief executive officer)
Gavin Ferrar (chief Financial officer)
nigel Hurst-Brown (deputy chairman)
Robert cathery
Roger davey
dr Gillian davidson (appointed 2 december 2019)
david swan
nurlan Zhakupov
Biographical details of the current directors are set out on pages
52 to 53. the directors’ interests in the ordinary share capital of
the company and any interests known to the company of their
connected persons are set out in the Report of the Remuneration
committee commencing on page 62.
At every Annual General Meeting (‘AGM’), any director who has
been a director at each of the two last AGMs and was not
appointed or reappointed at either of those meetings, is required
to retire and is eligible for reappointment. this year, nick clarke,
nigel Robinson, Gavin Ferrar, nigel Hurst-Brown and Robert
cathery are required to retire and be reappointed in this manner.
In addition, any director appointed by the Board since last year’s
AGM retires, and if appropriate, seeks reappointment. dr Gillian
davidson is accordingly required to retire and is being proposed for
reappointment at this meeting.
DIRECTORS’ INDEMNITY INSURANCE
during the year, directors’ and officers’ liability insurance was
maintained for directors and other officers of the Group.
SUBSTANTIAL SHAREHOLDING
At the date of this report the company has been notified or is
aware of the following interests in the shares of the company of
3% or more of the company’s total issued share capital (excluding
treasury shares).
Jo Hambro capital Management
orion Mine Finance
FIl Investment International
BlackRock Investment Management
canaccord Genuity Wealth Mgt
Majedie Asset Management
no. of
shares
% of voting
rights1
17,751,417
15,248,528
14,955,458
13,597,370
7,124,968
5,372,032
10.08%
8.66%
8.50%
7.72%
4.05%
3.05%
1
At 31 March 2020, the total voting rights attached to the issued share capital of the
company comprised 176,026,619 ordinary shares each of $0.01 nominal value, being
the 176,498,266 ordinary shares in issue, less 471,647 ordinary shares currently held
in treasury.
2 As at 31 december 2019: canaccord Genuity Wealth Management held 9,150,849
shares representing 5.20% of the voting rights in the company at that time.
the company received no notifications of interests indicating a
different whole percentage holding at 31 december 2019 other
than as shown in the footnotes to the table above.
CHANGES IN SHARE CAPITAL
there were no transactions during the year ended 31 december
2019 that increased the share capital of the company and there
were no movements of shares into or out of treasury.
As at 31 december 2019, 176,498,266 shares were in issue
including 511,647 shares held in treasury.
In January 2020, 40,000 shares were moved out of treasury
to satisfy the exercise of options under the company’s share
option schemes. At the date of this report, 471,647 shares are held
in treasury pending their cancellation or possible use in the
company’s share option schemes.
AGM NOTICE
A separate communication will be sent to shareholders and
published on the company’s website regarding the company’s
2020 AGM.
GREENHOUSE GAS EMISSION REPORTING
Reporting on emission sources as required under the energy and
carbon Report Regulations 2018 is included in our separate
sustainability Report to be available on the company’s website at
www.centralasiametals.com.
SECTION 172 STATEMENT
A statement of how the Board has performed its duties under
section 172 of the companies Act 2006 (‘the Act’) can be found on
pages 34 to 35 of the strategic Report.
AUDITORS AND DISCLOSURE OF INFORMATION TO AUDITORS
each director in office at the date of approval of this report has
confirmed that:
´ so far as he or she is aware, there is no relevant audit
information of which the company’s Auditors are unaware; and
´ he or she has taken all reasonable steps that he ought to have
taken as a director in order to make himself or herself aware of
any relevant audit information and to establish that the
company’s Auditors are aware of that information.
the Group’s Auditors, Bdo llp have indicated their willingness to
continue in office and, on the recommendation of the Audit
committee and in accordance with section 489 of the Act, a
resolution for their reappointment will be put to the 2020 AGM.
the audit tender process undertaken during 2019 is summarised
in the Audit committee Report on page 59.
POLITICAL DONATIONS
during the year the Group did not make any political donations.
CORPORATE GOVERNANCE
the Governance Report can be found on pages 48 to 71.
the Governance Report forms part of this directors’ Report
and is incorporated by cross reference.
Approved by the Board of directors and signed on its behalf
GAVIN FERRAR
cHIeF FInAncIAl oFFIceR
31 March 2020
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Strategic ReportFinancial StatementsGovernance STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT
to the members of Central Asia Metals plc
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable
law and regulation.
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 (‘IFRS’) as adopted by the European Union
and Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”, and applicable law). Under company law the Directors must
not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and
Company and of the profit or loss of the Group and Company for that period. The Directors are also required to prepare financial
statements in accordance with the rules of the London Stock Exchange for companies trading securities on AIM. In preparing the financial
statements, the Directors are required to:
´ select suitable accounting policies and then apply them consistently;
´ state whether applicable IFRS as adopted by the European Union have been followed for the Group financial statements and United
Kingdom Accounting Standards, comprising FRS 101, have been followed for the Company financial statements, subject to any material
departures disclosed and explained in the financial statements;
´ make judgements and accounting estimates that are reasonable and prudent; and
OPINION
We have audited the financial statements of Central Asia Metals plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year
ended 31 December 2019 which comprise the consolidated income statement, consolidated statement of comprehensive income, the Group
and Company statements of financial position, the consolidated statement of changes in equity, the Company statement of changes in equity,
the consolidated statement of cash flows and notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been
applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting Standards,
including Financial Reporting Standard 101 Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice).
In our opinion:
´ the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December
2019 and of the Group’s profit for the year then ended;
´ the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
´ the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
´ prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will
Accounting Practice; and
continue in business.
´ the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to
ensure that the financial statements comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
On behalf of the Board
GAVIN FERRAR
cHIeF FInAncIAl oFFIceR
31 March 2020
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of
the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Material uncertainty in relation to going concern arising from the COVID-19 pandemic
We draw attention to note 2 in the financial statements which sets out the Directors’ considerations of the potential impact on the Group’s
business of the COVID-19 pandemic. As stated in note 2, these events or conditions, along with other matters as set out in note 2, indicate
that a material uncertainty exists that may cast significant doubt on the Group and Parent Company’s ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
We have highlighted going concern as a key audit matter as a result of the uncertainty created by the COVID-19 pandemic and resulting
potential implications for our audit strategy.
Our audit procedures in response to this key audit matter included:
´ We discussed the potential impact of COVID-19 with management and the Audit Committee including their assessment of risks and
uncertainties associated with areas such as the Group’s workforce, supply chain, customer offtake and commodity market prices that
are relevant to the Group’s business model and operations. We formed our own assessment of risks and uncertainties based on our
understanding of the business and mining sector.
´ We obtained management’s reverse stress testing analysis which was performed to determine the point at which covenants and
liquidity breaks and considered whether such scenarios, including significant reductions in commodity prices and production were
possible given the potential impacts of COVID-19 and the level of uncertainty.
´ We critically assessed management’s base case cash flow forecasts and the underlying assumptions which have been approved by the
Board. Our testing included a comparison of forecast prices to spot prices together with consideration of broker consensus pricing
ranges.
´ We evaluated the forecast production levels against 2019 actuals, the life of mine plan and considered the impact of recent plant
upgrades on the achievability of forecasts.
´ We compared forecast refinery treatment charges to third party agreements. We compared the other forecast operational expenditure
to 2019 actuals and confirmed that planned capital expenditure is consistent with the life of mine plan.
´ We compared the Group’s operational results to the budget for 2019 to assess the quality of management’s budgetary process.
´ We reviewed and considered the adequacy of the disclosure within the financial statements relating to the Directors’ assessment of
the going concern basis of preparation.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our 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) we identified,
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 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. In addition to the matter described in the Material
uncertainty related to going concern section, we have determined the matters described below to be the key audit matters to be
communicated in our report.
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to the members of Central Asia Metals plc
Risk that judgments and estimates in the impairment test on the carrying value of the Sasa mining assets are inappropriate and the
assets require impairment
The Sasa cash generating unit (“CGU”) includes goodwill of $21.7m and therefore the Group must perform an annual impairment test.
As detailed in note 19, management prepared a discounted cash flow valuation model which indicated a recoverable amount above the
carrying value of the CGU with headroom of 13%.
The appropriateness of judgements and estimates applied in the determination of the recoverable amount represented a significant focus
area for our audit, including forecast commodity prices, refinery treatment costs, production and discount rates, together with forecast
operating and capital costs given the planned transition from a sub level caving mining method to cut and fill mining.
How we addressed the key audit matter in our audit
´ We evaluated management’s impairment model against the Board approved life of mine plan and our understanding of the operations.
We critically challenged the key estimates and assumptions used by management, including commodity pricing, treatment charges,
production, operational and capital expenditure and the discount rate.
´ We compared the forecast pricing assumptions to 2019 actuals, independently sourced broker consensus data and other third party
industry commentators.
´ We compared the forecasted treatment charges in the short term to agreements with the Group’s refineries and evaluated
management’s longer term forecast reduction in treatment charges considering analyst reports, market commentary and the historical
relationship between pricing and treatment charges.
´ We compared the forecast production to the internal Competent Person’s Reserves and Resources Statement, met with the Group’s
geologists to assess areas such as inferred resource conversion against empirical data and reviewed the reconciliation of movements
in ore reserves and resources against the external Competent Person’s Report in 2018. In placing reliance of management experts we
performed procedures to evaluate their competence and objectivity.
´ We assessed the appropriateness of the forecasted operating costs and capital expenditure associated with the cut and fill mining
method. In doing so we met with operational management to evaluate the basis of management’s assumptions, reviewed reports by
consultants engaged by the Group and considered the consistency of production forecasts and planned capital expenditure.
´ We used our valuation experts to evaluate the discount rate used by management and the structure of the valuation model.
´ We reviewed management’s sensitivity analysis and performed our own sensitivity analysis over individual key inputs to include pricing,
treatment charges, expenditure and discount rate together with a combination of sensitivities over such inputs.
´ We evaluated management’s conclusion that the potential impact of Covid-19 represented a non-adjusting subsequent event against
the relevant accounting standards.
´ We evaluated the disclosures given in note 19 and 37 and found them to be relevant and informative.
OUR OBSERVATIONS
In respect of the recoverable amount of Sasa mining assets, we found the Group’s conclusion that the recoverable amount at 31 December
2019 exceeded the carrying value of the cash generating unit to be appropriate. We found the disclosures in note 19 to be appropriate. We
found the conclusion that the potential impact of COVID-19 represent a non-adjusting subsequent event and the disclosures regarding
such subsequent events to be appropriate.
OUR APPLICATION OF MATERIALITY
Group materiality FY 2019
$3,500,000
Basis for materiality
5% of profit before tax
We apply the concept of materiality both in planning and performing our audit and in evaluating the effect of misstatements. We consider
materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users
that are taken on the basis of the financial statements. Importantly, misstatements below these levels will not necessarily be evaluated as
immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a whole.
We consider profit before tax to be the financial metric of the most interest to shareholders and other users of the financial statements
given the Group and significant components are profit orientated entities. This was our first year as auditors of the Group.
Materiality for the Parent Company was set at $1,700,000 being approximately 50% of Group materiality.
Performance materiality is the application of materiality at the individual account or balance level set at an amount to reduce to an
appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the
financial statements as a whole. Performance materiality was set at 65% of the above materiality levels for both Group ($2,200,000) and
Company ($1,100,000).
Whilst materiality for the financial statements as a whole was $3,500,000 each significant component of the Group was audited to a
lower level of materiality ranging from $500,000 to $2,000,000 which was used to determine the financial statement areas that were
included within the scope of the Component audits and the extent of sample sizes used during the audit.
We agreed with the Audit Committee that we would report to the Committee all individual audit differences identified during the course of
our audit in excess of $70,000. We also agreed to report differences below these thresholds that, in our view, warranted reporting on
qualitative grounds.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
The Group’s operations principally comprise mining operations split across two primary geographical locations being North Macedonia and
Kazakhstan. We assessed there to be five significant components (two in North Macedonia, two in Kazakhstan and the parent company)
which were subject to a full scope audit. Together with the parent company (also considered a significant component) and its group
consolidation, which was also subject to a full scope audit, these represent the significant components of the Group.
The five significant components subject to full scope audit procedures represent the principal business units and account for 100% of the
Group’s revenue and 97% of the Group’s profit before tax.
The audits of the North Macedonian and Kazakh components were performed in North Macedonia and Kazakhstan, respectively. The audits
of the parent company and the Group consolidation were performed in the United Kingdom. All of the audits were conducted by BDO LLP
and BDO network member firms.
All BDO member firms performed the full scope audit of the significant components in the North Macedonia and Kazakhstan, under the
direction and supervision of BDO LLP as Group auditor. As part of our audit strategy, the Group Audit Partner or senior members of the
Group audit team visited each of the Group’s key mining operations during the year and met with management and the component
auditors during the planning and execution phases of the audit. These teams from BDO UK performed a review of the component audit
files and held meetings with the component audit teams during the planning and completion phases of their audits.
The Group audit team was actively involved in the direction of the audits performed by the component auditors along with the
consideration of findings and determination of conclusions drawn. We performed additional procedures in respect of certain of the
significant risk areas that represented Key Audit Matters in addition to procedures performed by the component auditor.
The remaining components of the Group were considered non-significant and these components were principally subject to analytical
review procedures.
OTHER INFORMATION
The Directors are responsible for the other information. The other information comprises the information included in the annual
report other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover
the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion 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 such material inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in 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 in this regard.
OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion, based on the work undertaken in the course of the audit:
´ the information given in the Strategic Report and the Directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
´ the Strategic Report and the Directors’ report have been prepared in accordance with applicable legal requirements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report or the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if,
in our opinion:
´ adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received
from branches not visited by us; or
´ the Parent Company financial statements are not in agreement with the accounting records and returns; or
´ certain disclosures of Directors’ remuneration specified by law are not made; or
´ we have not received all the information and explanations we require for our audit.
