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a DeCaDe OF DeliVerY
annual rePOrt & aCCOunts 2020
Central asia Metals
is a DiVersiFieD
resOUrCes COMPanY
tHat OPerates lOW
COst Mineral assets
in nOrtH MaCeDOnia
anD KaZaKHstan
OUr PUrPOse is tO PrODUCe Base
Metals, WHiCH are essential FOr
MODern liVinG, PrOFitaBlY in a saFe
anD sUstainaBle enVirOnMent FOr
all OUr staKeHOlDers.
OPeratiOnal HiGHliGHts
SASA,
NORTH MACEDONIA
Zinc in concentrate
production of
23,815 tonnes
2019: 23,369 tonnes
Lead in concentrate
production of
29,742 tonnes
2019: 29,201 tonnes
KOUNRAD,
KAZAKHSTAN
GROUP
Copper cathode
production of
13,855 tonnes
2019: 13,771 tonnes
Copper sales of
13,860 tonnes
2019: 13,600 tonnes
Lost-time injury frequency
rate (‘LTIFR’) of 0.00
2019: 0.42
Corporate debt repayments
of $38.4 million
2019: $38.4 million
Overview
strategic report
Governance
Financial statements
FinanCial HiGHliGHts*
eBitDa margin
56%
2019: 60%
Dividend
14p
2019: 6.5p
Kounrad C1 copper cash cost
$0.51/lb
2019: $0.52/lb
sasa C1 zinc equivalent cash cost
$0.50/lb
2019: $0.47/lb
OVerVieW
strateGiC rePOrt
GOVernanCe
FinanCial stateMents
Financial Highlights
At a Glance
Building a Sustainable Business
01
02
04
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Introduction to
Corporate Governance
Board of Directors
Board Report
Audit Committee Report
Nomination Committee Report
Remuneration Committee Report
Sustainability Committee Report
Directors’ Report
Statement of Directors’
Responsibilities
60
64
66
70
72
76
86
89
91
Chairman’s Statement
Business Model
Our Markets
Chief Executive Officer’s Statement
Purpose, Culture and Values
Our Strategic Framework
Key Performance Indicators
Strategy in Action
Section 172
Sustainability Framework
Sustainability Summary
Operational Review
Financial Review
Risk Management
Principal Risks and Uncertainties
08
10
12
16
19
22
24
26
30
32
34
36
46
52
55
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
94
100
101
102
104
105
106
107
140
141
1
* See page 51 for definition of non-IFRS alternative financialperformance measures. Overview
strategic report
Governance
Financial statements
Kazakhstan
$87.7m
GrOss reVenUe
BY GeOGraPHY
north Macedonia
$82.6m
Copper
$87.7m
lead
$49.7m
GrOss reVenUe
BY Metal
Zinc
$30.9m
silver
$2.0m*
Kazakhstan
32%
north
Macedonia
66%
eMPlOYees BY
GeOGraPHY
UK
2%
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.
nOrtH MaCeDOnia
sasa Mine
¼¼ ZinC
¼¼ leaD
¼¼ silVer
SKOPJE
OVerVie W
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
delivered to smelters to be
processed into metal.
CAML plans to change the
mining method at Sasa with a
transition to cut and fill stoping
from the current sub-level
caving method. This is
expected to lead to maximum
recovery of mineral resources
as well as improved storage of
tailings for the life of the mine.
In 2020, the mine produced
23,815 tonnes of zinc in
concentrate and 29,742
tonnes of lead in concentrate.
Life of mine
17 years
Ore Reserve*
10.7Mt
Zinc grade
3.0%
Lead grade
4.0%
2
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
NUR-SULTAN
ALMATY
KaZaKHstan
KOUnraD OPeratiOn
¼¼ COPPer
OVerVie W
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 in 2034.
Since production
commenced, 110,100 tonnes
of copper have been produced
at Kounrad, at costs that
are amongst the lowest
in the world.
Life of operation to
2034
2020 copper production
13,855t
2020 copper sales
13,860t
Estimated remaining
recoverable copper
resources
140,000t
3
For operations in North Macedonia see page 38 For operations in Kazakhstan see page 42* The silver revenue of $2.0m is recognised in relation to the silver stream arrangement. Lead revenue of $49.7m includes silver by-product * Ore Reserves have an effective date of 30 June 2020 BUilDinG a sUstainaBle BUsiness
Overview
strategic report
Governance
Financial statements
OUr PUrPOse-DriVen aPPrOaCH
OUr PUrPOse sHaPes OUr BUsiness MODel anD OUr strateGiC DeCisiOns.
it is UnDerPinneD BY OUr ValUes WHiCH inFOrM tHe BeHaViOUr anD
stanDarDs eXPeCteD OF all OUr COlleaGUes in tHe BUsiness. tOGetHer
tHese DeterMine HOW We eMPlOY tHe inPUts tO tHe BUsiness tO iDentiFY
anD DeliVer OUr iMMeDiate anD lOnG-terM strateGiC OBJeCtiVes anD
Generate sUstainaBle, lOnG-terM retUrns FOr all OUr staKeHOlDers.
OUR
PURPOSE
OUR
VALUES
OUR
INPUTS
OUR
IMMEDIATE
STRATEGIC
OBJECTIVES
To produce base
metals, which are
essential for
modern living,
profitably in a safe
and sustainable
environment for all
our stakeholders.
PeOPle
anD sKills
resOUrCes
COMMUnitY
relatiOnsHiPs
inVestMent
HealtH
& saFetY
sUstainaBilitY
eFFiCienCY
anD innOVatiOn
resPeCt
anD trUst
FOCUs On saFetY
anD sUstainaBilitY
This objective ensures that
safety and sustainability
remains a key priority in
everything that we do.
tarGetinG lOW COst,
HiGH MarGins
This objective is around
our focus on low cost
production which results
in high margins.
ensUrinG PrUDent
CaPital allOCatiOn
This objective focuses on
CAML’s ability to allocate
capital efficiently.
OUR
LONG-TERM
STRATEGIC
OBJECTIVE
HOW
WE MEASURE
SUCCESS
OUR
ASSOCIATED
RISKS
OUR
STAKEHOLDERS
DeliVerinG
GrOWtH
Focus on CAML’s
ability to take
advantage of
opportunities to
grow the business
through acquisition.
MeasUrinG
sUCCess
tHrOUGH KPis
see pages
24-25
Generating
long-term
sustainable
value for:
eMPlOYees
COMMUnities
inVestOrs
GOVernMents
sUPPliers
DeliVerinG
ValUe tHrOUGH
rOBUst risK
ManaGeMent
see pages
52-54
4
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
5
Overview
strategic report
Governance
Financial statements
strateGiC rePOrt
COntents
Chairman’s Statement
Business Model
Our Markets
Chief Executive Officer’s Statement
Purpose, Culture and Values
Our Strategic Framework
Key Performance Indicators
Strategy in Action
Section 172
Sustainability Framework
Sustainability Summary
Operational Review
Financial Review
Risk Management
Principal Risks and Uncertainties
08
10
12
16
19
22
24
26
30
32
34
36
46
52
55
6
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
7
PAGE HEADER CHairMan’s stateMent
strOnG PerFOrManCe
DesPite CHallenGes
Overview
strategic report
Governance
Financial statements
Free cash flow
$58.9m
2019: $69.8m
Dividend per share
14p
2019: 6.5p
I am pleased that we ended the year in a strong
position. COVID-19 remains a very real risk for us
all, but we believe we navigated these challenges
as best as we could during 2020 and this,
coupled with much improved H2 2020 metals
prices, meant we ended the period with
commendable financial results and a strong
balance sheet.
niCK
ClarKe,
CHAIRMAN
2020
Despite the challenges of 2020, not least
the weak H1 2020 commodity prices, we
reported strong production from our
operations, which led to CAML EBITDA of
$95.7 million and free cash flow of $58.9
million. This has, in turn, meant we
continued to deleverage, and we ended
the year with gross debt of $80.4 million,
some $28.4 million lower than 2019.
lOOKinG BaCK OVer a sUCCessFUl
DeCaDe as an aiM-listeD COMPanY
We reached two significant milestones in
2020. In April, we produced our
100,000th tonne of copper cathode
from Kounrad. This achievement was
made possible due to the long-term
dedication of General Director, Pavel
Semenchenko, and his team, as well as
Technical Director, Howard Nicholson,
who took overall responsibility for the
project’s construction on time and below
budget and who remains responsible for
the technical aspects of 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.
September 2020 marked 10 years as an
AIM-listed company for CAML and we
have enjoyed a very successful decade.