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INDEPENDENT AUDITORS’ REPORT contInued
to the members of Central Asia Metals plc
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Directors’ responsibilities statement the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors 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 and the Parent Company’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 the Parent Company or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S 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 auditor’s 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 Financial Reporting Council’s
website : www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
USE OF OUR REPORT
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Parent Company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the Parent Company’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
RYAN FERGUSON
(senIoR stAtutoRY AudItoR)
For and on behalf of BDO LLP, Statutory Auditor
London
31 March 2020
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Continuing operations
Revenue
Presented as:
Gross revenue
Less:
Silver stream purchases
Off-take buyers’ fees
Revenue
Cost of sales
Distribution and selling costs
Gross profit
Administrative expenses
Other expenses
Other income
Foreign exchange gain/(loss)
Operating profit
Finance income
Finance costs
Profit before income tax
Income tax
Profit for the year from continuing operations
Discontinued operations
Profit/(loss) for the year from discontinued operations
Profit for the year
Profit attributable to:
– Non-controlling interests
– Owners of the parent
Earnings/(loss) per share from continuing and discontinued operations attributable to
owners of the parent during the year (expressed in cents per share)
Basic earnings/(loss) per share
From continuing operations
From discontinued operations
From profit for the year
Diluted earnings/(loss) per share
From continuing operations
From discontinued operations
From profit for the year
Group
2019
$’000
2018
$’000
Note
6
6
6
6
7
8
9
10
14
15
16
21
17
17
171,748
194,379
180,815
204,152
(5,556)
(3,511)
171,748
(73,098)
(1,823)
96,827
(18,323)
(481)
212
377
78,612
336
(11,153)
67,795
(15,911)
51,884
53
51,937
60
51,877
51,937
(6,023)
(3,750)
194,379
(76,418)
(2,045)
115,916
(23,950)
(1,030)
359
(3,879)
87,416
264
(14,999)
72,681
(18,822)
53,859
(7,274)
46,585
(1,439)
48,024
46,585
$ cents
$ cents
29.36
0.03
29.39
28.54
0.03
28.57
31.33
(4.12)
27.21
30.65
(4.12)
26.53
Total distribution and selling costs shown above previously recognised as a deduction from gross revenue have been reclassified below
revenue in the current year with the comparative reclassified for comparability.
The above Consolidated Income Statement should be read in conjunction with the accompanying notes.
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
STATEMENTS OF FINANCIAL POSITION
for the year ended 31 December
Profit for the year
Other comprehensive (expense)/income:
Items that may be subsequently reclassified to profit or loss:
Currency translation differences
Foreign exchange on intercompany loan
Other comprehensive (expense)/income for the year, net of tax
Total comprehensive income for the year
Attributable to:
– Non-controlling interests
– Owners of the parent
Total comprehensive income for the year
Total comprehensive income/(expense) attributable to equity shareholders arises from:
– Continuing operations
– Discontinued operations
Note
26
Group
2019
$’000
2018
$’000
51,937
46,585
(11,019)
–
(11,019)
40,918
60
40,858
40,918
40,865
53
40,918
(10,288)
(13,020)
(23,308)
23,277
(1,439)
24,716
23,277
30,551
(7,274)
23,277
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
as at 31 December
Registered no. 5559627
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred income tax asset
Investments
Other non-current receivables
Current assets
Inventories
Trade and other receivables
Restricted cash
Cash and cash equivalents (excluding bank overdrafts)
Assets of disposal group classified as held for sale
Total assets
Equity attributable to owners of the parent
Ordinary Shares
Share premium
Treasury shares
Currency translation reserve
Retained earnings
Non-controlling interests
Total equity
Note
18
19
36
20
22
23
22
24
24
21
25
25
25
26
Group
2019
$’000
Company
2018
$’000
2019
$’000
2018
$’000
406,387
58,676
266
–
3,389
429,601
61,311
–
–
2,120
468,718
493,032
838
–
–
5,491
–
6,329
7,283
6,276
4,013
28,566
46,138
219
7,529
10,078
4,376
34,649
56,632
61
–
342,083
3,824
17,834
363,741
–
290
3
–
5,491
–
5,784
–
374,192
4,222
15,297
393,711
–
46,357
56,693
363,741
393,711
515,075
549,725
370,070
399,495
1,765
191,184
(6,526)
(100,473)
250,480
1,765
191,184
(6,526)
(89,454)
230,281
1,765
191,184
(6,526)
–
70,086
1,765
191,184
(6,526)
–
63,127
336,430
327,250
256,509
249,550
(1,324)
(1,384)
–
–
335,106
325,866
256,509
249,550
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STATEMENTS OF FINANCIAL POSITION contInued
as at 31 December
Registered no. 5559627
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December
Liabilities
Non-current liabilities
Borrowings
Silver streaming commitment
Deferred income tax liability
Lease liability
Provisions for other liabilities and charges
Current liabilities
Borrowings
Silver streaming commitment
Trade and other payables
Provisions for other liabilities and charges
Liabilities of disposal group classified as held for sale
Total liabilities
Total equity and liabilities
Note
30
29
36
31
30
29
28
31
21
Group
2019
$’000
Company
2018
$’000
2019
$’000
2018
$’000
69,473
20,755
26,089
748
9,027
106,549
22,905
27,670
–
5,069
69,473
–
–
723
–
106,549
–
–
–
–
126,092
162,193
70,196
106,549
39,295
2,140
12,305
46
53,786
91
38,400
2,263
20,916
47
61,626
40
38,400
–
4,965
–
43,365
–
38,400
–
4,996
–
43,396
–
53,877
61,666
43,365
43,396
179,969
223,859
113,561
149,945
515,075
549,725
370,070
399,495
The above Statements of Financial Position should be read in conjunction with the accompanying notes.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent company
Income Statement or Statement of Comprehensive Income. The profit for the parent company for the year was $38,637,000
(2018: $42,830,000).
The financial statements on pages 79 to 115 were authorised for issue by the Board of Directors on 31 March 2020 and were signed on its
behalf by Gavin Ferrar.
GAVIN FERRAR
cHIeF FInAncIAl oFFIceR
Attributable to owners of the parent
Note
Ordinary
Shares
$’000
Share
premium
$’000
Treasury
shares
$’000
Currency
translation
reserve
$’000
Retained
earnings
$’000
Total
$’000
Non–
controlling
interests
$’000
Total
equity
$’000
Balance as at 1 January 2018
1,765
191,184
(7,780)
(79,166)
231,241
337,244
55
337,299
Profit/(loss) for the year
Other comprehensive expense –
currency translation differences
26
Foreign exchange on
intercompany loan
Total comprehensive income/
(expense)
Transactions with owners
Share based payments
Disposal of Zuunmod UUL LLC
Sales of EBT shares
Exercise of options
Dividends
Total transactions with owners,
recognised directly in equity
9
27
34
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
55
1,199
–
1,254
–
48,024
48,024
(1,439)
46,585
(10,288)
–
(10,288)
–
(13,020)
(13,020)
–
–
(10,288)
(13,020)
(10,288)
35,004
24,716
(1,439)
23,277
4,904
(66)
–
(1,199)
(39,603)
4,904
(66)
55
–
(39,603)
(35,964)
(34,710)
–
–
–
–
–
–
–
–
–
–
–
4,904
(66)
55
–
(39,603)
(34,710)
Balance as at 31 December 2018
1,765
191,184
(6,526)
(89,454) 230,281
327,250
(1,384) 325,866
Profit/(loss) for the year
Other comprehensive expense –
currency translation differences
Total comprehensive income/
(expense)
Transactions with owners
Share based payments
Exercise of options
Dividends
Total transactions with owners,
recognised directly in equity
26
9
27
34
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
51,877
51,877
60
51,937
(11,019)
–
(11,019)
–
(11,019)
(11,019)
51,877
40,858
60
40,918
–
–
–
–
1,085
(599)
(32,164)
1,085
(599)
(32,164)
(31,678)
(31,678)
–
–
–
–
1,085
(599)
(32,164)
(31,678)
Balance as at 31 December 2019
1,765
191,184
(6,526)
(100,473) 250,480 336,430
(1,324) 335,106
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
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COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December
Company
Balance as at 1 January 2018
Profit for the year
Total comprehensive income
Transactions with owners
Share based payments
Sale of EBT shares
Exercise of options
Dividends
Total transactions with owners, recognised directly in equity
Balance as at 31 December 2018
Profit for the year
Total comprehensive income
Transactions with owners
Share based payments
Exercise of options
Dividends
Total transactions with owners, recognised directly in equity
Ordinary
Shares
$’000
Share
premium
$’000
Treasury
shares
$’000
Retained
earnings
$’000
Total
equity
$’000
Note
1,765
191,184
(7,780)
56,195
241,364
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
42,830
42,830
42,830
42,830
–
55
1,199
–
1,254
4,904
–
(1,199)
(39,603)
4,904
55
–
(39,603)
(35,898)
(34,644)
1,765
191,184
(6,526)
63,127
249,550
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
38,637
38,637
38,637
38,637
1,085
(599)
(32,164)
1,085
(599)
(32,164)
(31,678)
(31,678)
9
27
34
9
27
34
Balance as at 31 December 2019
1,765
191,184
(6,526)
70,086
256,509
The above Company Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Cash flows from operating activities
Cash generated from operations
Interest paid
Corporate income tax paid (net of refunds)
Cash flow generated from operating activities
Cash flows from investing activities
Balancing receipt from CMK Group acquisition
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Deferred consideration paid
Purchase of intangible assets
Interest received
Decrease/(increase) in restricted cash
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Dividends paid to owners of the parent
Settlement on exercise of share options
Net cash used in financing activities
Effect of foreign exchange gain/(loss) on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Note
32
18
18
19
14
24
30
30
34
27
24
24
2019
$’000
2018
$’000
105,143
(9,445)
(14,845)
80,853
–
(11,042)
233
(6,500)
(21)
336
363
(16,631)
–
(38,400)
(32,164)
(589)
(71,153)
1
(6,930)
34,707
27,777
130,131
(14,510)
(31,833)
83,788
3,300
(15,019)
–
–
(907)
264
(1,564)
(13,926)
60,809
(99,265)
(39,603)
(21)
(78,080)
(248)
(8,466)
43,173
34,707
Cash and cash equivalents at 31 December 2019 includes cash at bank and on hand included in assets held for sale of $106,000
(31 December 2018: $58,000) (note 21) and bank overdrafts of $895,000 (2018: nil) (note 30). The Consolidated Statement of Cash Flows
does not include the restricted cash balance of $4,013,000 (2018: $4,376,000) (note 24).
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
Note 32 includes disclosures of major non-cash flows during the period relating to investing activities.
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NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2019
1. GENERAL INFORMATION
Central Asia Metals plc (‘CAML’ or the ‘Company’) and its subsidiaries (the ‘Group’) are a mining and exploration organisation with operations
primarily in Kazakhstan and North Macedonia and a parent holding company based in the United Kingdom (‘UK’).
The Group’s principal business activities are the production of copper cathode at its Kounrad operations in Kazakhstan and the production
of lead, zinc and silver at its Sasa operations in North Macedonia. CAML owns 100% of the Kounrad SX-EW copper project in Kazakhstan
and 100% of the Sasa zinc-lead mine in North Macedonia. The Company also owns two further operations which are currently held for sale
and this includes 80% of the Shuak copper exploration property in northern Kazakhstan and a 75% equity interest in Copper Bay Limited.
See note 21 for details.
CAML is a public limited company, which is listed on the AIM market of the London Stock Exchange and incorporated and domiciled in
England, UK. The address of its registered office is Masters House, 107 Hammersmith Road, London, W14 0QH. The Company’s registered
number is 5559627.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
The Group’s consolidated financial statements have been prepared in accordance with International Financial Reporting standards (‘IFRS’)
and IFRS Interpretations Committee (‘IFRSIC’) interpretations as adopted by the European Union, and the Companies Act 2006 applicable
to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention with
the exception of assets held for sale which have been held at the lower of fair value less costs to sell and carrying value. The accounting
policies which follow set out those policies which apply in preparing the financial statements for the year ended 31 December 2019. The
Group financial statements are presented in US Dollars ($) and rounded to the nearest thousand.
The parent company meets the definition of a qualifying entity under FRS 100 (‘Financial Reporting Standard 100’) issued by the Financial
Reporting Council. The parent company financial statements have therefore been prepared in accordance with FRS 101 ‘Reduced
Disclosure Framework’ as issued by the Financial Reporting Council. As permitted by FRS 101, the Company has taken advantage of the
disclosure exemptions available under that standard in relation to share-based payments, financial instruments, fair value measurements,
capital management, presentation of a cash flow statement, new standards not yet effective, impairment of assets and related party
transactions. Where relevant, equivalent disclosures have been given in the Group financial statements of Central Asia Metals plc.
The preparation of the Group financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher
degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements
are explained in note 4.
Going concern
The Group sells and distributes its copper cathode product primarily through an off-take arrangement with Traxys Europe S.A. with a
minimum of 95% of the SX-EW plant’s forecasted output committed as sales for the period up until October 2022. The Group sells Sasa’s
zinc and lead concentrate product through an off-take arrangement with Traxys which has been fixed through to 31 December 2022. The
commitment is for 100% of the Sasa concentrate production.
The Group meets its day to day working capital requirements through its profitable and cash generative operations at Kounrad and Sasa.
The Group manages liquidity risk by maintaining adequate committed borrowing facilities and the Group has substantial cash balances as
at 31 December 2019.
The price of copper, zinc and lead have been impacted in 2020 by concerns over the outbreak of the COVID-19 pandemic and this will
impact on Group revenue for the year ended 31 December 2020. Whilst there has been little impact of COVID-19 to the Group’s operations
at present, owing to the volatility of the commodity price environment, uncertainty regarding the future impact on operations and the
uncertainty surrounding implementation of government policies to manage the outbreak it is difficult to determine and quantify the
financial impact there may be on the business going forward. The CAML Board has considered and debated a range of substantial possible
scenarios on the Group’s operations, financial position and forecasts covering a period of at least the next 12 months considering potential
impacts associated with:
a) Operational disruption that may be caused by restrictions applied by governments, illness amongst our workforce and disruption to
supply chain and offtake arrangements;
b) Market volatility in respect of commodity prices;
c) Availability of existing credit facilities.
These scenarios include the potential for significant downside to commodity prices and production levels at Sasa and Kounrad which may
include periods with minimal or no revenue. Under these scenarios possible mitigations within the Group’s control or which can reasonably
be achieved have been considered by the Board to maintain liquidity and service debt and in light of COVID-19. As a result of the current
market uncertainty the CAML Board has taken the decision not to recommend a 2019 final dividend. Under the forecast scenarios the
Group is able to maintain liquidity and service debt assuming minimal or no revenue for a period of approximately 3-4 months, reflecting
its current cash resources. However, certain of the scenarios considered indicate a breach to the one of the Group’s short-term loan
covenants. However, management have engaged in continued dialogue with the lender and, whilst there can be no guarantee, anticipate
that existing facilities would remain available where there is a covenant breach. Should there be a period without production or sales in
excess of the above scenarios the Group would require additional funding in the form of debt or equity the availability of which cannot
be guaranteed.
After review of these forecasts the Directors have a reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the
consolidated financial statements. However, at the date of approval of these financial statements, the potential future impact of COVID-19
and the resulting forecast breach of covenants should such adverse scenarios materialise indicate the existence of a material uncertainty
which may cast significant doubt about the Group’s ability to continue as a going concern and therefore it may be unable to realise its
assets and discharge its liabilities in the normal course of business. The financial statements do not include the adjustments that would
result if the Group was unable to continue as a going concern.
Please refer to notes 6, 24 and 28 for information on the Group’s revenues, cash balances and trade and other payables.
New and amended standards and interpretations adopted by the Group
The Group has adopted the following standards and amendments for the first time for their annual reporting period commencing
1 January 2019:
IFRS 16 Leases has been applied from 1 January 2019. IFRS 16 requires a lessee to recognise assets and liabilities for all leases with a term
of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its
right to use the underlying leased asset and a lease liability representing its obligation to make lease payments.
The Group has reviewed all leasing arrangements and contracts in light of the new standard to determine whether the arrangements fall
under the definition of a lease per IFRS 16. The Group has applied the simplified transition approach from 1 January 2019 and therefore
does not require to restate the comparatives for the 2018 reporting period, as permitted under the specific transition provisions in the
standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance
sheet on 1 January 2019 amounting to $853,000. On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which
had previously been classified as ‘operating leases’ under the principles of IAS 17 Leases. These liabilities were measured at the present
value of the remaining lease payments, discounted using the incremental borrowing rate as of 1 January 2019. All other right-of-use assets
will continue to be measured at the amount of the lease liability on adoption.
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
´ applying a single discount rate to a portfolio of leases with reasonably similar characteristics
´ accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases
´ using hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
IFRIC 23 Uncertainty over Income Tax Treatments was introduced from 1 January 2019 and clarifies the accounting for uncertainties in
income taxes which is to be applied to determination of taxable profit and uncertainty over income tax treatments under IAS 12. The Group
will assess its judgements and estimates if facts and circumstances change. The Group operates in jurisdictions which necessarily require
judgment to be applied when assessing the applicable tax treatment for transactions and the Group obtains professional advice where
appropriate to ensure compliance with applicable legislation.
The following amendments did not have any impact on the amounts recognised in prior years or the current year and on foreseeable
future transactions:
´ Annual Improvements to IFRS Standards 2015–2017 Cycle
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2019 reporting
periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the
current or future reporting periods and on foreseeable future transactions.
There are no other standards that are not yet effective that would be expected to have a material impact on the Group.
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for the year ended 31 December 2019
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES contInued
Basis of consolidation
The Group financial statements consolidate the financial statements of CAML and the entities it controls drawn up to 31 December 2019.
Subsidiaries are all entities (including structured entities) over which the Group has control. 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. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases. Intercompany transactions, balances and unrealised losses/gains on transactions
between Group companies are eliminated. Unrealised losses/gains are also eliminated but considered an impairment indicator of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by
the Group.
Business combinations
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a
subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests
issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration
arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially
at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-
acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of the acquiree’s
identifiable net assets. Acquisition-related costs are expensed as incurred and reported within other expenses.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquired entity, and acquisition-date fair
value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as
goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised
directly in profit or loss as a bargain purchase. After initial recognition, goodwill is stated at cost less any accumulated impairment losses,
with the carrying value being reviewed for impairment, at least annually and whenever events or changes in circumstances indicate that
the carrying value may be impaired. For the purpose of impairment testing, goodwill is allocated to the cash-generating unit expected to
benefit from the business combination in which the goodwill arose. Where the recoverable amount is less than the carrying amount,
including goodwill, an impairment loss is recognised in the Income Statement. The carrying amount of goodwill allocated to an entity is
taken into account when determining the gain or loss on disposal of the unit. Where settlement of any part of cash consideration is
deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the
entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under
comparable terms and conditions.
Non-controlling interests
Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries that are not held by the Group and are
presented separately within equity in the Consolidated Statement of Financial Position distinct from parent shareholder’s equity. Where
losses are incurred by a partially owned subsidiary, they are consolidated such that the non-controlling interests’ share in the losses is
apportioned in the same way as profits. Where profits are then made in future periods, such profits are then allocated to the parent
company until all unrecognised losses attributable to the non-controlling interests but absorbed by the parent are recovered at which
point, profits are allocated as normal.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker which
is considered to be the Board.
Foreign currency translation
The functional currency for each entity in the Group is determined as the currency of the primary economic environment in which it
operates. The consolidated financial statements are presented in US Dollars, which is the Group’s and Company’s presentation currency.
The functional currency of the Company is US Dollars. Transactions in currencies other than the functional currency are initially recorded
at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the
functional currency rate of exchange ruling at the reporting date. All differences are taken to the Income Statement.
The results and financial position of all the Group entities that have a functional currency different from the US Dollar presentation
currency are translated into the US Dollar presentation currency as follows:
´ assets and liabilities for each Statement of Financial Position presented are translated at the closing rate at the reporting date;
´ income and expenses for each Income Statement are translated at average exchange rates; and
´ all resulting exchange differences are recognised in other comprehensive income.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost comprises the
aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to
making the asset capable of operating as intended.
The cost of the item also includes the cost of decommissioning any buildings or plant and equipment and making good the site, where a
present obligation exists to undertake the restoration work.
Development costs relating to specific mining properties are capitalised once management determines a property will be developed. A
development decision is made based upon consideration of project economics, including future metal prices, reserves and resources, and
estimated operating and capital costs. Capitalisation of costs incurred and proceeds received during the development phase ceases when
the property is capable of operating at levels intended by management and is considered commercially viable. Costs incurred during the
production phase to increase future output by providing access to additional reserves, are deferred and depreciated on a units-of-
production basis over the component of the reserves to which they relate. Ore reserves may be declared for an undeveloped mining
project before its commercial viability has been fully determined. Development costs incurred after the commencement of production are
capitalised to the extent they are expected to give rise to a future economic benefit. Development costs are not depreciated until such
time as the areas under development enter production.
Depreciation is provided on all property, plant and equipment on a straight-line basis over its total expected useful life. As at 31 December
2019 the remaining useful lives were as follows:
´ Construction in progress
´ Land
´ Plant and equipment
´ Mining assets
´ Motor vehicles
´ Office equipment
´ Right of use assets
– not depreciated
– not depreciated
– over 5 to 21 years
– over 2 to 21 years
– over 2 to 10 years
– over 2 to 10 years
– term of lease agreement
Mineral rights are depreciated on a Unit of Production basis (‘UoP’), in proportion to the volume of ore extracted in the year compared with
total proven and probable reserves as well as measured, indicated and certain inferred resources which are considered to have a
sufficiently high certainty of commercial extraction at the beginning of the year. Assets within operations for which production is not
expected to fluctuate significantly from one year to another or which have a physical life shorter than the related mine are depreciated on
a straight-line basis.
Construction in progress is not depreciated until transferred to other classes of property, plant and equipment.
The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate the
carrying value may not be recoverable and are written down immediately to their recoverable amount. Useful lives and residual values are
reviewed annually and where adjustments are required, these are made prospectively.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from
the continued use of the asset. Any gain or loss arising on de-recognition of the asset is included in the Income Statement.
Leases
As per IFRS 16 Leases the Group have applied the simplified transition approach for recognising liabilities. On adoption of IFRS 16, the
Group recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of IAS
17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the incremental
borrowing rate as of 1 January 2019.
Until the 2019 financial year, leases of property, plant and equipment were classified as either finance leases or operating leases. From
1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available
for use by the Group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of
the following lease payments:
´ fixed payments (including in-substance fixed payments), less any lease incentives receivable and variable payments based on index
or rate
On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is
recognised in the Income Statement. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets
and liabilities of the foreign entity and translated at the closing rate.
´ amounts expected to be payable by the Group under residual value guarantees
´ payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
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Strategic ReportFinancial StatementsGovernance
NOTES TO THE FINANCIAL STATEMENTS contInued
for the year ended 31 December 2019
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES contInued
Leases continued
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally
the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to
pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with
similar terms, security and conditions.
The Group leases offices and equipment. Rental contracts are typically made for fixed periods of six months to five years and have
extension options.
Revenue is measured at the fair value of consideration received or receivable from sales of metal to an end user, net of any buyers
discount, treatment charges and value added tax. The Group recognises revenue when the amount of revenue can be reliably measured
and when it is probable that future economic benefits will flow to the entity.
The value of consideration is fair value which equates to the contractually agreed price. The off-take agreements provide for provisional
pricing i.e. the selling price is subject to final adjustment at the end of the quotation period based on the average price for the month
following delivery to the buyer. Such a provisional sale contains an embedded derivative which is not required to be separated from the
underlying host contract, being the sale of the commodity. At each reporting date, if any sales are provisionally priced, the provisionally
priced copper cathode, zinc and lead sales are marked-to-market using forward prices, with any significant adjustments (both gains and
losses) being recorded in revenue in the Income Statement and in trade receivables in the Statement of Financial Position.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not
impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as
security for borrowing purposes.
The Company may mitigate commodity price risk by fixing the price in advance for its copper cathode, zinc and lead sales with the off-take
partner and also its zinc and lead sales with the banks where a facility has been set up and agreed. The price fixing arrangements are
outside the scope of IFRS 9 Financial Instruments: Recognition and Measurement and do not meet the criteria for hedge accounting.
Intangible assets
a) exploration and evaluation expenditure
Capitalised costs include costs directly related to any Group exploration and evaluation activities in areas of interest for which there is a
high degree of confidence in the feasibility of the project. Exploration and evaluation expenditure capitalised includes acquisition of rights
to explore, topographical, geological, geochemical and geophysical studies, exploration drilling, trenching, sampling and activities in relation
to the evaluation of the technical feasibility and commercial viability of extracting a mineral resource.
Exploration and evaluation assets are measured at cost less provision for impairment, where required.
b) Mining licences, permits and computer software
The historical cost model is applied, with intangible assets being carried at cost less accumulated amortisation and accumulated
impairment losses. Intangible assets with a finite life have no residual value and are amortised on a straight-line basis over their expected
useful lives with charges included in either cost of sales or administrative expenses:
Computer software
Mining licences and permits
– over two to five years
– over the duration of the legal agreement
The carrying value of intangible assets is reviewed for impairment whenever events or changes in circumstances indicate the carrying
value may not be recoverable.
Impairment of non-financial assets
The Group carries out impairment testing on all assets when there exists an indication of an impairment. If any such indication exists, the
Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating
unit’s fair value less costs to sell or its value in use.
Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its
recoverable amount. Impairment losses are recognised in the Income Statement.
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 assessments of the time value of money and risks specific to the asset.
The best evidence of an asset’s fair value is the value obtained from an active market or binding sale agreement. Where neither exists, fair
value less costs to sell is based on the best available information to reflect the amount the Group could receive for the cash-generating
unit in an arm’s length sale. In some cases, this is estimated using a discounted cash flow analysis on a post tax basis.
A previously recognised impairment loss is reversed if the recoverable amount increases as a result of a reversal of the conditions that
originally resulted in the impairment. This reversal is recognised in the Income Statement and is limited to the carrying amount that would
have been determined, net of depreciation, had no impairment loss been recognised in prior years.
Goodwill is also reviewed annually, as well as whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. Non-financial assets other than goodwill which have suffered an impairment are reviewed for possible reversal of the
impairment at each reporting date.
Revenue
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. These steps are as
follows: identification of the 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.
Under IFRS 15, revenue is recognised when the performance obligations are satisfied and the customer obtains control of the goods or
services, usually when title has passed to the buyer and the goods have been delivered in accordance with the contractual delivery terms.
The Group reports both a gross revenue and revenue line. Gross revenue is reported after deductions of treatment charges but before
deductions of off-takers fees and silver purchases under the Silver Stream.
Inventory
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method.
The cost of finished goods and work in progress comprises raw materials, direct labour and all other direct costs associated with mining
the ore and processing it to a saleable product.
Net realisable value is the estimated selling price in the ordinary course of business, less any further costs expected to be incurred to
completion. Provision is made, if necessary, for slow-moving, obsolete and defective inventory.
Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale
transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying
amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial
assets and investment property that are carried at fair value and contractual rights under insurance contracts, which are specifically
exempt from this requirement.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A
gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any
cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current
asset (or disposal group) is recognised at the date of derecognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for
sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.
Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from
the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other
liabilities in the balance sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a
separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business
or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented
separately in the Statement of Comprehensive Income.
Current and deferred income tax
The current income tax charge is calculated based on the tax laws enacted or substantively enacted at the reporting date in the countries
where the Group’s subsidiaries operate and generate taxable income.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it
arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction
affects neither accounting nor taxable profit nor loss. Deferred income tax is determined using tax rates that have been enacted or
substantially enacted by the Statement of Financial Position date and are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred tax assets are only recognised when they arise from timing differences where their recoverability in the short term is regarded
as being probable.
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Strategic ReportFinancial StatementsGovernance
NOTES TO THE FINANCIAL STATEMENTS contInued
for the year ended 31 December 2019
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES contInued
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with
original maturities of three months or less.
Restricted cash
Restricted cash is cash with banks that is not available for immediate use by the Group. Restricted cash is shown separately from cash and
cash equivalents on the Statement of Financial Position.
Investments
Investments in subsidiaries are recorded at cost less provision for impairment.
Share capital
Ordinary Shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a
deduction, net of tax, from the proceeds.
Treasury shares
Where any Group company purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly
attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders until the shares
are cancelled or reissued. Where such Ordinary Shares are subsequently reissued, any consideration received, net of any directly
attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity
holders.
Share based compensation
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, excluding the impact of any non-market service and
performance vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are
expected to vest. The total amount expensed is recognised over the vesting period, which is the period over which all of the specified
vesting conditions are to be satisfied. At each reporting date, the entity revises its estimates of the number of options that are expected to
vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the Income
Statement, with a corresponding adjustment to equity.
Trade and other receivables
Trade and other receivables are accounted for under IFRS 9 using the expected credit loss model and are initially recognised at fair value
and subsequently measured at amortised cost less any allowance for expected credit losses.
Impairment of financial assets
The Group and the Company has adopted the general expected credit loss model for financial assets, e.g. trade receivables and
intercompany receivables.
The allowance for expected credit losses for trade receivables is established by considering on a discounted basis the cash shortfalls it
would incur in various default scenarios for prescribed future periods and multiplying the shortfalls by the probability of each scenario
occurring. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting
the ability of the customers to settle the receivables. The allowance is the sum of these probability weighted outcomes. The allowance and
any changes to it are recognised in the Statement of Comprehensive Income within net operating expenses. A provision matrix is used to
calculate the allowance for expected credit losses on trade receivables which is based on historical default rates over the expected life of
the trade receivables and is adjusted for forward looking estimates. When a trade receivable is uncollectible, it is written off against the
allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against net operating
expenses in the Statement of Comprehensive Income.
The Company assesses on a forward-looking basis the expected credit losses associated with its intercompany balances carried at
amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
Trade and other payables
Trade and other payables are not interest bearing and are initially recognised at fair value and subsequently measured at amortised cost
using the effective interest method.
Silver stream commitment
The silver stream arrangement has been accounted for as a commitment as the Group has obligations to deliver silver to a third party at a
price below market value. On acquisition, following completion of the business combination, the silver stream commitment was identified
as an unfavourable contract and recorded at fair value. Payments received under the arrangement prior to the acquisition by the Group
were not considered to be a transaction with a customer. Management has determined that the agreement is not a derivative as it will be
satisfied through the delivery of non-financial items (i.e. silver commodity from the Company’s production), rather than cash or financial
assets. Subsequent to initial recognition the silver stream commitment is not revalued and is amortised on a units of production basis to
cost of sales.
The fair value of consideration received for delivered silver under the agreement is recorded as revenue. In addition, silver produced in
conjunction with the Group’s lead and zinc production and sold under the off-take agreement is recorded in gross revenue with a
corresponding deduction for silver purchased to deliver under the silver stream recorded in arriving at net revenue.