We have grown our business from an
exploration and development company
with a suite of assets in central Asia at
the time of listing, to a focused mining
company, producing the base metals
which are essential for modern living,
profitably and in a safe and sustainable
environment for all our stakeholders.
We now employ over 1,000 people in
Kazakhstan and North Macedonia and in
2020 produced some 13,855 tonnes of
copper, 23,815 tonnes of zinc and 29,742
tonnes of lead with gross revenue of
$170.3 million from our two projects. Our
local suppliers are important to us, and
many others in the local communities
also depend on our operations for their
livelihoods. We have a strong health and
safety ethos and our operations have
leading safety statistics. We are most
proud to have now set up charitable
foundations in both countries with clear
mandates to support sustainable and
long-term development around both of
our operations. In the nine years since we
commenced copper production at
Kounrad, we will soon have returned to
our supportive shareholders over $209.6
million in dividends. We believe that our
alignment with our shareholders as well
as other stakeholders in this regard sets
us apart from many of our peers.
sUstainaBilitY
We have continued to devote much of
our time and energy to advancing our
ESG and sustainability efforts during
2020. In Q2, 2020 we published our first
Sustainability report, detailing our efforts
and achievements in this key area, and
this was very well received.
We advanced our approach in 2020, as
we retained independent consultants,
ERM, to undertake a stakeholder
engagement exercise to revisit our
material topics as previously defined by
our desk-based assessment in 2019.
We were reassured to conclude that we
had been focusing on the areas that are
most important to our internal and
external stakeholders and, crucially, we
believe this additional analysis has given
us the depth of understanding to align our
next Sustainability Report, which will be
published in Q2 2021, to the Global
Reporting Initiative (‘GRI’) Standards
‘Core option’.
Our September 2020 tailings storage
facility 4 (‘TSF4’) leakage, see note 4, was
a big disappointment for us and we have
since made operational, monitoring and
personnel changes at Sasa to try to
ensure that this never happens again. I
was, however, impressed with how the
team dealt with this issue. We have been
transparent and open with all of our
stakeholders and we appointed the best
consultants in their fields to help us with
the tailings dam and the associated river
remediation programme. Our CEO, Nigel
Robinson, spent the majority of Q4 2020
in North Macedonia and held many
meetings with local and national
government officials in conjunction with
the Sasa team to ensure our relationships
in North Macedonia remain as strong now
as they were before the incident.
GOVernanCe
Non-Executive Directors Nigel Hurst-
Brown and Robert Cathery have informed
me that they plan to leave the CAML
Board during 2021. I am delighted that
Mike Prentis has agreed to join the CAML
Board as an Independent Non-Executive
Director, effective from 31 March 2021.
Formerly a fund manager with BlackRock,
Mike brings to the Board over 35 years of
investment and capital markets
experience and will be a great addition to
the Group. Mike will join the Audit,
Sustainability and Nomination Committees.
Since the escalation of the COVID-19
pandemic in March 2020, we held weekly
CAML Board gatherings as we felt that it
was important to provide hands-on
guidance and support to the Executive
Directors and senior management team
in what has arguably been the most
unusual period in recent history. I believe
that we have navigated this virus (and the
unfortunate TSF4 incident) as well as
possible and we look forward to a
brighter 2021 with various vaccine
programmes now being implemented.
aCKnOWleDGeMents
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 2020, in what was a
particularly challenging year globally. Your
efforts do not go unnoticed and we very
much appreciate your hard work.
niCK ClarKe
CHAIRMAN
29 March 2021
8
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
9
BUsiness MODel
HOW We Generate ValUe
FOr all OF OUr staKeHOlDers
Overview
strategic report
Governance
Financial statements
OPeratinG WitH eXCellenCe
DeliVerinG ValUe FOr all OF OUr staKeHOlDers
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.
sUstainaBilitY UnDerPins
OUr BUsiness MODel
10
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
11
INVESTORSEPS24.78 cents2019: 29.36 centsDividend full year 14p2019: 6.5pEMPLOYEESSasa Kounrad693 3302019: 698 2019: 323Total number of CAML employees and contractors 1,2452019: 1,230COMMUNITIESSasa social contributions $0.3m2019: $0.3mKounrad social contributions $0.2m2019: $0.3mGOVERNMENTSTax paid in North Macedonia since November 2017 acquisition $48.6mTax paid in Kazakhstan since 2012 $163.4mSUPPLIERSSasa % in-country procurement 52%Kounrad % Karaganda region procurement 56%PEOPLE, KNOWLEDGE AND EXPERIENCEEFFICIENT EXTRACTION LOW-COST OPERATIONS Our peopleWe 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. Mining oreSasa is a conventional underground mine and ore is treated by froth flotation to produce separate zinc and lead concentrates.Annual plant throughput is currently up to 850,000 tonnes.CAML plans to transition its mining method to cut and fill stoping at Sasa from the current sub-level caving method, which is expected to lead to maximum recovery of mineral resources as well as improved storage of tailings for the life of the mine.Sasa currently has reserves and resources to support a 17-year mine life. in-situ dump leachingCAML has now had nine 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 140,000 tonnes of estimated remaining recoverable copper resources, which should ensure a life of operation to the end of the licence in 2034. Producing our metalsCapital and operational cost control is applied at both operations. Maintaining low costs underpins our profitability, allowing us to look after our stakeholders and to reward shareholders with attractive dividends.Sasa had on-site 2020 costs of only $39.2 per tonne (2019: $40.3 per tonne) and Kounrad is one of the lowest cost copper producers globally.sasa local workforce 99%sasa 2020 ore extraction826,421t2019: 817,714tsasa C1 zinc equivalent cash cost $0.50/lb2019: $0.47/lbKounrad local workforce 100%Kounrad estimated remaining recoverable copper resources140,000tKounrad C1 copper cash cost$0.51/lb2019: $0.52/lb Market Overview
OUr MarKets
tHe lOnG-terM FUtUre
OF OUr PrODUCts
CAML has built its business producing the base metals which are essential
for a modern world. The Company has confidence in the long-term demand
aspects for the copper, zinc and lead it produces which, coupled with a
limited longer-term pipeline of good quality development projects, should
see attractive metal prices prevail for the future.
COPPer
As the world transitions from fossil fuels to green
technology, there is an increasing demand for the base
metals which are used in their production. Copper is an
essential component of this transition as it is used in wiring,
electric motors, wind turbines and other technologies.
Global electrification and green stimulus trends look set to
boost copper demand into the future.
There is a surge in demand for copper to wire the green
economy, as electric vehicles need around four times more
copper than those with internal combustion engines (‘ICEs’).
According to industry experts, solar panels and wind farms
need as much as five times the amount of copper needed
for fossil fuel power generation. Around 1 million tonnes per
year demand growth is predicted by 2025 in each of the
electric vehicle and renewable energy sectors.
Furthermore, copper is used in almost all construction
projects and major appliances. Copper will also play a key
role in a push to boost building efficiencies as there will be
wiring upgrades, LED lighting, and heat pumps. However,
there is a threat of copper losing market share in low
voltage and communications cables and optical fibres could
displace some material demand in the medium term.
PrODUCinG tHe Base Metals
WHiCH are essential FOr
MODern liVinG
Overview
strategic report
Governance
Financial statements
ZinC
leaD
The major application for lead is in lead-acid battery
production which accounts for nearly 80% of total demand.
Batteries play an essential role in the function of our society
from trucks which are needed to ship supplies to hospitals,
supermarkets etc, to industrial batteries.
Stationary batteries are also essential for backup power at
hospitals, data centres, telecommunications companies and
other critical infrastructure. As a result, lead batteries have a
place in the green economy alongside lithium-ion batteries.
A huge amount of regulation has been passed in recent
decades to control lead exposure and protect both the
workforce and the environment from its toxic aspects.
This has led to the reduction in lead usage.
Opportunities:
´ Increasing demand for uninterrupted power supply, rising
energy storage application
´ Plays an important role in electric vehicles by running
electrical systems such as lights, windows, navigation,
air-conditioning and airbag sensors
´ Potential substitute when other metal supplies (i.e. cobalt,
nickel and lithium) are limited
´ Near to medium term, start-stop technology in internal
combustion engine vehicles requires more lead
Threats:
´ Losing market share due to environmental concerns
´ Well established secondary market
´ Main use in batteries is being replaced in the longer term
by nickel and lithium batteries in electric vehicles
12
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
13
Increasing the life span of products and reducing the need for replacement parts has been a key initiative for sustainability. The prime use of zinc is galvanising steel and iron to protect against corrosion. This prevents the premature replacement of these products as the zinc coating protects them. Rising wealth in emerging markets is driving increased investment into galvanisation to extend the life cycle of steel and iron-based products. However, there is increasing competition from aluminium in die-cast alloys. Furthermore, with the galvanising coating technology improvements, there is a reduction in zinc ‘wastage’, in turn reducing zinc demand. Increasing battery storage demand due to the shift towards renewables has resulted in a search for alternatives to expensive lithium-ion batteries. Recent developments in zinc batteries offer good signs of progress to provide a cheaper potential alternative for buyers. Furthermore, one of the less well-known uses of zinc is in fertilisers. As a micronutrient for plant life, zinc is an important component of various enzymes that are responsible for driving many metabolic reactions in crops.Opportunities: ´Rising wealth in emerging markets driving increased investment into galvanisation to extend the life cycle of products ´Limited scrap recovery Threats: ´Risk of substitution from aluminium, for die-cast alloys in particular ´Reduction in zinc wastage due to improvements in galvanisation techniquesOpportunities: ´Beneficiary of global renewable energy trend ´Electric vehicles are more copper-intensive than incumbents, plus the infrastructure required to transmit the required electricity to charging stations ´Drive for building efficiencies will result in greater demand for copperThreats: ´Losing market share in low voltage and communications cables ´Ex-Chinese demand remains below levels seen 15 years ago OUr MarKets CONTINUED
2020 was a tale of two halves for base metals prices, which recovered well in H2 2020 from their H1 2020
lows. the expectation is that the stimulus measures by governments around the world will drive metal
demand over the near and medium term.
Overview
strategic report
Governance
Financial statements
KaZaKHstan
nOrtH MaCeDOnia
The COVID-19 pandemic has been the biggest
shock to Kazakhstan’s economy in almost two
decades. While the collapse in oil prices in
2009 and 2015 shrank aggregate demand
and rocked the stability of the financial sector,
the current crisis has meant that the supply
side of the economy has also been affected
by a series of lockdowns. Following the
announcement of a state of emergency, a
state commission was set up to coordinate
the efforts to fight the pandemic, impose
quarantine control, and provide support to
those people whose livelihoods were affected
by the virus or by the emergency restrictions.
More than a year ago President Kassym-Jomart
Tokayev came to power and initiated an ambitious
economic and political reform programme in
Kazakhstan. While the pandemic has posed
various challenges to the implementation of
reforms, it has also become a catalyst for
launching new reform measures such as public
sector reform, large-scale privatisation and the
promotion of a green economy. These measures
are aimed at tackling the impact of the pandemic
while also accelerating the path to diversify the
economy away from hydrocarbons.
According to the National Bank of Kazakhstan,
Kazakhstan’s 2020 GDP declined by 2.6%,
and inflation was 7.5%.
Copper
Copper began the year close to $6,000 per
tonne and fell to its lowest point on 19 March
2020, at $4,353 per tonne, when concerns
over the spread of COVID-19 came into focus.
Global lockdowns resulting in temporary mine
shutdowns and reduced production levels
rebalanced the copper market and, on the
expectation of stimulus measures, pushed
copper to above $8,000 per tonne in
December 2020, the highest price since
2013. The International Copper Study Group
(‘ICSG’) expects a 2020 global refined copper
deficit of 589,000 tonnes. Fastmarkets
expects a 2021 deficit of 600,000 tonnes
as a result of a sharp rebound in global
ex-China demand.
Following the outbreak of the COVID-19
pandemic, a state of emergency was declared
in North Macedonia between March and June
2020, which delayed the parliamentary
elections until July, resulting in the country
being run by the ‘technical government’ for H1
2020. Following elections, a government was
formed in August 2020, comprising a
coalition between two parties, the ruling
party, SDSM, and DUI, which typically
represents Albanian voters. This elected
Government will continue to implement
EU-related reforms and progress with EU
membership negotiations. In March 2020,
North Macedonia officially joined NATO.
According to the National Bank of North
Macedonia, North Macedonia’s 2020 GDP is
expected to have declined by 4.4%, with
inflation of 1.1%.
Zinc
The zinc concentrate market was anticipated
to be in surplus during 2020. However,
COVID-19 related shutdowns of major mines
in Peru, Bolivia and India in particular offset
this somewhat. China’s demand for zinc
picked up in the second half of the year and
this, combined with the rockfall-related
supply disruption at Vedanta’s Gamsberg zinc
mine in South Africa and renewed investor
confidence, pushed the zinc price higher, rising
by approximately $300 per tonne to $2,800
per tonne after the Gamsberg incident.
According to the International Lead and Zinc
Study Group (‘ILZSG'), there was an overall
2020 surplus of 553,000 tonnes. However,
the Group envisages a surplus of 463,000
tonnes in 2021, due in part to fewer mine
disruptions. While governments have begun
to roll out COVID-19 vaccines, the threat of
another year of above-average disruptions
remains high.
Lead
The 2020 lead market was tight due to
reduced mine supply coupled with reduced
demand from the global automotive industry,
which uses lead in lead-acid batteries, due to
COVID-19. Consultancy group LMC
Automotive forecasts global light vehicle
sales could increase to 86 million vehicles in
2021 - up from an estimated 77 million
vehicles in 2020, but still below the 90 million
vehicles sold in 2019. The ILZSG estimates a
refined lead market surplus of 166,700
tonnes for the first 11 months of 2020.
oversupply expected in 2021.
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 attractive high dividend yield.
2020 was a challenging year for global stock markets due in large part to
COVID-19. The FTSE 100 fell by over 30% between January and March as
the severity of the pandemic became apparent. Markets generally improved
as the year progressed though, and the FTSE 100 ended the year down only
15% since January 2020.
At the end of the year, the CAML share price closed at £2.40, which
represents a 9% increase on the 31 December 2019 price of £2.20.
However, since the share price low of £1.14 in March 2020, which was
related to the COVID-19 pandemic, the CAML share price appreciated by
over 100% to £2.40 by 31 December 2020. The FTSE AIM All Share/Basic
Resources Index gained 104% during 2020 and outperformed CAML.
The graphs below show CAML’s share price performance against the FTSE
AIM All Share/Basic Resources Index.
CAML versus AIM Basic Resources (IPO – 2020)
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FTSE AIM All Share/Basic Resources Index (Rebased)
CAML versus AIM Basic Resources (2020)
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CAML
FTSE AIM All Share/Basic Resources Index (Rebased)
COPPer
1 JAN 2020
$6,149/t
+26.0%
31 DEC 2020
$7,749/t
Commodity market $/t
average
$6,184/t
ZinC
1 JAN 2020
$2,280/t
+19.7%
31 DEC 2020
$2,729/t
Commodity market $/t
average
$2,268/t
leaD
1 JAN 2020
$1,914/t
+3.3%
31 DEC 2020
$1,976/t
Commodity market $/t
average
$1,825/t
14
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
15
CHieF eXeCUtiVe OFFiCer’s stateMent
Overview
strategic report
Governance
Financial statements
enterinG 2021 in a strOnG POsitiOn
Gross revenue
$170.3m
2019: $180.8m
ltiFr
0.00
2019: 0.42
We ended 2020 in a strong position, having
overcome a number of difficulties during the year,
in particular the impact of the COVID-19
pandemic. With zero LTIs at both of our
operations, we met our increased production
guidance at Kounrad and, at Sasa, we achieved
our zinc guidance and came within 1% of our lead
guidance, despite the TSF4 related shutdown.
niGel
rOBinsOn,
CHIEF EXECUTIVE OFFICER
2020 OVerVieW
Sasa produced 23,815 tonnes of zinc in
concentrate and 29,742 tonnes of lead in
concentrate at a C1 zinc equivalent cash
cost of production of $0.50 per pound.
While these costs are above previous
years, this is largely due to increased
treatment charges globally as on-site
costs remained low.
We have continued to deleverage during
2020, having repaid a further $38.4 million
of corporate debt, ending the year in a net
debt position of $36.2 million, with cash in
the bank of $47.9 million (including
restricted cash). We view this as significant
progress given that CAML had debt of
almost $200 million on acquiring Sasa in
November 2017.
Our Kounrad operations continued to
perform well, delivering copper cathode
output within the increased production
guidance range of 13,855 tonnes.
Kounrad’s 2020 C1 copper cash cost of
production remained extremely low by
global standards at $0.51 per pound.