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised
cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the
period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as
transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is
deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn
down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
An amendment in a loan facility gives rise to a modification gain or loss to reflect the amended terms under the new facility. In 2018, the
Group consolidated and restructured its borrowings into one corporate debt package. The total available amount under the facility was
increased by $60,000,000. The refinancing resulted in the recognition of a modification gain of $836,000 which was recognised in the
Income Statement during 2018.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The
difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the
consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or
finance costs.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12
months after the reporting period.
Provisions
a) Asset retirement obligation
Provisions for environmental restoration of mining operations are recognised when the Group has a present legal or constructive
obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount can
be reliably estimated. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that
reflects current market assessments of the time value of money and the cash flows incorporate assessments of risk. The increase in the
provision due to passage of time is recognised as interest expense.
b) employee benefits – pension
The Group, in the normal course of business, makes payments on behalf of its employees for pensions, health-care, employment and
personnel tax, which are calculated based on gross salaries and wages according to legislation. The cost of these payments is charged to
the Consolidated Statement of Comprehensive Income in the same period as the related salary cost.
c) employee benefits – retirement benefits and jubilee awards
Pursuant to the labour law prevailing in the North Macedonian subsidiaries, the Group is obliged to pay retirement benefits for an amount
equal to two average monthly salaries, at their retirement date. According to the collective labour agreement, the Group is also obliged to
pay jubilee anniversary awards for each 10 years of continuous service of the employee. Due to the long-term nature of these plans, such
estimates are subject to significant uncertainty. In addition, the Group is not obligated to provide further benefits to current and
former employees.
Retirement benefit obligations arising on severance pay are stated at the present value of expected future cash payments towards the
qualifying employees. These benefits have been calculated by an independent actuary in accordance with the prevailing rules of actuarial
mathematics. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or
credited to profit and loss over the employees’ expected average remaining working lives.
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Strategic ReportFinancial StatementsGovernance NOTES TO THE FINANCIAL STATEMENTS contInued
for the year ended 31 December 2019
3. FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks; market risk (including foreign currency exchange risk, commodity price risk
and interest rate risk), liquidity risk, capital risk and credit risk. These risks are mitigated wherever possible by the Group’s financial
management policies and practices described below. The Group’s risk management is carried out by a central treasury department (Group
treasury) under policies approved by the Board. Group treasury identifies, evaluates and hedges financial risks in close co-operation with
the Group’s operating units.
Foreign currency exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. The primary Group
currency requirements are US Dollar, British Pound, Kazakhstan Tenge, Euro and North Macedonian Denar.
The following table highlights the major currencies the Group operates in and the movements against the US Dollar during the course of
the year:
Kazakhstan Tenge
Macedonian Denar
Euro
British Pound
Average rate
Reporting date spot rate
2019
2018
Movement
2019
2018
Movement
382.75
54.96
1.12
0.79
344.71
52.12
1.15
0.75
38.04
2.84
(0.03)
0.04
381.18
54.95
1.12
0.76
384.20
53.69
1.18
0.79
(3.02)
1.26
(0.06)
0.03
Foreign exchange risk does not arise from financial instruments that are non-monetary items or financial instruments denominated in the
functional currency. Kazakhstan Tenge and North Macedonian Denar denominated monetary items are therefore not reported in the tables
below, as the functional currency of the Group’s Kazakhstan-based and North Macedonian-based subsidiaries is the Tenge and Denar
respectively.
Liquidity risk
Liquidity risk relates to the ability of the Group to meet future obligations and financial liabilities as and when they fall due. The Group
currently has sufficient cash resources to facilitate the debt and a material income stream from the Kounrad and Sasa projects. The Group
has no undrawn borrowings as at 31 December 2019 (2018: nil).
Future expected payments:
Trade and other payables within one year
Borrowings payable within one year (note 30)
Borrowings payable later than one year but not later than five years (note 30)
Lease liability payable later than one year but not later than five years
Group
31 Dec 19
$’000
31 Dec 18
$’000
8,981
44,684
76,304
748
17,637
47,868
122,323
–
130,717
187,828
Capital risk
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to maintain an optimal structure to reduce the cost of capital.
The Group manages its capital in order to provide sufficient funds for the Group’s activities. Future capital requirements are regularly
assessed and Board decisions taken as to the most appropriate source for obtaining the required funds, be it through internal revenue
streams, external fund raising, issuing new shares or selling assets. In order to maintain or adjust the capital structure, the Group may
adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The debt is subject to financial covenants which include the monitoring of gearing and leverage ratios and these are all currently complied with.
The Group’s exposure to foreign currency risk based on US Dollar equivalent carrying amounts at the reported date:
Consistent with others in the industry, the Group monitors capital on the basis of the following gearing ratio:
In $’000 equivalent
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Net exposure
In $’000 equivalent
Cash and cash equivalents
Trade and other payables
Net exposure
Group
2019
EUR
94
–
(609)
(515)
Group
2018
EUR
6
(452)
(446)
USD
2,419
1
–
2,420
USD
12,792
–
12,792
GBP
2,220
–
(429)
1,791
GBP
774
(2,522)
(1,748)
Trade and other receivables excludes prepayments and VAT receivable and trade and other payables excludes corporation tax, social
security and other taxes as they are not considered financial instruments.
At 31 December 2019, if the foreign currencies had weakened/strengthened by 10% against the US Dollar, post-tax Group profit for the
year would have been $194,000 lower/higher (2018: $231,000 lower/higher).
Commodity price risk
The Group has a hedging policy in place to allow us to manage commodity price risk however the Directors elected not to hedge during 2019.
The following table details the Group’s sensitivity to a 10% increase and decrease in the copper, zinc and lead price against the invoiced price.
10% is the sensitivity used when reporting commodity price internally to management and represents management’s assessment of the
possible change in price. A positive number below indicates an increase in profit for the year and other equity where the price increases.
10% increase in copper, zinc and lead price
10% decrease in copper, zinc and lead price
Estimated effect on
earnings and equity
2019
$’000
2018
$’000
18,853
(18,853)
20,526
(20,526)
Net debt
Cash and cash equivalents
Bank overdraft
Borrowings, variable interest rates – repayable within one year
Borrowings, variable interest rates – repayable after one year
Net debt
Total equity
Net debt to equity ratio
Note
24
30
30
30
2019
$’000
28,566
(895)
(38,400)
(69,473)
2018
$’000
34,649
-
(38,400)
(106,549)
(80,202)
(110,300)
335,106
325,866
24%
34%
Changes in liabilities arising from financing activities
The total borrowings as at 1 January 2019 were $144,949,000 (1 January 2018: $181,914,000). During the year, total repayments were
$38,400,000 (2018: $99,265,000) with nil (2018: $60,809,000) drawdowns during the year. There was a drawdown of an unsecured
overdraft of $895,000 (2018: nil). Other changes amounted to $1,324,000 (1 January 2018: $1,491,000) leading to a closing debt balance
of $108,768,000 (2018: $144,949,000). See note 30 for more details.
The cash and cash equivalents including cash at bank and on hand in assets held for sale brought forward were $34,707,000 (2018:
$43,173,000) with a $6,930,000 outflow (2018: $8,466,000 outflow) during the year and therefore a closing balance of $27,777,000
(2018: $34,707,000).
Credit risk
Credit risk refers to the risk that the Group’s financial assets will be impaired by the default of a third party. The Group is exposed to credit risk
primarily on its cash and cash equivalents as set out in note 24 and on its trade and other receivables as set out in note 22. The Group sells a
minimum of 95% of Kounrad’s copper cathode production to a credit-worthy off-taker and during the year 100% of Sasa’s zinc and lead
concentrate was sold to credit-worthy customers. The Group sells Sasa’s zinc and lead concentrate product through an off-take arrangement
with Traxys which has been fixed through to 31 December 2022. The commitment is for 100% of the Sasa concentrate production.
For banks and financial institutions, only parties with a minimum rating of BBB- are accepted. 24% of the Group’s cash and cash
equivalents including restricted cash at the year-end were held by an A+ rated bank (2018: 15% by an A+ bank). The rest of the Group’s cash
was held with a mix of institutions with credit ratings between A to BB (2018: A to BBB-).
The Directors have considered the credit exposures and do not consider that they pose a material risk at the present time. The credit risk
for cash and cash equivalents is managed by ensuring that all surplus funds are deposited only with financial institutions with high quality
credit ratings.
The expected credit loss for intercompany loans receivable are considered immaterial (note 22).
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NOTES TO THE FINANCIAL STATEMENTS contInued
for the year ended 31 December 2019
3. FINANCIAL RISK MANAGEMENT contInued
Interest rate risk
The Group’s main interest rate risk arises from long-term borrowings with variable rates, which expose the Group to cash flow interest
rate risk. During 2019, the Group’s borrowings at variable rates were denominated in US Dollars. The Group’s borrowings are carried at
amortised cost. The Group has borrowings at variable interest rates and a 1% point rise in market interest rate would have caused the
interest paid to increase by $1,343,000 (2018: $1,666,000) while a similar decrease would have caused the same decrease in interest
paid. The Group does not hedge its exposure to interest rate risk.
The Group had $14,494,000 of cash balances on short-term deposit as at 31 December 2019 (2018: $13,044,000). The average fixed
interest rate on short-term deposits during the year was 0.6% (2018: 1.2%).
Categories of financial instruments
Financial assets
Cash and receivables:
Cash and cash equivalents including restricted cash (note 24)
Trade and other receivables
Group
31 Dec 19
$’000
31 Dec 18
$’000
32,579
2,980
35,559
39,025
6,609
45,634
Trade and other receivables excludes prepayments and VAT receivable as they are not considered financial instruments. All trade and other
receivables are receivable within one year for both reporting years.
Financial liabilities
Measured at amortised cost:
Trade and other payables within one year
Borrowings payable within one year (note 30)
Borrowings payable later than one year but not later than five years (note 30)
Lease liability later than one year but not later than five years
Group
31 Dec 19
$’000
31 Dec 18
$’000
8,981
39,295
69,473
748
17,637
38,400
106,549
–
118,497
162,586
Trade and other payables excludes the silver streaming commitment, corporation tax, social security and other taxes as they are not
considered financial instruments.
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group has the following key areas where critical accounting estimates and judgements are required that could have a material impact
on the financial statements:
Impairment of non-current assets
significant accounting judgements
The carrying value of the goodwill generated by accounting for the business combination of the Group acquiring an additional 40% in the
Kounrad project in May 2014 (the “Kounrad Transaction”) and the CMK Resources Limited acquisition in November 2017 requires an annual
impairment review. This review determines whether the value of the goodwill can be justified by reference to the carrying value of the
business assets and the future discounted cash flows of the business. The key assumptions used in the Group’s impairment assessments
are disclosed in note 19.
Key sources of estimation uncertainty
Estimates are required periodically to assess assets for impairment. The critical accounting estimates are future commodity prices,
treatment charges, future ore production, discount rates and projected future costs of development and production. Ore reserves and
resources included in the forecasts include certain resources considered to be sufficiently certain and economically viable. The Group’s
resources statements include additional resources which are not included in the life of mine plan or impairment test.
Decommissioning and site rehabilitation estimates
significant accounting judgements
Provision is made for the costs of decommissioning and site rehabilitation costs when the related environmental disturbance takes place.
Judgement and experience is used in determining the expected timing, closure and decommissioning methods, which can vary in response
to changes in the relevant legal requirements or decommissioning technologies.
Key sources of estimation uncertainty
The discounted provision recognised represents management’s best estimate of the costs that will be incurred, and many of these costs
will not crystallise until the end of the life of the mine. Estimates are reviewed annually and are based on current contractual and
regulatory requirements and the estimated useful life of mines. Engineering and feasibility studies are undertaken periodically and in the
interim management make assessments for appropriate changes based on the environmental management strategy; however significant
changes in the estimates of contamination, restoration standards, timing of expenditure and techniques will result in changes to provisions
from period to period.
A 1% change in the discount rate on the Group’s rehabilitation estimates would result in an impact of $781,000 (2018: $473,000) on the
provision for environmental rehabilitation, and an impact of $781,000 (2018: $473,000) on the statement of comprehensive income. A 5%
change in cost on the Group’s rehabilitation estimates would result in an impact of $420,000 (2018: $208,000) on the provision for
environmental rehabilitation, and an impact of $48,000 (2018: $21,000) on the statement of comprehensive income.
Mineral reserves and resources
Key sources of estimation uncertainty
The major value associated with the Group is the value of its mineral reserves and resources. The value of the reserves and resources have
an impact on the Group’s accounting estimates in relation to depreciation and amortisation, impairment of assets and the assessment of
going concern. These resources are the Group’s best estimate of product that can be economically and legally extracted from the relevant
mining property. The Group’s estimates are supported by geological studies and drilling samples to determine the quantity and grade of
each deposit.
Ore resource estimates may vary from period to period. This judgement has a significant impact on impairment consideration and the
period over which capitalised assets are depreciated within the financial statements.
The Kounrad resources were classified as JORC Compliant in 2013 and mineral resources were estimated in June 2017 and the Sasa JORC
ore reserves and mineral resources were estimated in December 2019.
Tax
significant accounting judgements
Management make judgements in relation to the recognition of various taxes payable by the Group and VAT recoverability for which the
recoverability and timing of recovery is assessed. The Group operates in jurisdictions which necessarily require judgment to be applied
when assessing the applicable tax treatment for transactions and the Group obtains professional advice where appropriate to ensure
compliance with applicable legislation.
5. SEGMENTAL INFORMATION
The segmental results for the year ended 31 December 2019 are as follows:
Gross revenue
Silver stream purchases
Off-take buyers’ fees
Revenue
EBITDA
Depreciation and amortisation
Foreign exchange (loss)/gain
Other income
Other expenses (note 10)
Finance income (note 14)
Finance costs (note 15)
Profit/(loss) before income tax
Income tax
Profit for the year after tax from continuing operations
Profit from discontinued operations
Profit for the year
Kounrad
$’000
81,708
–
(2,424)
79,284
61,720
(4,533)
(169)
182
(40)
9
(106)
Sasa
$’000
Unallocated
$’000
Total
$’000
99,107
(5,556)
(1,087)
92,464
59,564
(25,308)
698
30
(441)
1
(263)
–
–
–
–
180,815
(5,556)
(3,511)
171,748
(12,700)
108,584
(239)
(152)
–
–
326
(10,784)
(30,080)
377
212
(481)
336
(11,153)
57,063
34,281
(23,549)
67,795
(15,911)
51,884
53
51,937
Depreciation and amortisation includes amortisation on the fair value uplift on acquisition of Sasa and Kounrad of $19.4m.
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Strategic ReportFinancial StatementsGovernance NOTES TO THE FINANCIAL STATEMENTS contInued
for the year ended 31 December 2019
5. SEGMENTAL INFORMATION contInued
The segmental results for the year ended 31 December 2018 are as follows:
Gross revenue
Silver stream purchases
Off-take buyers’ fees
Revenue
EBITDA
Depreciation and amortisation
Foreign exchange (loss)/gain
Other income
Other expenses (note 10)
Finance income (note 14)
Finance costs (note 15)
Profit/(loss) before income tax
Income tax
Profit for the year after tax from continuing operations
Loss from discontinued operations
Profit for the year
Sasa
$’000
Unallocated
$’000
Kounrad
$’000
92,644
–
(2,535)
111,508
(6,023)
(1,215)
90,109
104,270
Total
$’000
204,152
(6,023)
(3,750)
194,379
–
–
–
–
66,833
71,221
(12,746)
125,308
(6,335)
276
359
–
10
(140)
(26,951)
(4,165)
–
(561)
3
(8,555)
(56)
10
–
(469)
251
(6,304)
(33,342)
(3,879)
359
(1,030)
264
(14,999)
61,003
30,992
(19,314)
72,681
(18,822)
53,859
(7,274)
46,585
Kounrad
The Group sells and distributes its copper cathode product primarily through an off-take arrangement with Traxys, which has been
retained as CAML’s off-take partner through to September 2022. The off-take arrangements are for a minimum of 95% of the SX-EW
plant’s output. Revenue is recognised at the Kounrad mine gate when the goods have been delivered in accordance with the contractual
delivery terms.
The off-take agreement provides for the option of provisional pricing i.e. the selling price is subject to final adjustment at the end of the
quotation period based on the average price for the month following delivery to the buyer, however during 2019 all sales prices were
calculated at the LME price on the date of dispatch. The Company may mitigate commodity price risk by fixing the price in advance for its
copper cathode sales with the off-take partner (see note 3).
The costs of delivery to the end customers have been effectively borne by the Group through means of an annually agreed buyer’s fee
which is deducted from the selling price.
During 2019, the Group sold 13,100 tonnes (2018: 13,696 tonnes) of copper through the off-take arrangements. Some of the copper
cathodes are also sold locally and during 2019, 500 tonnes (2018: 386 tonnes) were sold to local customers.
Sasa
The Group sells Sasa’s zinc and lead concentrate product to two European smelters through an off-take arrangement with Traxys which
has been fixed through to 31 December 2022. For one of the smelters, revenue is recognised at the Sasa mine gate when the goods have
been delivered in accordance with the contractual delivery terms and for the other smelter revenue is recognised on delivery to the
smelter in accordance with the contractual delivery terms. The commitment is for 100% of the Sasa concentrate production. The
agreements with the smelters provides for provisional pricing i.e. the selling price is subject to final adjustment at the end of the quotation
period based on the average price for the month following delivery to the buyer and subject to final adjustment for assaying results. The
impact of mark-to-market adjustments for forward prices on provisional sales was not significant in the current or prior year.
Depreciation and amortisation includes amortisation on the fair value uplift on acquisition of Sasa and Kounrad of $20.2m.
The Group sold 19,697 tonnes (2018: 18,792 tonnes) of zinc in concentrate and 27,875 tonnes (2018: 27,878 tonnes) of lead in concentrate.
A reconciliation between profit for the year and EBITDA is presented in the Financial Review section.
Group segmental assets and liabilities for the year ended 31 December 2019 are as follows:
The revenue arising from silver relates to a contract with Osisko Gold Royalties where the Group has agreed to sell all of its silver at a fixed
price of $5.58/oz, significantly below market value and arising from the silver stream commitment inherited on acquisition (note 29).
Kounrad
Sasa
Assets held for sale (note 21)
Unallocated including corporate
Segmental assets
Additions to non-current assets
Segmental liabilities
31 Dec 19
$’000
31 Dec 18
$’000
31 Dec 19
$’000
76,118
411,899
219
26,839
80,384
450,495
61
18,785
1,850
9,432
–
870
31 Dec 18
$’000
1,395
13,352
907
298
31 Dec 19
$’000
31 Dec 18
$’000
(11,017)
(55,269)
(91)
(113,592)
(11,666)
(78,720)
(40)
(133,433)
515,075
549,725
12,152
15,952
(179,969)
(223,859)
The assets and liabilities of the Copper Bay and Shuak entities were classified as assets held for sale during the comparative year ended
31 December 2018 (note 21).
6. REVENUE
Group
International customers (Europe) – copper cathode
International customers (Europe) – zinc and lead concentrate
Domestic customers (Kazakhstan) – copper cathode
International customers (Europe) – silver
Total gross revenue
Less:
Silver purchases from silver stream
Off-take buyers’ fees
Revenue
2019
$’000
78,848
97,199
2,860
1,908
2018
$’000
90,376
109,451
2,269
2,056
180,815
204,152
(5,556)
(3,511)
(6,023)
(3,750)
171,748
194,379
7. COST OF SALES
Group
Reagents, electricity and materials
Depreciation and amortisation
Silver stream commitment (note 29)
Royalties
Employee benefit expense
Consulting and other services
Taxes and duties
8. DISTRIBUTION AND SELLING COSTS
Group
Freight costs
Transportation costs
Employee benefit expense
Depreciation and amortisation
Materials and other expenses
2019
$’000
19,931
29,499
(2,285)
7,271
12,862
5,398
422
73,098
2019
$’000
1,550
108
61
20
84
1,823
2018
$’000
19,676
33,407
(2,627)
7,995
12,053
5,412
502
76,418
2018
$’000
1,670
184
76
15
100
2,045
The above distribution and selling costs are those incurred at Kounrad and Sasa in addition to the costs associated with the off-
take arrangements.
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NOTES TO THE FINANCIAL STATEMENTS contInued
for the year ended 31 December 2019
9. ADMINISTRATIVE EXPENSES
Group
Employee benefit expense
Share based payments
Consulting and other services
Auditors remuneration (note 11)
Office-related costs
Taxes and duties
Depreciation and amortisation
Total from continuing operations
Total from discontinued operations (note 21)
10. OTHER EXPENSES
Group
Loss on disposal of property, plant and equipment
Impairment of receivable from Orion
2019
$’000
8,867
1,085
6,084
378
1,271
77
561
2018
$’000
9,709
4,904
6,345
409
1,783
45
755
18,323
23,950
170
153
18,493
24,103
2019
$’000
481
–
481
2018
$’000
561
469
1,030
The impairment of receivable from Orion in the prior year relates to $5,969,000 of withholding tax payable relating to income from
payments in 2016 and 2017. This tax relates to a period pre the Group’s ownership and so due to the tax indemnity in place on acquisition
was considered fully recoverable as per the acquisition accounting. A settlement was reached in March 2019 where Orion would pay
$5,500,000 of the withholding tax payable and therefore the Group recognised a $469,000 write off in 2018.
11. AUDITORS’ REMUNERATION
During the year, the Group obtained the following services from the Company’s auditors and its associates:
Fees payable to BDO LLP the Company’s auditors for the audit of the parent company and consolidated
financial statements
Fees payable to PWC LLP the previous Company’s auditors for the audit of the parent company and
consolidated financial statements
Fees payable to BDO LLP the Company’s auditors and its associates for other services:
– The audit of Company’s subsidiaries
– Tax compliance services
– Other assurance services
Fees payable to PWC LLP the previous Company’s auditors and its associates for other services:
– The audit of Company’s subsidiaries
– Tax compliance services
– Other assurance services
12. EMPLOYEE BENEFIT EXPENSE
The aggregate remuneration of staff, including Directors, was as follows:
Group
Wages and salaries
Social security costs
Staff healthcare and other benefits
Other pension costs
Share based payments (note 27)
Total for continuing operations
Total for discontinuing operations (note 21)
2019
$’000
160
36
144
–
–
–
–
38
378
2018
$’000
–
146
–
–
–
179
26
58
409
2019
$’000
16,294
3,823
2,424
564
1,085
24,191
75
2018
$’000
14,856
4,484
2,266
497
4,904
27,008
75
24,266
27,083
The total employee benefit expense includes an amount of $1,316,000 (2018: $1,137,000) which has been capitalised within property, plant
and equipment. The 2018 comparative has been reclassified due to the reallocation of costs to ensure consistent presentation of
employee benefit expense.
Company
Wages and salaries
Social security costs
Staff healthcare and other benefits
Other pension costs
Share based payments (note 27)
Key management remuneration is disclosed in the Remuneration Committee report.
13. MONTHLY AVERAGE NUMBER OF PEOPLE EMPLOYED
Group
Operational
Construction
Management and administrative
The monthly average number of staff employed by the Company during the year was 15 (2018: 14).
14. FINANCE INCOME
Group
Foreign exchange gain on intercompany borrowings
Bank interest received
15. FINANCE COSTS
Group
Provisions: unwinding of discount (note 31)
Interest on borrowings (note 30)
Bank charges
Gain on modification of the debt facility
Total for continuing operations
Total for discontinuing operations (note 21)
16. INCOME TAX
Group
Current tax on profits for the year
Deferred tax credit (note 36)
Income tax expense
Taxation for each jurisdiction is calculated at the rates prevailing in the respective jurisdictions.
2019
$’000
5,391
934
533
165
1,085
8,108
2019
Number
901
8
130
2018
$’000
4,778
1,325
479
146
4,904
11,632
2018
Number
906
8
125
1,039
1,039
2019
$’000
–
336
336
2019
$’000
329
10,779
45
–
11,153
57
2018
$’000
3
261
264
2018
$’000
489
15,225
117
(832)
14,999
–
11,210
14,999
2019
$’000
17,234
(1,323)
15,911
2018
$’000
20,391
(1,569)
18,822
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NOTES TO THE FINANCIAL STATEMENTS contInued
for the year ended 31 December 2019
16. INCOME TAX contInued
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate
applicable to profits of the consolidated entities as follows:
Group
Profit before taxation including loss from discontinued operations
Tax calculated at domestic tax rates applicable to profits in the respective countries
Tax effects of:
Expenses not deductible for tax purposes
Non-taxable income
Movement on unrecognised deferred tax – tax losses
Movement on recognised deferred tax (note 36)
Income tax expense
2019
$’000
67,794
23,287
19,854
(27,194)
1,287
(1,323)
2018
$’000
65,407
27,410
2,982
(15,827)
5,826
(1,569)
15,911
18,822
Corporate income tax is calculated at 19% (2018: 19%) of the assessable profit for the year for the UK parent company, 20% for the
operating subsidiaries in Kazakhstan (2018: 20%) and 10% (2018: 10%) for the operating subsidiaries in North Macedonia.
Expenses not deductible for tax purposes includes share-based payment charges, transfer pricing adjustments in accordance with local
tax legislation and depreciation and amortisation charges. Non-taxable income includes intercompany dividend income. The 2018
comparative has been reclassified to ensure consistent presentation with the current year.
Deferred tax assets have not been recognised on tax losses primarily at the parent company as it remains uncertain whether this entity
will have sufficient taxable profits in the future to utilise these losses.
17. EARNINGS/(LOSS) PER SHARE
(a) Basic
Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to owners of the Company by the weighted average
number of Ordinary Shares in issue during the year excluding Ordinary Shares purchased by the Company and held as treasury shares
(note 25).
Profit from continuing operations attributable to owners of the parent
Profit/(loss) from discontinued operations attributable to owners of the parent
Profitable attributable to owners of the parent
Weighted average number of Ordinary Shares in issue
Earnings/(loss) per share from continuing and discontinued operations attributable to
owners of the parent during the year (expressed in $ cents per share)
From continuing operations
From discontinued operations
From profit for the year
2019
$’000
51,824
53
51,877
2019
No.
2018
$’000
55,298
(7,274)
48,024
2018
No.
176,498,266 176,498,266
2019
$ cents
2018
$ cents
29.36
0.03
29.39
31.33
(4.12)
27.21
(b) Diluted
The diluted earnings/(loss) per share is calculated by adjusting the weighted average number of Ordinary Shares outstanding after
assuming the conversion of all outstanding granted share options.
Profit from continuing operations attributable to owners of the parent
Profit/(loss) from discontinued operations attributable to owners of the parent
Profitable attributable to owners of the parent
2019
$’000
51,824
53
51,877
2018
$’000
55,298
(7,274)
48,024
Weighted average number of Ordinary Shares in issue
Adjusted for:
– Share options
Weighted average number of Ordinary Shares for diluted earnings per share
2019
No.
2018
No.
176,498,266 176,498,266
5,076,397
3,937,283
181,574,663
180,435,549
2019
$ cents
28.54
0.03
28.57
2018
$ cents
30.65
(4.12)
26.53
Construction in
progress
$’000
Plant and
equipment
$’000
Mining
assets
$’000
Motor vehicles
and ROU
assets
$’000
Land
$’000
Mineral
rights
$’000
Total
$’000
At 1 January 2018
11,038
115,183
1,636
1,703
664
365,010
495,234
Diluted earnings/(loss) per share
From continuing operations
From discontinued operations
From profit for the year
18. PROPERTY, PLANT AND EQUIPMENT
Group
Cost
Additions
Disposals
Change in estimate – asset retirement
obligation (note 31)
Transfers
Transfer from stock
Exchange differences
Impairment
At 31 December 2018
Additions
Disposals
Change in estimate – asset retirement
obligation (note 31)
Transfers
Exchange differences
At 31 December 2019
Accumulated depreciation
At 1 January 2018
Provided during the year
Disposals
Impairment
Exchange differences
At 31 December 2018
Provided during the year
Disposals
Exchange differences
At 31 December 2019
14,398
(24)
–
(7,439)
35
(691)
–
108
(596)
(159)
7,432
116
(8,809)
(43)
–
–
–
–
–
(221)
–
17,317
113,232
1,415
10,566
(214)
–
(12,951)
(345)
481
(732)
3,664
12,951
(941)
–
–
–
–
11
513
(60)
–
7
–
(216)
–
1,947
1,084
(32)
–
–
(14)
–
–
–
–
–
(30)
–
–
–
–
–
–
(14,677)
–
15,019
(680)
(159)
–
151
(24,644)
(43)
634
350,333
484,878
–
–
–
–
(15)
–
–
–
–
(8,532)
12,131
(978)
3,664
–
(9,836)
14,373
128,655
1,426
2,985
619
341,801
489,859
–
–
–
–
–
–
–
–
–
–
22,211
13,086
(66)
(6)
(2,229)
32,996
9,964
(237)
127
42,850
80,236
168
89
–
–
(32)
225
89
–
2
316
1,190
1,110
789
201
(30)
–
(108)
852
471
(27)
5
1,301
1,095
1,684
–
–
–
–
–
–
–
–
–
–
634
619
2,805
18,399
–
–
–
25,973
31,775
(96)
(6)
(2,369)
21,204
55,277
17,801
–
–
28,325
(264)
134
39,005
83,472
329,129
429,601
302,796
406,387
Net book value at 31 December 2018
17,317
Net book value at 31 December 2019
14,373
85,805
The Company had $838,000 of office equipment at net book value as at 31 December 2018 (2018: $290,000).
The increase in estimate in relation to the Kounrad asset retirement obligation of $783,000 (2018: reduction of $159,000) is due to a
combination of adjusting the provision recognised at the net present value of future expected costs using latest assumptions on inflation
rates and discount rates as well as updating the provision for management’s best estimate of the costs that will be incurred based on
current contractual and regulatory requirements and the estimated useful life of mine (note 31).