Despite the challenges of COVID-19 and
weak H1 2020 metal prices, demand for
copper, zinc and lead improved materially
in H2 2020 and that, combined with our
robust production, led to us reporting
gross revenue of $170.3 million. 2020
EBITDA was $95.7 million with an EBITDA
margin of 56%.
The Group generated 2020 free cash flow
of $58.9m million, enabling us to
recommend a 8 pence per share final
dividend. This equates to a full-year
dividend of 14 pence per share, which
represents 57% of 2020 free cash flow.
sUstainaBilitY
This strong operational and financial
performance underpins our business and
we place significant emphasis on ensuring
that we are sustainable for all stakeholders.
To demonstrate our efforts and
achievements in this area, we will soon be
publishing our second Sustainability
Report, our first to GRI standards core
option, which will provide qualitative and
quantitative data to support material
sustainability topic areas for us and our
external stakeholders. We have also
refined our corporate strategy to embed
sustainability issues and ensure it reflects
our purpose of ensuring we produce base
metals profitably in a safe and sustainable
environment.
We remain focused on safety and are
pleased to report zero LTIs at either of our
operations during 2020. We therefore
report a 2020 LTIFR of 0.00, a marked
improvement on the LTIFR of 0.42 that we
reported in 2019. By the end of 2020,
there had been 959 days since the last LTI
at Kounrad and 702 days since the last LTI
at Sasa. Effective safety training and
supervision for our employees will always
be a priority and are crucial to achieving a
strong safety record.
We were disappointed to report a leakage
at our TSF4 in September 2020. However,
under the guidance of global tailings
experts, Knight Piésold, we were able to
swiftly repair the facility and make some
engineering, operational and monitoring
improvements for the future stability of
the dam. Most importantly, we managed to
maintain our strong government and local
community relationships through our
transparent and open approach to this
issue, as well as our efforts in remediating
the river.
It is estimated that, by 31 December 2020,
in excess of 95% of the tailings deposited
during the leakage had been removed from
the river. Efforts to remove the remaining
tailings will continue into 2021, with the
necessary sediment traps already in place
and collecting material. Biodiversity efforts
can now accelerate in 2021, with
revegetation and tree planting activities to
be undertaken along the riverbanks, as well
as the long-term monitoring of algae and
macro-invertebrate regeneration.
During 2020, we spent $0.5 million at Sasa
and Kounrad, supporting the local
communities and our host countries
nationally as we played our part in helping
to mitigate the negative health impacts of
the COVID-19 pandemic. 62% of our
community support budget was spent on
COVID-19 related expenditure. In
Kazakhstan, our Kounrad Foundation
charity purchased a polymerase chain
reaction (‘PCR’) machine for Balkhash
Central Hospital to ensure timely virus
testing for the local population. In North
Macedonia, Sasa donated $166,000 to
provide support for hospitals
(approximately 50% of funds), as well as
providing help for the most vulnerable in
the local community and contributing to
the Government’s Ministry of Health
COVID-19 fund.
Supporting our local communities in
general 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 have
recently completed the formation of a
similar Sasa Foundation.
sasa
At Sasa, in addition to our efforts in broadly
achieving our production goals despite
TSF4 related production stoppages, we
also completed our Life of Mine studies,
the findings of which were announced with
our interim results in September 2020.
The Board recommends the transition of
Sasa’s Svinja Reka orebody from the
current sub-level caving method to cut and
fill stoping as this will not only result in
maximum recovery of mineral resources
but will also enable safer operating
practices as well as longer-term
improvements to tailings disposal.
Implementation of the Cut and Fill Project
has commenced, and a dedicated Capital
Projects Team formed to ensure the
delivery of this project.
16
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
17
CHieF eXeCUtiVe OFFiCer’s stateMent CONTINUED
PUrPOse, CUltUre anD ValUes
Overview
strategic report
Governance
Financial statements
eBitDa
$95.7m
2019: $108.6m
eBitDa margin
56%
2019: 60%
an OPen anD
transParent BUsiness
tHrOUGH OUr ValUes, We BelieVe We HaVe CreateD
a WOrKinG CUltUre tHat is enterPrisinG, resPeCtFUl
anD PrODUCtiVe, WitH FOCUs On saFetY anD
sUstainaBilitY as Well as eFFiCienCY anD innOVatiOn.
KOUnraD
During the year at Kounrad, leaching
operations performed well, as did the
SX-EW processing facilities which
achieved availability of over 99%. We
continued to develop more of the Western
Dumps for future leaching operations,
while focusing on maximising copper
extraction in the Eastern Dumps. Capital
expenditure remained very low at $1.3
million, comprising some replacement
anodes, plus increasing our footprint of
leaching infrastructure and collector
trenches around the Western Dumps.
MarKet PerFOrManCe
During 2020, the CAML share price
closed on 31 December 2020 at £2.40,
which represents a 9% increase on the
31 December 2019 closing price of
£2.20. However, since the COVID-19
related share price low of £1.14 in March
2020, CAML shares appreciated by over
100% to the end of the year.
OUtlOOK
The outlook for 2021 is positive, and we
look forward to the year ahead producing
the base metals essential for modern
living, for all stakeholders, in a safe and
sustainable manner.
WitH FOCUs
Our culture of embracing technology with
an enterprising spirit is born out of our
values, which ensure we focus on safety,
sustainability, respect and trust, and
efficiency and innovation.
While we remain in the midst of the
COVID-19 pandemic, we have gained
confidence over the last 12 months in the
measures we have put in place to try to
manage, as best we can, infection rates on
our sites. We no longer currently fear the
forced shutdown or force majeures that
we believed possible last year, and the
2021 roll-out of vaccine programmes
around the world should soon result in a
marked improvement in the health of the
global population. Despite the COVID-19
impact, the Group did not access any
financial support throughout the
pandemic from the UK Government.
We start 2021 in a strong base metal price
environment, with improving treatment
charges and increased demand for the
metals we produce. Our production
guidance for Sasa is 825,000 to 850,000
tonnes of ore, which should lead to
between 23,000 and 25,000 tonnes of
zinc in concentrate and between 30,000
and 32,000 tonnes of lead in concentrate.
At Kounrad, we expect to produce
between 12,500 and 13,500 tonnes
of copper.
Our focus at Sasa during 2021 and 2022
will be implementing the Cut and Fill
Project. We now expect 2021 capital
expenditure of $22-23 million, higher than
previously guided in the H1 2020 results
announcement. This adjustment is due to
an additional $2-3 million in sustaining
capital expenditure deferred from 2020 as
well as a decision taken to bring forward
from 2022 $4-5 million of project capital
expenditure due to the current strong
commodity prices. We are progressing well
and look forward to implementing this
project which will see us extract the
maximum resources in a safe, sustainable
and efficient manner.
niGel rOBinsOn
CHIEF EXECUTIVE OFFICER
29 March 2021
OUr PUrPOse
OUr CUltUre anD ValUes
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 by
embracing technology and continues
to operate with an enterprising spirit.
Our values inform the behaviour and
standards expected of all our colleagues in
the business regardless of the 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 purpose is to produce base metals
which are essential for modern living,
profitably, in a safe and sustainable
environment for all our stakeholders. Our
metals play a key role in transmitting
power, in accommodation and
workspaces, as well as for energy storage
and the transformation of people, all of
which fosters economic growth and
development.
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.
18
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
19
See following section for how we have lived our values during 2020
PUrPOse, CUltUre anD ValUes CONTINUED
Overview
strategic report
Governance
Financial statements
HOW We’Ve liVeD UP tO OUr ValUes
HealtH anD saFetY
sUstainaBilitY
eFFiCienCY anD innOVatiOn resPeCt anD trUst
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.
Our priority in 2020 primarily focused on
keeping our employees and contractors
healthy during the pandemic. We shielded
vulnerable workers at both of our operations
and continued to pay our employees as
normal during these challenging times.
Through ongoing communications with our
employees, including Toolbox Talks, meetings
and videos, we continued to keep our
employees aware of preventative
measures for COVID-19.
We have good presence on site by our
Company doctors who have provided
tremendous support during the pandemic.
We adopted their advice, as well as all
COVID-19 measures that were
recommended by the World Health
Organization (‘WHO’) and our host
governments. At Sasa, our teams have kept
in regular communications with the Mayor
of the nearby town, Makedonska Kamenica,
and the Local Crisis Committee too.
We were delighted to have zero LTIs at
either operation during the year and, by
the end of 2020, we had recorded 702
days without a LTI at Sasa and 959 days
since the last LTI at Kounrad.
Both operations are in the process of
moving all mandatory HSE training to
online to make this easy to access
and administrate.
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.
Throughout 2020, we strengthened our
focus on sustainability by integrating it
throughout our business and, in doing so,
we moved aspects of governance and HR
teams under the sustainability realm.
We taught our management teams and
employees about the importance of
Corporate Governance and undertook an
internal review and self-assessment. This
included refresher training on our
whistleblowing and code of conduct
policies. Our new hires now receive our
various corporate policies, such as the
Whistleblowing, Code of Conduct and
Anti-Bribery and Corruption and they
confirm that they have read and
understood them.
We endeavour to better understand,
engage and partner with our key
stakeholders to create sustained, mutual
value. To that end, we appointed
consultants to undertake a stakeholder
engagement programme to ensure we
were focussing on the most important
sustainability areas and we provided GRI
training for key personnel, as we wish to
report in line with these standards
going forward.
We want to make sure that we are doing
all that we can for our employees and
support them during difficult times. For
that reason, we introduced return to
work interviews for those who come
back to work following a period of illness.
20
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
21
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 to achieve long-term sustainable production.Despite the challenges that occurred in 2020, both of our operations have continued to drive positive changes with innovations in the production process, education and social aspects.Our technical team has proven itself during 2020 for its focus on efficiency and innovation. In delivering the Sasa Life of Mine study, we are committed to optimising our mining method with the Cut and Fill project which will allow us to extract our maximum resources while storing over 40% of our tailings underground in a more innovative and environmentally and socially acceptable manner. Also, during 2020, we installed NewTrax digital monitoring systems to our mobile plant, which enables us to efficiently monitor utilisation and availability. We also undertook a scoping study into the potential to use solar power to generate a portion of our energy requirements at Kounrad, which is currently entirely reliant on the local grid. Further work will be undertaken this year.Attracting, developing and retaining the best people is crucial to our success. At Sasa, we developed various HR processes to help streamline and reduce non-value-add administrative activities. We implemented a recruitment procedure, to include online testing and a new initiative called ‘Rising Stars.'. Here we identified our leaders of tomorrow and we will be working with these individuals in 2021 to create development plans to assist them on the path to reach their full potential.We are also moving towards ‘one single source of truth’ for employee information, linking our time and attendance system to our payroll.Our Sasa team created a website for our local community to access for news about the mine and potential job openings.Kounrad kicked off the first phase of a programme that is aimed at transforming the culture, management and employee experience of the operations. In the initial phase, a number of employees and members of the management team were interviewed by an external party to understand how engaged and motivated employees are and identify opportunities for improvement.2021 will see us continue to develop our culture of sustainability, to include safety, governance and employee satisfaction and development, all of which are core to our business.We encourage open and constructive communications with team members and value collaborative working. We accomplish transparency through honest, fair, and open communication with all key stakeholders, built on disclosure, clarity, and accuracy. We are open to recognising our faults and improving practices. Our purpose is to provide a safe, collaborative and agile workplace that provides employees with the tools and training to be successful. During the pandemic we proactively increased communications with our employees via various planned and impulsive meetings, Toolbox Talks and written communications. We also used our unions at Sasa and our Employee Representative Group at Kounrad to gather employee feedback and consult with them on the COVID-19 preventive measures and receive feedback. Managers personally called employees who had tested positive and/or were isolating to check they were supported.We recognise and respect diverse cultures and communities and to that end we supported low-income citizens, children and disadvantaged people within the local villages throughout the year. In particular, the Kounrad Foundation charity assisted the Blind Society with renovation work on their premises and built a crisis centre for victims of domestic violence. We also purchased COVID-19 PCR testing equipment and installed a diesel generator at the local Balkhash Central Hospital. This commitment on our behalf helps to form the mutual respect and trust between the Company, our employees and the local community.The management at Kounrad partnered with the Employee Representative Group to successfully agree on the terms of a new collective agreement that will be in place for the next three years. Some additional benefits included the increase of minimal paid vacation from 24 days to 30 days. We will also be financially supporting families with four or more children in contributions made towards their children’s nursery expenses and schooling.At Sasa, we donated numerous tablet computers to local schools for children from vulnerable families to continue to study from home. We also continuously kept the local community up to date with regards to the cleaning and river remediation project. This is extremely important to us to be able to build up the trust again and maintain the open dialogue.We held a management away day for our leaders to come together and openly discuss and agree the road ahead for Sasa following the TSF4 incident in September. The management team openly discussed various issues and agreed, as a team, how to work together to resolve them and drive the business forward. The away day included discussions around culture and the open and transparent environment we would like to foster for employees. We will be holding follow up sessions in 2021.
OUr strateGiC FraMeWOrK
Overview
strategic report
Governance
Financial statements
DUrinG tHe Year We HaVe eVOlVeD OUr strateGiC
OBJeCtiVes anD aliGneD tHeM MOre ClOselY WitH
OUr PUrPOse – tO PrODUCe Base Metals, WHiCH are
essential FOr MODern liVinG, PrOFitaBlY anD
in a saFe anD sUstainaBle enVirOnMent FOr
all OUr staKeHOlDers.
Our strategic objectives of safety and sustainability, low cost, high margins and prudent capital allocation are
underpinned by our longer-term ambition of growth through acquisition.
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, and other
facilities, while at the same time focusing on the financial sustainability of our operations.
OUR IMMEDIATE STRATEGIC OBJECTIVES
PROGRESS IN 2020
PERFORMANCE IN 2020
Focus on safety and sustainability
This objective ensures that safety and sustainability remains a key
priority in everything that we do
´ The health, safety and wellbeing of our employees is our top priority
´ Prevent, mitigate and control our environmental impacts through
a focus on energy use and climate change, air quality and pollution,
water, waste and biodiversity
´ Continue to drive social and economic value in the communities
we operate in
´ Strong health and safety performance
at both operations
´ Strong stakeholder relationships
maintained despite disappointing
TSF4 incident
ltiFr
0.00
Fatalities
environmental incidents
0
1
OUR LONG-TERM OBJECTIVES
´ 15% reduction in five-year average LTIFR
´ 0 fatalities
´ 0 severe or major environmental incidents
´ 0 severe or major community incidents
targeting low cost, high margins
´ Met increased 2020 copper production
This objective is around our focus on low cost production which
results in high margins
´ Consistently focus on maintaining low cost production while
maintaining high margins
´ Aim to continue efficient operations to unlock maximum value
and profitable operations
ensuring prudent capital allocation
This objective focuses on CAML’s ability to allocate capital efficiently
´ Focus on capital allocation, including:
´ investing in our operations
´ debt reduction
´ returns to shareholders
OUR LONG-TERM STRATEGIC OBJECTIVE
Delivering growth
This objective is a continuous and underlying ambition
´ Focus on CAML’s ability to take advantage of opportunities to
grow the business through acquisition
guidance
´ Met zinc production guidance
´ Lead production only 1% below guidance
despite TSF4 related shutdown
´ Maintain low Kounrad 2020 C1 copper cash
costs and Sasa 2020 C1 zinc equivalent
cash costs
´ 2020 debt repayments of $3.2m
per month
´ 2020 Board commitment to implement
Sasa Cut and Fill project
´ Dividend payments during 2020 of $13.9m
´ Size and liquidity becoming more important
investment considerations
´ Attractive commodity exposure
(ideally copper)
´ Looking to acquire with manageable
balance sheet implications
Copper equivalent
production
eBitDa
Cash cost, copper
equivalent
29,082t
$95.7m
$1.15/lb
´ Meeting annual production targets
´ Strong cost control
Capital expenditure
net debt
Corporate debt repayments
$8.5m
$36.2m
$38.4m
´ Continue to reduce debt in the absence
of an acquisition opportunity
´ Deliver on Sasa Cut and Fill project to
change the mining method
´ Ensure dividends are within policy
range of between 30%-50%
Opportunities
reviewed
site visits
undertaken
non-disclosure
agreements signed
20
1
5
´ NAV/share increase
´ EBITDA/share increase
´ EPS increase
See pages 24 and 25, Our KPIs, for more information on our performance
22
22
Central asia Metals PlC
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
ANNUAL REPORT & ACCOUNTS 2020
23
23
KeY PerFOrManCe inDiCatOrs
Overview
strategic report
Governance
Financial statements
We have identified a range of financial and non-financial KPIs
aligned to our strategic objectives to measure our performance.