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NOTES TO THE FINANCIAL STATEMENTS contInued
for the year ended 31 December 2019
18. PROPERTY, PLANT AND EQUIPMENT contInued
The increase in estimate in relation to the Sasa asset retirement obligation of $2,881,000 (2018: reduction of $10,000) is due a review of
the provision for management’s best estimate of the costs that will be incurred based on current contractual and regulatory requirements
and the estimated useful life of mine (note 31).
The Group has reviewed all the leasing arrangements and contracts in light of adopting IFRS 16 Leases and has capitalised $853,000 as
right-of-use assets (‘ROU’) during the year and is included within additions. All right-of-use assets will continue to be measured at the
amount of the lease liability on adoption.
During the year there were total disposals of plant, property and equipment at cost of $978,000 with accumulated depreciation of
$264,000. The Group received $233,000 consideration for these assets and therefore a loss of $481,000 was recognised in other
expenses (note 10).
Amounts recognised in the income statement
The income statement shows the following amounts relating to leases:
Depreciation charge of right-of-use assets
Office
Other
Interest expense included in finance costs
2019
$’000
2018
$’000
323
19
342
54
–
–
–
–
As at 31 December 2019 there are no indications of impairment with the fair value of the assets exceeding the net book value.
19. INTANGIBLE ASSETS
Group
Cost
At 1 January 2018
Additions
Disposals
Exchange differences
At 31 December 2018
Additions
Disposals
Exchange differences
At 31 December 2019
Accumulated amortisation
At 1 January 2018
Provided during the year
Disposals
Exchange differences
At 31 December 2018
Provided during the year
Disposals
Exchange differences
At 31 December 2019
Net book value at 31 December 2018
Net book value at 31 December 2019
Goodwill
$’000
Mining licences
and permits
$’000
Computer
software and
website
$’000
Total
$’000
33,464
41,730
514
75,708
–
–
(2,285)
–
–
(4,096)
28
(6)
(17)
28
(6)
(6,398)
31,179
37,634
519
69,332
–
–
(507)
–
–
(140)
21
(12)
1
21
(12)
(646)
30,672
37,494
529
68,695
–
–
–
–
–
–
–
–
–
5,728
2,134
–
(325)
7,537
1,940
–
15
9,492
31,179
30,097
30,672
28,002
65
433
(6)
(8)
484
55
(12)
–
527
35
2
5,793
2,567
(6)
(333)
8,021
1,995
(12)
15
10,019
61,311
58,676
The Company had nil of computer software and website costs at net book value as at 31 December 2019 (2018: $3,000).
Impairment assessment
Kounrad project
The Kounrad project located in Kazakhstan has an associated goodwill balance of $8,999,000 (2018: $8,928,000). In accordance with IAS
36 “Impairment of assets” and IAS 38 “Intangible Assets”, a review for impairment of goodwill is undertaken annually or at any time an
indicator of impairment is considered to exist and in accordance with IAS 16 “Property, plant and equipment”, a review for impairment of
long-lived assets is undertaken at any time an indicator of impairment is considered to exist. The discount rate applied to calculate the
present value is based upon the nominal weighted average cost of capital applicable to the cash generating unit (‘CGU’). A CGU is the
smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or
groups of assets. The recoverable amount of the CGU is assessed by reference to the higher of value in use (‘VIU’), being the net present
value (‘NPV’) of future cash flows expected to be generated by the asset, and fair value less costs to dispose (‘FVLCD’). The FVLCD is
considered to be higher than VIU and has been derived using discounted cash flow techniques (NPV of expected future cash flows of a
CGU), which incorporate market participant assumptions.
The discount rate reflects equity risk premiums over the risk-free rate, the impact of the remaining economic life of the CGU and the risks
associated with the relevant cash flows based on the country in which the CGU is located. These risk adjustments are based on observed
equity risk premiums, historical country risk premiums and average credit default swap spreads for the period.
The key economic assumptions used in the review were a five-year forecast average nominal copper price of $6,372 per tonne
(2018: $6,985) and a long-term price of $6,595 per tonne (2018: $7,472) and a discount rate of 8% (2018: 8%). Assumptions in relation
to operational and capital expenditure are based on the latest budget approved by the Board. The carrying value of the net assets is not
currently sensitive to any reasonable changes in key assumptions. Management concluded and the net present value of the asset is
significantly in excess of the net book value of assets, and therefore no impairment has been identified.
sasa project
The Sasa project located in North Macedonia has an associated goodwill balance of $21,673,000 (2018: $22,251,000). The business
combination in 2017 was accounted for at fair value under IFRS 3 and therefore recoverable value is sensitive to changes in commodity
prices, operational performance, treatment charges, future cash costs of production and capital expenditures. In accordance with IAS 36
‘Impairment of assets’ and IAS 38 ‘Intangible Assets’, a review for impairment of goodwill is undertaken annually or at any time an indicator
of impairment is considered to exist and in accordance with IAS 16 ‘Property, plant and equipment’, a review for impairment of long-lived
assets is undertaken at any time an indicator of impairment is considered to exist.
The assessment compared the recoverable amount of the Sasa Cash CGU with its carrying value for the year ended 31 December 2019.
The recoverable amount of the CGU is assessed by reference to the higher of VIU, being the NPV of future cash flows expected to be
generated by the asset, and FVLCD. The FVLCD is considered to be higher than VIU and has been derived using discounted cash flow
techniques (NPV of expected future cash flows of a CGU), which incorporate market participant assumptions. Cost to dispose is based on
management’s best estimates of future selling costs at the time of calculating FVLCD. Costs attributable to the disposal of the CGU are
not considered significant. The methodology used for the fair value is a level 3 valuation.
The expected future cash flows utilised in the FVLCD model are derived from estimates of projected future revenues based on broker consensus
commodity prices, treatment charges, future cash costs of production and capital expenditures contained in the life of mine (‘LOM’) plan, and as
a result FVLCD is considered to be higher than VIU. The Group’s discounted cash flow analysis reflects probable reserves as well as indicated
resources and certain inferred resources which are considered sufficiently certain and economically viable, and is based on detailed research,
analysis and modelling. The forecast operational and capital expenditure reflects the transition of mining method from sub-level caving to cut
and fill stoping, which is expected to lead to improved reserve grades for both zinc and lead and increased metal production over the life of mine.
At 31 December 2019, the Group has reviewed the indicators for impairment, including forecasted commodity prices, treatment charges,
discount rates, operating and capital expenditure, and the mineral reserves and resources’ estimates and an impairment is not necessary.
For the purposes of the impairment review a discount rate of 8.07% (2018: 12%) was applied to calculate the present value of the CGU.
The reduction in the discount rate from the prior year was supported by a detailed WACC calculation and due to the reduced country risk
profile and asset specific risk factors through operational improvements, environmental and social plans having owned and operated the
asset for over two years. The key economic assumptions used in the review were a five-year forecast average nominal zinc and lead price
of $2,220 (2018: $2,441) and $1,986 (2018: $2,200) per tonne respectively and a long-term price of $2,358 (2018: $2,604) and $1,900
(2018: $2,264) per tonne respectively. Zinc and lead treatment charges are forecast to rise significantly in 2020 with a significant
reduction from these returning to historic averages by 2022.
Management then performed sensitivity analyses whereby certain parameters were flexed downwards by reasonable amounts for the
CGU to assess whether the recoverable value for the CGU would result in an impairment charge. The following sensitivities were applied:
Long-term zinc price reduced by 5%
Long-term lead price reduced by 5%
Discount rate increased to 9%
Production decreased by 2.5%
Treatment charges increased by 20%
Operational expenditure increased by 7%
Capital expenditure increased by 20%
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Strategic ReportFinancial StatementsGovernance NOTES TO THE FINANCIAL STATEMENTS contInued
for the year ended 31 December 2019
19. INTANGIBLE ASSETS contInued
Impairment assessment continued
In isolation, none of the changes set out above would result in an impairment. This sensitivity analysis also does not take into account any
of management’s mitigation factors should these changes occur or the planned production optimisation in future years. The Board
considers the base case forecasts to be appropriate and balanced best estimates.
20. INVESTMENTS
Shares in Group undertakings:
At 1 January
Investment in Shuak BV
Impairment of investment in Shuak BV
Impairment of investment in Copper Bay
At 31 December
Company
31 Dec 19
$’000
5,491
2,800
(2,800)
–
5,491
31 Dec 18
$’000
11,821
35
(143)
(6,222)
5,491
CMK Resources Limited
During 2019, CMK Mining B.V. (formally CMK Mining Limited (Bermuda) was reincorporated from Bermuda into the Netherlands. Prior to this
reincorporation, CMK Resources Limited transferred its shareholding in CMK Mining B.V. to CAML MK Limited. CMK Resources Limited was
liquidated in February 2020, see note 37.
21. ASSETS HELD FOR SALE
The assets and liabilities of the Shuak entities continue to be presented as held for sale in the Statement of Financial Position. During the
prior year, the exploration assets and property, plant and equipment held in Shuak were impaired in full. In February 2020, the Group
reduced its effective interest in the Shuak project from 80% to 10%. The Group will not be required to contribute towards future costs of
the project.
The assets and liabilities of the Copper Bay entities continue to be presented as held for sale in the Statement of Financial Position
following the decision of the CAML Board to sell the project in August 2017 and the Company progresses it’s sale process. The results of
the Copper Bay entities for the year ended 31 December 2019 and the comparative year ended 31 December 2018 are shown within
discontinued operations in the Consolidated Income Statement. During the prior year, the exploration assets and property, plant and
equipment held in Copper Bay were impaired in full as although the Group is confident of making a sale in the near future, it is not clear of
the cash generative abilities of these assets.
Assets of disposal group classified as held for sale:
Investments in Group undertakings are recorded at cost which is the fair value of the consideration paid, less impairment.
Details of the Group holdings are included in the table below:
Subsidiary
Registered office address
Activity
CAML %
2019
CAML %
2018
Date of
incorporation
Cash and cash equivalents
Trade and other receivables
CAML Kazakhstan BV
Shuak BV
Sary Kazna LLP
Kounrad Copper
Company LLP
Ken Shuak LLP
Copper Bay Limited
Copper Bay (UK) Ltd
Copper Bay Chile
Limitada
Minera Playa Verde
Limitada
CAML MK Limited
Herikerbergweg 238, 1101 CM Amsterdam,
The Netherlands
Herikerbergweg 238, 1101 CM Amsterdam,
The Netherlands
Business Centre No. 2, 4 Mira Street,
Balkhash, Kazakhstan
Business Centre No. 2, 4 Mira Street,
Balkhash, Kazakhstan
Business Centre No. 2, 4 Mira Street,
Balkhash, Kazakhstan
Masters House, 107 Hammersmith Road,
London, W14 0QH, United Kingdom
Masters House, 107 Hammersmith Road,
London, W14 0QH, United Kingdom
Ebro 2740, Oficina 603, Las Condes,
Santiago, Chile
Ebro 2740, Oficina 603, Las Condes,
Santiago, Chile
Masters House, 107 Hammersmith Road,
London, W14 0QH, United Kingdom
CMK Mining B.V.
CMK Resources Limited Cannon’s Court, 22 Victoria St, Hamilton
HM12, Bermuda
Prins Bernhardplein 200
1097 JB Amsterdam, The Netherlands
Ivo Lola Ribar no. 57-1/6, 1000 Skopje,
North Macedonia
CMK Europe SPLLC
Skopje
Holding Company
Holding Company
Kounrad project
(SUC operations)
Kounrad project
(SX-EW plant)
Shuak project
(exploration)
Holding Company
Holding Company
Holding Company
Exploration – Copper
Seller of zinc and lead
concentrate
Holding Company
Holding Company
Holding Company
Rudnik SASA DOOEL
Makedonska Kamenica
28 Rudarska Str, Makedonska Kamenica,
2304, North Macedonia
Sasa project
* Fully diluted basis
100
80
100
100
80
75*
75*
75*
75*
100
100
100
100
100
100
23 Jun 08
80
20 Sep 16
100
6 Feb 06
100
29 Apr 08
80
75*
75*
75*
75*
100
100
100
100
5 Oct 16
29 Oct 10
9 Nov 11
12 Oct 11
20 Oct 11
5 Sep 17
19 Jun 15
30 Jun 15
10 Jul 15
100
22 Jun 05
Liabilities of disposal group classified as held for sale:
Trade and other payables
Provisions
During the year the following have been recognised in discontinued operations:
Profit/(loss) from discontinued operations:
General and administrative expenses
Foreign exchange gain/(loss)
Finance costs
Impairment of exploration and evaluation assets
Loss from discontinued operations
Cash flows of disposal group classified as held for sale:
Operating cash flows
Total cash flows
31 Dec 19
$’000
31 Dec 18
$’000
106
113
219
58
3
61
31 Dec 19
$’000
31 Dec 18
$’000
73
18
91
2019
$’000
(170)
280
(57)
–
53
2019
$’000
48
48
40
–
40
2018
$’000
(153)
(927)
–
(6,194)
(7,274)
2018
$’000
(93)
(93)
CAML MK
For the period ended 31 December 2019, CAML MK Limited (registered number: 10946728) has opted to take advantage of a statutory
exemption from audit under section 479A of the Companies Act 2006 relating to subsidiary companies. The members of CAML MK Limited
have not required it to obtain an audit of their financial statements for the period ended 31 December 2019. In order to facilitate the
adoption of this exemption, Central Asia Metals plc, the parent company of the subsidiaries concerned, undertakes to provide a guarantee
under Section 479C of the Companies Act 2006 in respect of CAML MK Limited.
Shuak
In February 2020, the Group reduced its effective interest in Ken Shuak LLP from 80% to 10%. The Group will not be required to
contribute towards future costs of the project. The asset has been fully impaired.
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Strategic ReportFinancial StatementsGovernance NOTES TO THE FINANCIAL STATEMENTS contInued
for the year ended 31 December 2019
22. TRADE AND OTHER RECEIVABLES
Current receivables
Receivable from subsidiary
Loans due from subsidiaries
Trade receivables
Prepayments
VAT receivable
Other receivables
Non-current receivables
Prepayments
VAT receivable
Group
Company
31 Dec 19
$’000
31 Dec 18
$’000
31 Dec 19
$’000
31 Dec 18
$’000
–
–
1,493
2,195
1,101
1,487
6,276
441
2,948
3,389
–
–
3,746
1,463
2,006
2,863
381
341,005
–
387
90
220
10,078
342,083
71
2,049
2,120
–
–
–
215
373,182
–
395
189
211
374,192
–
–
–
The carrying value of all the above receivables is a reasonable approximation of fair value. There are no amounts past due at the end of the
reporting period that have not been impaired apart from the VAT receivable balance as explained below. Trade and other receivables and
loans due from subsidiaries are accounted for under IFRS 9 using the expected credit loss model and are initially recognised at fair value
and subsequently measured at amortised cost less any allowance for expected credit losses.