FOCUs On saFetY anD sUstainaBilitY
ensUrinG PrUDent CaPital allOCatiOn
ltiFr
3.76
Fatalities
enVirOnMental inCiDents
CaPital eXPenDitUre
COrPOrate DeBt rePaYMents
net DeBt
1.00
14.8
11.0
38.5
38.4
38.4
m
$
8.5
m
$
m
$
110.3
80.2
36.2
0.42
2018
2019
0.00
2020
0.00
2018
0.00
2019
0.00
2020
0.00
2018
0.00
2019
2020
Definition/rationale
We aim to provide a safe working environment
for our people. LTIFR is lost time injury frequency
rate, which is calculated as the number of work
lost-time injuries, divided by the number of
hours worked, multiplied by 1,000,000.
2020 performance
CAML’s 2020 safety performance was excellent,
with zero lost time injuries at either operation.
Definition/rationale
CAML has a target of no fatalities and of zero
harm in the workplace, and firmly believes that
every employee should go home safely to their
family at the end of their shift.
2020 performance
There were no fatalities due to a workplace
safety incident at either operation in 2020.
Indeed, there has never been a fatality at a CAML
operated site.
Definition/rationale
CAML strives for zero severe environmental
incidents and Executive Director remuneration
is linked to performance in this important area.
2020 performance
Sasa’s TSF4 incident in September 2020
was a serious environmental incident and
a disappointment. The team moved swiftly
to repair the facility and clean up the
tailings spillage.
2018
2019
2020
2018
2019
2020
2018
2019
2020
Definition/rationale
Capital expenditure reflects the investment in
the operations and includes sustaining capital
expenditure at both operations and Sasa’s TSF4
construction expenditure during 2018 / 2019.
2020 performance
During the year, Group capital expenditure totalled
$8.5 million, a combination of $1.3 million Kounrad
sustaining capital expenditure and $7.2 million
Sasa sustaining capital expenditure.
Definition/rationale
CAML’s focus is on deleveraging its balance
sheet as well as ensuring the Group is able to
maintain liquidity and service debt.
2020 performance
All contractual principal debt repayments were
made under the borrowings held with Traxys
Europe S.A. totalling $38.4million.
Definition/rationale
Net debt reflects the Group’s financial liquidity.
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.
2020 performance
Net debt reduced by $44.0 million in 2020 to
$36.2 million as at 31 December 2020.
tarGetinG lOW-COst, HiGH MarGins
PrODUCtiOn
CasH COst, COPPer eQUiValent
eBitDa
Copper
Zinc
Lead
29,388
29,201
29,742
1.15
0.94
0.87
t
22,532
23,369
23,815
b
l
/
$
14,049
13,771
13,855
125.3
108.6
95.7
m
$
DeliVerinG GrOWtH
BUsiness DeVelOPMent
OPPOrtUnities reVieWeD
28
19
20
nOn-DisClOsUre aGreeMents
siGneD
site Visits UnDertaKen
10
9
3
5
2
1
2018
2019
2020
2018
2019
2020
2018
2019
2020
2018
2019
2020
2018
2019
2020
2018
2019
2020
Definition/rationale
CAML aims to meet annual production targets
and continue efficient operations to unlock
maximum value and ensure a profitable
performance.
2020 performance
2020 copper production at Kounrad within
increased guidance range. Strong 2020 zinc and
lead production at Sasa despite TSF4 related
shutdown. Zinc in concentrate production
within guidance range and lead in concentrate
production within 1% of guidance range.
Definition/rationale
EBITDA is a valuable indicator of the Group’s
underlying profitability and is frequently used in
the mining sector by investors and analysts for
valuation purposes. EBITDA is earnings before
interest, taxation, depreciation, amortisation
and other special items. It is a non-IFRS financial
measure which is reconciled on page 51.
2020 performance
The Group generated 2020 EBITDA of $95.7
million, representing a decrease of 12% from the
prior year due to the decline in commodity prices
and an increase in Sasa’s treatment charges.
Definition/rationale
Maintaining low costs at both of our operations
underpins profitability. CAML reports its Group
C1 cash cost on a copper equivalent basis
incorporating production costs at Sasa. C1 cash
cost of production is a standard metric used in
the mining industry to allow comparison across
the sector. CAML calculates C1 cash cost by
including all direct costs of production (reagents,
power, production labour and materials, as
well as realisation charges such as freight
and treatment charges) in addition to local
administrative expenses. Royalties, depreciation
and amortisation charges are excluded.
2020 performance
The Group C1 cash cost on a copper equivalent
basis has increased largely as a result of higher
realisation costs at Sasa, primarily due to
increased treatment charges, and lower copper
equivalent production units.
Definition/rationale
Reviews of potential opportunities for mergers
and acquisitions are undertaken as a routine part
of our business.
2020 performance
Despite COVID-19 related challenges,
management continued to review a significant
number of potential opportunities for growth.
Definition/rationale
Signing a NDA gives CAML access to company
information that is not in the public domain. This
greatly improves the level of due diligence that
can be undertaken on a potential opportunity.
2020 performance
With many global businesses concentrating on
the challenges of COVID-19 and associated weak
H1 2020 metal prices, companies were typically
not as focused on business development as in
prior periods.
Definition/rationale
Senior management undertaking a site visit
denotes an advanced level of interest in a
business development opportunity.
2020 performance
With senior management focused primarily on
the existing business plus COVID-19 related
travel restrictions, only one site visit was
undertaken during the year.
24
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
25
strateGY in aCtiOn
Overview
strategic report
Governance
Financial statements
FOCUs On
saFetY anD
sUstainaBilitY
One OF OUr FOUr KeY strateGiC
OBJeCtiVes is OUr FOCUs On saFetY
anD sUstainaBilitY.
WitH COViD-19 Cases in
BOtH KaZaKHstan anD
nOrtH MaCeDOnia,
CaMl’s tOP PriOritY
DUrinG 2020 Has Been,
anD COntinUes tO Be,
tHe WelFare OF OUr
eMPlOYees anD
COntraCtOrs
The safety and wellbeing of our team is of
the upmost importance to us as we want
each of our employees to return home
safely to their families at the end of their
shifts. Our Group Health and Safety
Manager, Peter Hoh, who joined us in
2018, brought with him a wealth of
international mining health and safety
experience and he has been instrumental
in the improvements we have made
during the last two years.
The broader sustainability topic is
embedded in every aspect of our
operations and the way we conduct
ourselves as CAML personnel, and we are
firmly committed to looking after the
environment in which we operate,
developing our people, helping to foster
sustainable development in the
communities close to our operations and
operating to the highest standards of
business ethics.
OUr COViD-19 resPOnse
total COViD-19
community support
$0.3m
CAML has taken significant steps to try to ensure the
continued good health of its team members, including:
´ Established a COVID-19 ‘Crisis
´ Made changes to alcohol testing
at Sasa to increase social
distancing
´ Made changes to canteen and
transport arrangements at both
operations to increase social
distancing
´ Reinforced relevant government
guidance and increased hygiene
measures on both sites
´ Issued instructions to employees
to stay at home if they suffer
from any potential COVID-19
symptoms
´ Requested employees take their
temperatures before coming
into work, and testing
temperatures at the mine gate
Committee’
´ Instructed staff to work from
home wherever possible
´ A cessation of all but essential
international travel
´ A cessation of all but necessary
visitors to site (subject to
authorisation from General
Directors)
´ Identification and close
monitoring of team members
most vulnerable to COVID-19
´ The distribution of COVID-19
related PPE to employees and
contractors
´ The distribution of COVID-19
related PPE to community
members in the town close to
the Sasa mine
´ Undertaken a detailed review of
all activities at both operations
to ensure that social distancing
is at the heart of how we operate
during the pandemic
26
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
27
strateGY in aCtiOn CONTINUED
Overview
strategic report
Governance
Financial statements
ensUrinG
PrUDent CaPital
allOCatiOn
OUr aPPrOaCH tO CaPital allOCatiOn
is Central tO HOW We Generate ValUe
FOr OUr staKeHOlDers.
OUr seniOr
ManaGeMent teaM
BalanCes OUr CaPital
allOCatiOn PriOrities
tO ensUre lOnG-terM
ValUe CreatiOn FOr
all staKeHOlDers
At CAML, we allocate capital in four
predominant areas. These are capital
expenditure to ensure our operations are
as efficient as they can be, debt
repayments, dividends and, longer term,
looking for acquisition opportunities to
grow our business.
Since instigating our first policy in 2012,
we have now returned to our supportive
shareholders over $209.6 million in
dividends. On acquiring Sasa in 2017, we
took on corporate debt totalling $187.0
million. By 31 December 2020, we had
repaid $123.7 million of this total, and
ended the 2020 financial year with net
debt of $36.2 million and a strong
balance sheet.
We devote material management time to
appraising business development
opportunities which we deem could result
in growth and value creation for our
Company. While these activities were
reduced during H1 2020, they gathered
momentum during H2 2020 during which
time we reviewed 20 opportunities.
CUt anD Fill PrOJeCt
2021-2022 investment at sasa
$19m
2022
Project completion by
The CAML Board has made the decision to invest in Sasa for the long term
to transition the mining method from the current sub-level caving to a
method known as cut and fill stoping. The reasons are:
´ Cut and fill enables maximum
recovery of Sasa’s mineral
resources due to increased
selective mining and the limited
need for support pillars deeper in
the mine
´ Cut and fill is widely understood
to be a safer mining method than
sub-level caving
´ This method is superior from a
social and environmental
perspective as it enables Sasa to
store over 40% of its life of mine
tailings underground as part of
the paste fill material
´ Economically, this, in combination
with dry stacking of the
remaining tailings, should mean
that no more costly tailings
storage facilities will be built
´ Development of a new decline will
facilitate faster underground
access, increased ventilation and
remove ‘double handling’ aspects
which will be exacerbated once
production is below the current
830 main haulage level
28
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
29
seCtiOn 172
staKeHOlDer enGaGeMent
Overview
Overview
strategic report
strategic report
Governance
Governance
Financial statements
Financial statements
The Board of Directors has always been
mindful of the duties of directors under
s172 of the Companies Act 2006.
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 in
making decisions for its success
over the long term. Key decisions
and matters that are of strategic
importance to the Company are
appropriately influenced by the
matters set out in s172.
in Kazakhstan and North Macedonia,
ensuring that this process
continues to take account of the
interests and views of our
stakeholder groups. By careful
consideration of these factors, we
believe that we can create positive
benefits for our stakeholders, which
are integrated into our strategic
model, that are also in the interests
of the Company and its members.
Our purpose is to produce base
metals, which are essential for
modern living, profitably in a safe and
sustainable environment for all our
stakeholders. Throughout the year
we continually engage, both formally
and informally with our key
stakeholders. This has enabled us to
assess and clearly understand their
needs, consider their perspectives
and monitor their impact on our
strategic ambition. During 2020,
an independent stakeholder
engagement process was
undertaken with consultants,
ERM, specifically to ascertain
stakeholder views and re-visit
CAML’s material sustainability topics.
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. These include 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 can be seen in the
long-term planning for the
operation of the Group’s key assets
30
Remuneration is another area in
which the Group which takes
account of the views of its
stakeholders, through employees
and their representatives and, at a
senior level, through the views of
investors. The recent re-design of
the Company’s Long-Term Incentive
Plan has taken into account the
feedback received following
shareholder consultation and has
been implemented with due
consideration to responses received
as part of this process. Details on
how we have further developed this
area with the incorporation of a
sustainability performance measure
to align our incentive schemes with
our business and sustainability
priorities are commented upon
further in the table opposite and in
the report of the Remuneration
Committee on pages 76-77. Each of
these matters are of great
importance and help shape the
success of the Group in achieving its
long-term strategic aims in the
interests of all stakeholders.
Examples 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.
stakeholders
inVestOrs
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 ESG performance.
eMPlOYees
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.
GOVernMents / nGOs
Building trust and partnership with the governments
that host our operations is very important to us while
minimising any adverse impacts on the
natural environment.
COMMUnities
Building trust and partnership with the communities
closest to our operations is very important to us while
minimising any adverse impacts on the
natural environment.
sUPPliers
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.
How the Board and
Company engage with them
´ Regular one-on-one meetings with Executive
Directors and Director of Corporate relations via
telephone / videocall when face-to-face meetings
not possible
´ Investor presentations (Executive Directors)
´ AGM (all Directors)
´ In-person and virtual Industry conferences (including
Executive Directors)
´ Social media (CAML has an established Twitter
platform, and commenced posting material on
LinkedIn during 2020)
´ Newsletters
´ Email
´ Briefings
´ HR discussions
´ Notice boards and suggestion boxes
´ Local website at both operations
´ Union representatives at Sasa and Employee
representative group at Kounrad
´ Video presentations to disseminate key messages to
employees while social distancing measures are in
place (including Executive Directors)
Key topics raised
´ TSF4 leakage
´ COVID-19
´ Climate change
´ Sustainability reporting
´ Tailings storage facilities
´ Updates to COVID-19
operating practices
´ New vacancies and new hire
information
´ Senior management changes
´ Pay review and bonuses
´ Meetings with Company management (including
Executive Directors)
´ Local and national government engagement
(including Executive Directors)
´ TSF4 leakage
´ Remediation of river
following TSF4 incident
´ Partnership regarding
´ Site visits by government officials and ministers
community development
(including Executive Directors)
´ Significant technical input by professors of local
technical universities
´ Employment
´ COVID-19
´ Local media
´ Drop-in community relations centre at Sasa
´ Public meetings
´ Local websites at both operations
´ Support for local community events such as
Spring Festival in Kazakhstan and Miners’ Day in
North Macedonia
´ Increased use of telephone and email to maintain
strong engagement with the community throughout
the COVID-19 pandemic
´ Sponsor of university students
´ Sasa training centre activities limited due
to COVID-19
´ TSF4 leakage
´ Remediation of tailings
spillage
´ Dust from TSF and from
vehicle movements
´ Employment
´ Community support
including COVID-19
´ Communications to suppliers regarding Local
´ Local procurement ( jobs for
Procurement Policy
community residents)
´ Communications covering anti-bribery and other
´ Clear and concise
ethical/ governance issues
anti-bribery provisions
´ Long-term partnerships
(preferred supplier status)
BOarD DeCisiOn
The Remuneration Committee of
the Board in consultation with the
Sustainability Committee made
the decision to introduce
sustainability performance targets
in relation to 25% of the Long-
Term Incentive Plan (‘LTIP') awards
granted in 2020.
stakeholder interests affected
the new target includes the
following key areas:
´ health and safety of
employees
´ environmental protection
´ community interests
For more details please see pages
76-77 of the Report of the
Remuneration Committee.
reason for decision
Stakeholder interests have always
been a key part of CAML’s
methods of operation. The
decision to include sustainability
measures in the LTIP reinforces
and provides public affirmation of
this. Stakeholders can take
comfort that Executive Director
(and senior management)
remuneration is intrinsically linked
to sustainability performance.
actions undertaken
All LTIP awards for Executive
Directors and senior management
granted in 2020 include
sustainability performance
targets.
Progress and outcomes
Performance against targets is
being monitored over a three-year
period and similar targets are
intended to be included in the
2021 LTIP awards.
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
31
sUstainaBilitY FraMeWOrK
DriVinG ValUe
FOr OUr staKeHOlDers
OUR FOCUS ON SAFETY
AND SUSTAINABILITY
OUR FOCUS ON SAFETY
AND SUSTAINABILITY
OUR FOCUS ON SAFETY
AND SUSTAINABILITY
FOCUsinG On
OUr PeOPle
OVERVIEW
2020 TARGETS
OVERVIEW
Central Asia Metals plc | Annual Report 2020 | Creative concepts
Central Asia Metals plc | Annual Report 2020 | Creative concepts
2020 staKeHOlDer
enGaGeMent
inFOrMs Material
tOPiCs
Central Asia Metals plc | Annual Report 2020 | Creative concepts
During 2020, CAML engaged external
consultants, SustainAbility, to undertake
a stakeholder engagement exercise. Our
material topics as covered in our
inaugural 2019 Sustainability Report
were broadly confirmed and are
demonstrated in the materiality matrix,
which reflects the relative importance
of each topic to the business (x-axis)
and to external stakeholders (y-axis).
OUR FOCUS ON SAFETY AND SUSTAINABILITY
OUR FOCUS ON SAFETY AND SUSTAINABILITY
CARING FOR THE
ENVIRONMENT
MAINTAINING
HEALTH AND SAFETY
We adhere to high
standards of corporate
and sustainability
governance. We also
recognise that through
business success, we
are able to generate and
distribute economic value.
MATERIAL TOPIC LIST
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.