There are two loans due from subsidiaries. One loan is owed by CAML MK Limited, a directly owned subsidiary for $301,179,000 (2018:
$315,116,000), accrues interest at a rate of 5% per annum and is repayable on demand. There is another loan which is owed by CMK Mining
B.V, a subsidiary, for $39,826,000 (2018: $58,067,000) which accrues interest at a rate of 4.75% per annum and is repayable on demand.
These loans have been assessed for expected credit loss under IFRS 9, however as the Group’s strategies are aligned there is no realistic
expectation that repayment would be demanded. The expected future cash flows arising from the asset exceed the intercompany loan
values under various scenarios considered so it is believed these loans can be repaid and the expected credit loss is immaterial.
As at 31 December 2019, the total Group VAT receivable was $4,049,000 (2018: $4,055,000) which includes an amount of $3,086,000
(2018: $2,813,000) of VAT owed to the Group by the Kazakhstan authorities. In 2019, the Kazakhstan authorities refunded $403,000 and a
further $125,306 was received in March 2020 and this has been classified as current trade and other receivables as at 31 December 2019.
The Group is working closely with its advisers to recover the remaining portion. The planned means of recovery will be through a
combination of the local sales of cathode copper to offset VAT liabilities and by a continued dialogue with the authorities.
23. INVENTORIES
Group
Raw materials
Finished goods
31 Dec 19
$’000
6,431
852
7,283
31 Dec 18
$’000
6,901
628
7,529
The Group did not have any slow-moving, obsolete or defective inventory as at 31 December 2019 and therefore there were no write-offs
to the Income Statement during the year (2018: nil). The total inventory recognised through the Income Statement was $4,955,000
(2018: $4,668,000).
24. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
Cash at bank and on hand
Short-term deposits
Cash and cash equivalents
Restricted cash
Total cash and cash equivalent including restricted cash
Group
Company
31 Dec 19
$’000
14,072
14,494
28,566
4,013
32,579
31 Dec 18
$’000
21,605
13,044
34,649
4,376
39,025
31 Dec 19
$’000
3,340
14,494
17,834
3,824
21,658
31 Dec 18
$’000
2,253
13,044
15,297
4,222
19,519
The restricted cash amount of $4,013,000 (2018: $4,376,000) is held at bank to cover debt service compliance and Kounrad SUC licence
requirements. Short-term deposits are held at call with banks.
The Group holds an overdraft facility in Sasa and these amounts are disclosed in note 30 Borrowings.
Reconciliation to cash flow statements
The above figures reconcile to the amount of cash shown in the statement of cash flows at the end of the financial year as follows:
Cash and cash equivalents as above (excluding restricted cash)
Bank overdrafts (note 30)
Cash at bank and on hand in assets held for sale (note 21)
Balance per statement of cash flows
25. SHARE CAPITAL AND PREMIUM
At 1 January 2018
Treasury shares
At 31 December 2018
Treasury shares
At 31 December 2019
Group
31 Dec 19
$’000
28,566
(895)
106
27,777
Number of
shares
176,498,266
–
176,498,266
–
Ordinary
Shares
$’000
1,765
–
1,765
–
Share
premium
$’000
191,184
–
191,184
–
31 Dec 18
$’000
34,649
–
58
34,707
Treasury
shares
$’000
(7,780)
1,254
(6,526)
–
176,498,266
1,765
191,184
(6,526)
The par value of Ordinary Shares is $0.01 per share and all shares are fully paid.
26. CURRENCY TRANSLATION RESERVE
Currency translation differences arose primarily on the translation on consolidation of the Group’s Kazakhstan-based and North
Macedonian-based subsidiaries whose functional currency is the Tenge and North Macedonian Denar respectively. In addition, currency
translation differences arose on the goodwill and fair value uplift adjustments to the carrying amounts of assets and liabilities arising on
the Kounrad Transaction and CMK Resources acquisition which are denominated in Tenge and Denar respectively. During 2019, a non-cash
currency translation loss of $11,019,000 (2018: $10,288,000) was recognised within equity.
27. SHARE BASED PAYMENTS
The Company provides rewards to staff in addition to their salaries and annual discretionary bonuses, through the granting of share
options in the Company. The Company effectively has two such option schemes in place, the Old Scheme and the New Scheme.
Old Scheme
The first share option plan was introduced by the Company in February 2008 and initially had an exercise price of $6.42. On the
recommendation of the Remuneration Committee, the exercise price for the participants was reduced to $0.68 in February 2010 to
reflect the changed economic circumstances of the Company and maintain some form of incentive for staff. Only those staff still
employed by the Group at this time benefited from this decision and those participants who had left the Group maintained an exercise
price of $6.42 on their options. The vesting of share options in the plan is purely conditional upon time served by the participant and as at
31 December 2019, all options have fully vested.
New Scheme
The Company introduced the second share option plan in October 2011. This scheme has an exercise price of effectively nil for the
participants. The share options granted during 2012 until 2018 under this scheme were based on the achievement by the Group and the
participant of the performance targets as determined by the CAML Remuneration Committee that are required to be met in year one and
then options could be exercised one third annually from the end of year one. Options granted during 2012 to 2018 had straight forward
conditions attached and were valued using a Black-Scholes model.
Share options granted in 2019 vest after three years depending on achievement of the Group of performance target relating to the level of
absolute total shareholder return compound annual growth rate of the value of the Company’s shares over the performance period of
three financial years ending 31 December 2021. The fair value at grant date is independently determined using a Monte Carlo simulation
model that takes into account the exercise price, the term of the option, the impact of dilution (where material), the share price at grant
date and expected price volatility of the underlying share, the expected dividend yield, the risk-free interest rate for the term of the option,
and the correlations and volatilities of the share price.
The assessed fair value at grant date of options granted during the year ended 31 December 2019 was $1,450,000 in total with an amount
of $362,000 expensed for the year ended 31 December 2019. An additional dividend related share option charge of $723,000 (2018:
$699,000) was also recognised. The number of shares covered by such awards is increased by up to the value of dividends declared as if
these were reinvested in Company shares at the dates of payment. The outstanding share options included in the calculation of diluted
earnings/(loss) per share (note 17) includes these additional awards but they are excluded from the disclosures in this note.
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Strategic ReportFinancial StatementsGovernance
NOTES TO THE FINANCIAL STATEMENTS contInued
for the year ended 31 December 2019
27. SHARE BASED PAYMENTS contInued
New scheme continued
In total, an amount of $1,085,000 (2018: $4,904,000) has been credited to retained earnings and expensed within employee benefits
expense from continuing operations for the grant of stock options for the year ended 31 December 2019.
The model inputs for options granted during the year ended 31 December 2019 included:
Vesting period: 3 years
Vested options are exercisable for a period of 7 years after vesting
Exercise price: $0.01
Grant date: 30 May 2019
Expiry date: 29 May 2029
Share price at grant date: $2.71
Expected price volatility of the Company’s shares: 15%
Risk-free interest rate: 1.84%
As at 31 December 2019, nil (2018: 16,000) Old Scheme options and 4,182,729 (2018: 3,295,600) New Scheme options (including those
issued to Nurlan Zhakupov) were outstanding. Share options are granted to Directors and selected employees. The exercise price of the
granted options is presented in the table below for every grant. The Company has the option but not the legal or constructive obligation to
repurchase or settle the options in cash.
Movements in the number of share options outstanding and their related weighted average price are as following:
At 1 January
Granted
Exercised
Expired
Non-vesting
At 31 December
2019
2018
Average exercise
price in $ per
share option
Options
(number)
Average exercise
price in $ per
share option
0.01
0.01
0.08
–
0.01
0.01
3,311,600
1,124,877
(156,627)
–
(97,121)
4,182,729
0.39
0.01
0.01
6.42
–
0.01
Options
(number)
2,772,260
1,067,414
(364,074)
(164,000)
–
3,311,600
Non-vesting shares relates to options granted for which the performance targets were not met. Out of the outstanding options of
4,182,729 (2018: 3,311,600), 2,149,192 options (2018: 1,505,830) were exercisable as at 31 December 2019 excluding the value of additional
share options for dividends declared on those outstanding. The related weighted average share price at the time of exercise was $2.73
(2018: $3.71) per share.
Share options exercised by the Directors during the year are disclosed in the Remuneration Committee Report.
Share options outstanding at the end of the year have the following expiry date and exercise prices:
28. TRADE AND OTHER PAYABLES
Trade and other payables including accruals
Deferred consideration
Corporation tax, social security and other taxes
Group
Company
31 Dec 19
$’000
8,981
–
3,324
12,305
31 Dec 18
$’000
11,137
6,500
3,279
20,916
31 Dec 19
$’000
4,760
–
205
4,965
31 Dec 18
$’000
4,805
–
191
4,996
The carrying value of all the above payables is equivalent to fair value.
In April 2019, an agreement with the previous owners of CMK Resources Limited for receipt of $5,500,000 was finalised relating to the
$5,900,000 withholding tax liability in North Macedonia that relates to the activities of CMK Europe prior to CAML ownership. During the
year, the Group has paid the remaining $6,500,000 of deferred consideration.
The Group made a provision for the 2019 Kazakhstan corporate income tax liability of $424,000 (2018: $773,000) having paid an amount
of $13,284,000 in advance during the year (2018: $13,588,000). $841,000 was also paid during the year in relation to 2018 corporate
income tax (2018: $1,259,000 in relation to 2017).
The Group made a provision for the 2019 North Macedonian corporate income tax liability of $nil (2018: $1,293,000) having paid an amount
of $6,211,000 in advance during the year which exceeded the final liability (2018: $8,191,000). $792,000 was also paid during the year in
relation to 2018 corporate income tax (2018: $2,840,000 in relation to 2017).
All Group and Company trade and other payables are payable within less than one year for both reporting periods.
29. SILVER STREAMING COMMITMENT
The carrying amounts of the silver streaming commitment for silver delivery are as follows:
Current
Non-current
Group
Company
31 Dec 19
$’000
2,140
20,755
22,895
31 Dec 18
$’000
2,263
22,905
25,168
31 Dec 19
$’000
31 Dec 18
$’000
–
–
–
–
–
–
On 1 September 2016, the CMK Group entered into a Silver Purchase Agreement. The Group acquired this agreement as part of the
acquisition of the CMK Group and inherited a silver streaming commitment related to the production of silver during the life of the mine.
The reduction in the silver streaming commitment is recognised in the Income Statement within cost of sales as the silver is delivered
based on the units of production.
Grant – vest
Old Scheme:
21 Feb 10
New Scheme:
8 May 12
24 Jul 13
3 Jun 14
8 Oct 14
22 Apr 15
18 Apr 16
21 Apr 17
2 May 18
30 May 19
Expiry date
of option
Option exercise
price $
Share options (number)
2019
2018
30. BORROWINGS
21 Feb 20
7 May 22
23 Jul 23
2 Jun 24
7 Oct 24
21 Apr 25
18 Apr 26
21 Apr 27
2 May 28
2 May 29
0.68
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
–
16,000
100,000
60,155
196,355
214,354
358,948
533,157
642,376
952,507
1,124,877
100,000
60,155
196,355
214,354
358,948
621,790
676,583
1,067,415
–
Secured: Non-current
Bank loans
Secured: Current
Bank loans
Unsecured: Current
Bank overdraft
Total Current
Total borrowings
4,182,729
3,311,600
The carrying value of loans approximates fair value:
Employee Benefit Trust
The Company set up an Employee Benefit Trust (‘EBT’) during 2009 as a means of incentivising certain Directors and senior management
of CAML prior to the Initial Public Offering (‘IPO’). All of the shares awarded as part of the EBT scheme vested on the successful completion
of the IPO on 30 September 2010.
2,534,688 Ordinary Shares were initially issued as part of the arrangements in December 2009 followed by a further issue of 853,258 in
September 2010. The shares were issued at the exercise price of $0.68, which was the best estimate of the Company’s valuation at the
time. Details of the awards to Directors of the Company are contained in the Remuneration Committee Report.
Traxys
Bank overdraft
110
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
Group
Company
31 Dec 19
$’000
31 Dec 18
$’000
31 Dec 19
$‘000
31 Dec 18
$‘000
69,473
106,549
69,473
106,549
38,400
38,400
38,400
38,400
895
39,295
108,768
–
38,400
144,949
–
38,400
107,873
–
38,400
144,949
Carrying amount
Fair value
31 Dec 19
$’000
107,873
895
108,768
31 Dec 18
$’000
144,949
–
144,949
31 Dec 19
$’000
107,873
895
108,768
31 Dec 18
$’000
144,949
–
144,949
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
111
Strategic ReportFinancial StatementsGovernance
NOTES TO THE FINANCIAL STATEMENTS contInued
for the year ended 31 December 2019
30. BORROWINGS contInued
The movement on borrowings can be summarised as follows:
Group
Company
Balance at 1 January
Drawdown of borrowings
Repayment of borrowings
Finance charge interest
Finance charge unwinding of directly attributable fees
Interest paid
Gain on modification of the debt facility
Overdraft drawdown
31 Dec 19
$’000
144,949
–
(38,400)
9,455
1,324
(9,455)
–
895
31 Dec 18
$’000
181,914
60,809
(99,265)
12,065
2,323
(12,065)
(832)
–
Balance at 31 December
108,768
144,949
31 Dec 19
$‘000
144,949
–
(38,400)
9,455
1,324
(9,455)
–
–
107,873
31 Dec 18
$‘000
113,711
60,000
(28,744)
7,142
814
(7,142)
(832)
–
144,949
During the year, $38,400,000 (2018: $38,500,000) of the principal amount of Group debt was repaid as well as a further $9,455,000
(2018: $12,065,000) interest. As at 31 December 2019, non-current and current borrowings were $69,473,000 and $38,400,000
respectively (2018: $106,549,000 and $38,400,000 respectively).
The Group holds one corporate debt package with Traxys Europe S.A. repayable on 4 November 2022. Interest is payable at LIBOR plus
4.75% and reduced to LIBOR plus 4.00% with effect from 27 March 2020. Security is provided over the shares in CAML Kazakhstan BV,
certain bank accounts and the Kounrad off-take agreement as well as over the Sasa off-take agreement.
The debt is subject to financial covenants which include the monitoring of gearing and leverage ratios and these are all currently
complied with.
In August 2019, an overdraft facility was agreed with Komercijalna Banka AD Skopje with a fixed interest rate of 3.80% denominated in
Macedonian Denar. The overdraft was utilised for the first time in December 2019.
As at 31 December 2019, the Group measured the fair value using techniques for which all inputs which have a significant effect on the
recorded fair value are observable, either directly or indirectly (Level 2).
The different levels have been defined as follows:
´ Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
a) Asset retirement obligation
The Group provides for the asset retirement obligation associated with the mining activities at Kounrad, estimated internally to be required
in 2034. The provision is recognised at the net present value of future expected costs using a discount rate of 8.07% (2018: 8.07%). The
increase in estimate in relation to the asset retirement obligation of $750,000 (2018: reduction of $159,000) is due to a combination of
adjusting the provision recognised at the net present value of future expected costs using an inflation rate of 4.13% (2018: 5.59%) as well
as updating the provision for management’s best estimate of the costs that will be incurred based on current contractual and regulatory
requirements and the estimated useful life of mine to 2034.
Under current legislation entities operating mining and related activities in North Macedonia are required to take remedial action for the
land where such activities have occurred based on a plan approved by the Ministry of the Environment as well as in accordance with
international best practices. In 2017, the Group engaged an independent expert to conduct an independent assessment on the
environment of the mining activities of the Group and to prepare an assessment of the restoration and the relevant costs connected with
the mine, and the mining properties and in 2019, the Group engaged the University of Shtip to assess future costs in relation to TSF3.2 and
TSF4. The final asset retirement obligation used these external assessment as well as the Group’s own internal calculations to estimate the
future potential obligations. The expected current cash flows were projected over the useful life of the mining sites and discounted to
2019 terms using a discount rate of 7.25% (2018: 7.87%). The cost of the related assets are depreciated over the useful life of the assets
and are included in property, plant and equipment. The increase in estimate in relation to the asset retirement obligation of $2,914,000
(2018: reduction of $10,000) is from updating the provision for management’s best estimate of the costs that will be incurred based on
current contractual and regulatory requirements and the estimated useful life of mine to 2038.
b) Employee retirement benefit
All employers in North Macedonia are obliged to pay employees minimum severance pay on retirement equal to two months of the
average monthly salary applicable in the country at the time of retirement. The retirement benefit obligation is stated at the present value
of expected future payments to employees with respect to employment retirement pay. The present value of expected future payments
to employees is determined by an independent authorised actuary in accordance with the prevailing rules of actuarial mathematics.
c) Other employee benefit
The Group is also obliged to pay jubilee anniversary awards in North Macedonia for each ten years of continuous service of the employee.
Provisions for termination and retirement obligations are recognised in accordance with actuary calculations. Basic 2019 actuary
assumptions are used as follows:
Discount rate: 3.0%
Expected rate of salary increase: 2.2%
d) Legal claims
The Group is party to certain legal claims and the recognised provision reflects management’s best estimate of the most likely outcome.
´ Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or
32. CASH GENERATED FROM OPERATIONS
indirectly (that is, derived from prices) (Level 2).
´ Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).
Group
31. PROVISIONS FOR OTHER LIABILITIES AND CHARGES
Group
At 1 January 2018
Change in estimate
Settlements of provision
Unwinding of discount (note 15)
Exchange rate difference
At 31 December 2018
Change in estimate
Settlements of provision
Unwinding of discount (note 15)
Exchange rate difference
At 31 December 2019
Non-current
Current
At 31 December 2019
Asset
retirement
obligation
$’000
4,576
(159)
–
489
(478)
4,428
3,664
–
329
(23)
8,398
8,398
–
8,398
Employee
retirement
benefits
$’000
180
55
(31)
–
(8)
196
39
(32)
–
(4)
199
171
28
199
Other
employee
benefits
$’000
154
21
(3)
–
(7)
165
36
(11)
–
(4)
186
168
18
186
Legal
claims
$’000
455
–
(108)
–
(20)
327
–
(30)
–
(7)
290
290
–
290
Total
$’000
5,365
(83)
(142)
489
(513)
5,116
3,739
(73)
329
(38)
9,073
9,027
46
9,073
Profit before income tax including discontinued operations
Adjustments for:
Depreciation and amortisation
Silver stream commitment
Loss on disposal of property, plant and equipment
Foreign exchange gain/(loss)
Share based payments
Finance income
Finance costs
Other expenses
Impairment of held for sale assets
Changes in working capital:
Inventories
Trade and other receivables
Trade and other payables
Provisions for other liabilities and charges
Cash generated from operations
Note
10
27
14
15
10
21
23
22
28
31
2019
$’000
2018
$’000
67,847
65,406
30,080
(2,285)
481
(375)
1,085
(336)
11,153
–
–
246
(1,740)
(940)
(73)
33,342
(1,599)
561
3,879
4,904
(264)
14,999
576
6,194
(683)
(386)
3,550
(348)
105,143
130,131
Non-cash investing activities
In April 2019, a settlement agreement with the previous owners of CMK Resources Limited was finalised in respect of the $5,900,000
withholding tax liability in North Macedonia paid in the prior year. The liability related to activities of CMK Europe prior to CAML’s ownership.
The settlement amounted to $5,500,000 and accordingly, during 2019, CAML agreed to pay only the balancing $6,500,000 due in respect
of the $12,000,000 deferred consideration owed to the previous owners.
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Strategic ReportFinancial StatementsGovernance NOTES TO THE FINANCIAL STATEMENTS contInued
for the year ended 31 December 2019
33. COMMITMENTS
Significant expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows:
All deferred tax assets are due after 12 months.
Group
Property, plant and equipment
Other
31 Dec 19
$’000
851
340
1,191
31 Dec 18
$’000
475
570
1,045
34. DIVIDEND PER SHARE
In line with the Company dividend policy, the Company paid $32,164,000 in 2019 (2018: $39,603,000) which consisted of a 2019 interim
dividend of 6.5 pence per share and a final dividend for 2018 of 8.0 pence per share (2018: interim dividend of 6.5 pence per share and a
final dividend for 2017 of 10.0 pence per share).
35. RELATED PARTY TRANSACTIONS
Key management remuneration
Key management remuneration comprises the Directors’ remuneration, including Non-Executive Directors, disclosed in the Remuneration
Committee Report.
Non-Executive Directors
During the year, the Group paid consultancy fees of nil (2018: $13,261) to Nurlan Zhakupov, a Non-Executive Director of the Company,
under a consultancy agreement in terms of which Mr Zhakupov provides services over and above his normal duties.
The Kounrad foundation, a vehicle through which Kounrad donates to the community, was advanced $195,000 (2018: $226,000). This is a
related party by virtue of common Directors.
36. DEFERRED INCOME TAX ASSET AND LIABILITY
Group
The movements in the Group’s deferred tax assets and liabilities are as follows:
Other timing differences
Deferred tax liability on fair value adjustment on Kounrad Transaction
Deferred tax liability on fair value adjustment on CMK acquisition
Deferred tax liability, net
Reflected in the statement of financial position as:
Deferred tax asset
Deferred tax liability
At 1 Jan 19
$’000
(77)
(6,681)
(20,912)
(27,670)
Currency
translation
differences
$’000
(Debit)/credit to
income
statement
$’000
–
(51)
575
524
(113)
304
1,132
1,323
31 Dec 19
$’000
266
At 31 Dec 19
$’000
(190)
(6,428)
(19,205)
(25,823)
31 Dec 18
$’000
–
(26,089)
(27,670)
A taxable temporary difference arose as a result of the Kounrad Transaction and CMK Resources Limited acquisition, where the carrying
amount of the assets acquired were increased to fair value at the date of acquisition but the tax base remained at cost. The deferred tax
liability arising from these taxable temporary differences has been reduced by $1,436,000 during the year (2018: $1,535,000) to reflect
the tax consequences of depreciating and amortising the recognised fair values of the assets during the year.
Other timing differences
Deferred tax liability on fair value adjustment on Kounrad Transaction
Deferred tax liability on fair value adjustment on CMK acquisition
Deferred tax liability
Deferred tax liability due within 12 months
Deferred tax liability due after 12 months
Deferred tax liability
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AnnuAl RepoRt And Accounts 2019
At 1 Jan 18
$’000
(121)
(8,103)
(22,972)
(31,196)
Currency
translation
differences
$’000
(Debit)/credit to
income
statement
$’000
10
1,056
891
1,957
34
366
1,169
1,569
At 31 Dec 19
$’000
(1,345)
(24,744)
(26,089)
At 31 Dec 18
$’000
(77)
(6,681)
(20,912)
(27,670)
At 31 Dec 18
$’000
(1,017)
(26,653)
(27,670)
Where the realisation of deferred tax assets is dependent on future profits, the Group recognises losses carried forward and other
deferred tax assets only to the extent that the realisation of the related tax benefit through future taxable profits is probable.
The Group did not recognise other potential deferred tax assets arising from losses of $7,417,000 (2018: $8,465,000) as there is
insufficient evidence of future taxable profits within the entities concerned. Unrecognised losses can be carried forward indefinitely.
At 31 December 2019, the Group had other deferred tax assets of $2,810,000 (2018: $2,085,000) in respect of share-based payments and
other temporary differences which had not been recognised because of insufficient evidence of future taxable profits within the entities
concerned.
There are no significant unrecognised temporary differences associated with undistributed profits of subsidiaries at 31 December 2019
and 2018, respectively.
Company
At 31 December 2019 and 2018 respectively, the Company had no recognised deferred tax assets or liabilities.
At 31 December 2019, the Company had not recognised potential deferred tax assets arising from losses of $7,417,000 (2018: $8,465,000)
as there is insufficient evidence of future taxable profits. The losses can be carried forward indefinitely.
At 31 December 2019, the Company had other deferred tax assets of $2,810,000 (2018: $2,085,000) in respect of share-based payments
and other temporary differences which had not been recognised because of insufficient evidence of future taxable profits.
37. EVENTS AFTER THE REPORTING PERIOD
On 6 February 2020, the Group reduced its effective interest in Ken Shuak LLP from 80% to 10%. The Group will not be required to
contribute towards future costs of the project.
On 7 February 2020, the Group liquidated CMK Resources Limited, a wholly owned subsidiary.
The price of copper, zinc and lead have been impacted in 2020 by concerns over the outbreak of the COVID-19 pandemic and this will
impact on Group revenue for the year ended 31 December 2020 and may impact future asset values should they remain depressed. The
CAML Board has considered and debated a substantial range of possible scenarios of the Group’s operations, financial position and
forecasts covering a period of at least the next 12 months from the date of this report and these are discussed in note 2. Whilst there has
been little impact of COVID-19 to our operations at present, restrictions on the movement of goods, people and services could impact the
Group’s operations and management.
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
115
Strategic ReportFinancial StatementsGovernance GLOSSARY OF TECHNICAL TERMS
DIRECTORS, SECRETARY AND ADVISORS
Ag
Assay
Grade
g/t
Indicated Mineral Resource
Inferred Mineral Resource
JORC
Mineral Resource
NSR cut off
Ore Reserve
chemical symbol for silver
laboratory test conducted to determine the proportion of a mineral within a rock or other material
the proportion of a mineral within a rock or other material. For zinc and lead mineralisation this is
usually reported as a percentage of zinc and lead per tonne of rock
Grammes per tonne
An Indicated Mineral Resource is that part of a Mineral Resource for which quantity, grade or quality,
densities, shape and physical characteristics are estimated with sufficient confidence to allow the
application of Modifying Factors in sufficient detail to support mine planning and evaluation of the
economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable
exploration, sampling and testing and is sufficient to assume geological and grade or quality continuity
between points of observation. An Indicated Mineral Resource has a lower level of confidence than that
applying to a Measured Mineral Resource and may only be converted to a probable ore Reserve
An Inferred Mineral Resource is that part of a Mineral Resource for which quantity and grade or quality
are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient
to imply but not verify geological and grade or quality continuity. An Inferred Mineral Resource has a
lower level of confidence than that applying to an Indicated Mineral Resource and must not be
converted to an ore Reserve. It is reasonably expected that the majority of Inferred Mineral Resources
could be upgraded to Indicated Mineral Resources with continued exploration
the Australasian code for Reporting of exploration Results, Mineral Resources and ore Reserves, as
published by the Joint ore Reserves committee of the Australasian Institute of Mining and Metallurgy,
Australian Institute of Geoscientists and Minerals council of Australia
A Mineral Resource is a concentration or occurrence of solid material of economic interest in or on the
earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for
eventual economic extraction. the location, quantity, grade or quality, continuity and other geological
characteristics of a Mineral Resource are known, estimated or interpreted from specific geological
evidence and knowledge, including sampling
the lowest net smelter return (‘nsR’) value of mineralised material that qualifies as potentially
economically mineable
An ore Reserve is the economically mineable part of a Measured and/or Indicated Mineral Resource. It
includes diluting materials and allowances for losses, which may occur when the material is mined or
extracted and is defined by studies at pre-Feasibility or Feasibility level as appropriate that include
application of Modifying Factors. such studies demonstrate that, at the time of reporting, extraction
could reasonably be justified. the reference point at which Reserves are defined, usually the point
where the ore is delivered to the processing plant, must be stated. It is important that, in all situations
where the reference point is different, such as for a saleable product, a clarifying statement is included
to ensure that the reader is fully informed as to what is being reported
Pb
chemical symbol for lead
Probable Ore Reserve
A probable ore Reserve is the economically mineable part of an Indicated, and in some circumstances,
a Measured Mineral Resource. the confidence in the Modifying Factors applying to a probable ore
Reserve is lower than that applying to a proved ore Reserve
Zn
chemical symbol for zinc
BOARD OF DIRECTORS
nick clarke, non-executive chairman
nigel Robinson, chief executive officer
Gavin Ferrar, chief Financial officer
nigel Hurst-Brown, deputy chairman
Robert cathery, non-executive director
Roger davey, non-executive director
dr Gillian davidson, non-executive director
david swan, non-executive director
nurlan Zhakupov, non-executive director
PRINCIPAL PLACES OF BUSINESS
UK
sackville House
40 piccadilly
london W1J 0dR
united Kingdom
Kazakhstan
Business centre no.2
4 Mira street
Balkhash
Kazakhstan
North Macedonia
sasa dooel
28 Rudarska street
Makedonska Kamenica
north Macedonia
COMPANY SECRETARY
tony Hunter
REGISTERED ADDRESS
Masters House
107 Hammersmith Road
london W14 0QH
united Kingdom
REGISTERED NUMBER
5559627
COMPANY WEBSITE
www.centralasiametals.com
NOMINATED ADVISOR AND JOINT BROKER
Peel Hunt LLP
Moor House
120 london Wall
london ec2Y 5et
united Kingdom
JOINT BROKER
BMO Capital Markets
95 Queen Victoria street
london ec4V 4HG
united Kingdom
LEGAL ADVISORS
As to English Law
Fieldfisher llp
Riverbank House
2 swan lane
london ec4R 3tt
united Kingdom
As to Kazakh Law
Haller lomax llp
6/1 Kabanbai Batyr Ave.
16th floor
Kaskad Business center
Astana
Kazakhstan
As to North Macedonian Law
Karanovic partners
Bulevar partizanski odredi 14
“Aura” Business center III/5
skopje
north Macedonia
INDEPENDENT AUDITORS
BDO London
55 Baker street
london W1u 7eu
united Kingdom
PUBLIC RELATIONS
Blytheweigh
4-5 castle court
london ec3V 9dl
united Kingdom
REGISTRARS
Computershare Investor Services
the pavilions
Bridge Road
Bristol Bs13 8Ae
united Kingdom
116
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117
Strategic ReportFinancial StatementsGovernance
NOTES
118
CENTRAL ASIA METALS PLC
AnnuAl RepoRt And Accounts 2019
Sackville House
40 Piccadilly
London W1J 0DR
United Kingdom
www.centralasiametals.com