Energy usage and
climate change
Air quality and pollution
Safety
Occupational health
and wellbeing
CARING FOR THE
ENVIRONMENT
DELIVERING
VALUE THROUGH
STEWARDSHIP
FOCUSING ON
We are dedicated to treating all employees
OUR PEOPLE
fairly, recognising core labour and human
We are committed to
We are aware of the
We adhere to high
rights principles and supporting the right to
preventing, mitigating
importance of our
standards of corporate
and controlling the impacts
operations on our
and sustainability
freedom of association and collective
of our activities on the
people’s lives and we are
governance. We also
bargaining, as well as respecting the right to
environment. We recognise
committed to making a
recognise that through
that as a business, we have
positive impact on these
business success, we
be free of harassment or intimidation in the
a responsibility to the
individuals.
are able to generate and
health of the environment.
distribute economic value.
workplace. We look to promote our Company
culture and provide a positive, stimulating and
productive workplace, where continuous
Corporate governance
Energy usage and
and business ethics
climate change
employee development is encouraged.
Responsible
supply chain
Workforce culture
and development
Labour Relations
MATERIAL TOPIC LIST
UNLOCKING VALUE FOR
MAINTAINING
OUR COMMUNITIES
HEALTH AND SAFETY
CARING FOR THE
ENVIRONMENT
Our focus on customers
The health, safety
and communities
and wellbeing of our
aims to provide the
employees is of the
highest product quality
upmost priority.
and drive social value
We adhere to the highest
in the communities
standards and ensure
we operate in.
that safety measures are
taken to mitigate risk.
We adhere to high
standards of corporate
and sustainability
governance. We also
recognise that through
business success, we
are able to generate and
distribute economic value.
MATERIAL TOPIC LIST
Safety
Occupational health
Community engagement
Socio-Economic
and wellbeing
Contribution
Energy usage and
climate change
Air quality and pollution
Waste management
Water management
Rehabilitation and
To find out more refer to
To find out more refer to
page 00
page 00
To find out more refer to
page 00
To find out more refer to
page 00
Focus on
Safety and
Sustainability
Focus on
Safety and
Sustainability
Sustainability
biodiversity
Closure planning
To find out more refer to
page 00
CENTRAL ASIA METALS PLC
SAFETY AND SUSTAINABILITY REPORT 2020
Material tOPiCs
Workforce culture and
5.
development
Waste management
Water management
Rehabilitation and
biodiversity
Closure planning
To find out more refer to
page 00
Focus on
Safety and
CENTRAL ASIA METALS PLC
SAFETY AND SUSTAINABILITY REPORT 2020
To find out more refer to
page 00
DeliVerinG ValUe tHrOUGH
steWarDsHiP
MaintaininG HealtH
anD saFetY
We look to maintain the highest levels of
ethical standards in our conduct and
encourage the same for our suppliers whilst
working in full compliance with the laws and
regulations of our host countries. Robust
corporate governance systems are the
foundation from which we can promote
optimal economic, social and
environmental outcomes.
OUR FOCUS ON SAFETY AND SUSTAINABILITY
Material tOPiCs
1. Responsible supply chain
Our priority is to provide a safe and healthy
working environment for our employees,
contractors and visitors and work together
towards the goal of zero harm in the
workplace. We aim to eliminate occupational
health risks brought about by our operations
and support employee wellbeing, whilst
monitoring the health of our people and
promoting a healthy lifestyle.
Material tOPiCs
Health and wellbeing
3.
4.
OVERVIEW
2020 TARGETS
Safety
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DELIVERING
VALUE THROUGH
STEWARDSHIP
DELIVERING
VALUE THROUGH
STEWARDSHIP
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FOCUSING ON
UNLOCKING VALUE FOR
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OUR COMMUNITIES
OUR PEOPLE
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earionsed.
CarinG FOr tHe
enVirOnMent
UnlOCKinG ValUe FOr
tHe COMMUnities
2. Corporate governance
and business ethics
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FOCUSING ON
MAINTAINING
We recognise our responsibility, as a
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OUR PEOPLE
HEALTH AND SAFETY
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contributor of greenhouse gas emissions, to
We are committed to
We are aware of the
We are aware of the
The health, safety
Our focus on customers
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identify and implement programmes to
preventing, mitigating
importance of our
importance of our
and wellbeing of our
and communities
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and controlling the impacts
operations on our
operations on our
employees is of the
aims to provide the
minimise energy usage where possible, as
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of our activities on the
people’s lives and we are
people’s lives and we are
upmost priority.
highest product quality
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well as to mitigate and adapt to the impacts
environment. We recognise
committed to making a
committed to making a
We adhere to the highest
and drive social value
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that as a business, we have
positive impact on these
positive impact on these
standards and ensure
in the communities
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of climate change throughout the value chain.
a responsibility to the
individuals.
individuals.
that safety measures are
we operate in.
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health of the environment.
taken to mitigate risk.
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We monitor water use and aim to minimise
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freshwater withdrawal, whilst also carefully
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managing discharge water quality. We are
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Corporate governance
Safety
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and business ethics
committed to effectively and responsibly
Occupational health
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and wellbeing
managing tailings storage facilities and
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To find out more refer to
To find out more refer to
To find out more refer to
proactively working to reduce and recycle
page 00
page 00
page 00
nonmineral, hazardous and non-hazardous
materials waste and preventing or reducing
ALIGNING OURSELVES TO THE
pollution. We aim to protect and promote
biodiversity and will ensure a responsible
approach to rehabilitation and closure
planning to ensure a sustainable legacy,
recognising the potential for an operation to
impact on the environment and local society
after the end life of the asset.
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UNLOCKING VALUE FOR
We concentrate on developing positive,
OUR COMMUNITIES
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constructive and professional relationships
Our focus on customers
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with host governments and communities
and communities
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aims to provide the
close to our operations, investing resources
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highest product quality
to understand their needs and promoting
and drive social value
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in the communities
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close collaboration to respect human rights
we operate in.
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and implement social investment strategies.
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We recognise our responsibility to create
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shared value for all our stakeholders. By hiring
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Community engagement
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locally and providing fair wages and benefits,
Socio-Economic
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we wish to contribute not only to employee’s
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To find out more refer to
well-being, but also to the economic strength
page 00
of the communities in which we operate. By
procuring from local supply chains, paying
ALIGNING OURSELVES TO THE
taxes and royalties, providing education and
internship opportunities and local community
investment, we aim to contribute to
socioeconomic development.
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.
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explandem.
Workforce culture
and development
Labour Relations
Workforce culture
and development
Labour Relations
Community engagement
Socio-Economic
To find out more refer to
page 00
To find out more refer to
page 00
To find out more refer to
page 00
Corporate governance
and business ethics
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Responsible
supply chain
Responsible
supply chain
Contribution
Contribution
Air quality and pollution
Waste management
Water management
Rehabilitation and
biodiversity
Closure planning
To find out more refer to
page 00
Overview
strategic report
Governance
Financial statements
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Significance of economic, environmental and social impacts
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ALIGNING OURSELVES TO THE
CENTRAL ASIA METALS PLC
SAFETY AND SUSTAINABILITY REPORT 2020
Material tOPiCs
7.
Biodiversity, rehabilitation and
closure planning
00
Material tOPiCs
11. Socio-economic contribution
12. Community engagement
00
00
All information © Emperor. All Rights Reserved.
All information © Emperor. All Rights Reserved.
All information © Emperor. All Rights Reserved.
6. Labour relations
8. Energy usage and climate change
and development
9. Water management
10. Waste management
32
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
33
2102313178111256910234OTHER LOW-PRIORITY TOPICS� Advocacy and public policy� Resource efficiencyMEDIUM-PRIORITY TOPICSHIGH-PRIORITY TOPICS
sUstainaBilitY sUMMarY
Overview
strategic report
Governance
Financial statements
tHe BUsiness OF sUstainaBilitY
Sustainability is integrated and embedded in
every aspect of our business. We aim to create
long-term value for all our stakeholders and
therefore we take our responsibility for ensuring
sustainable operations at CAML very seriously.
niCK
sHirleY,
SUSTAINABILITY DIRECTOR
OVerVieW
We have been encouraged by feedback
receive on our first standalone annual
Sustainability Report in 2019 and will
soon publish our second Sustainability
Report for 2020 (available on our website
at: www.centralasiametals.com), in
accordance with Global Reporting
Initiative (‘GRI') Standards ‘Core option’. In
2020, we have also identified the United
Nations Sustainable Development Goals
(‘UN SDGs') to which CAML has the
capacity to best contribute, given the
nature of our business operations as well
as our operating environment.
CAML has robust sustainability risk
management systems in place and a
strong framework to promote the ethical
behaviour and corporate governance that
are crucial for the effective running of our
operations and the sustainability of our
business. A detailed corporate governance
review and risk assessment process was
conducted in 2020 and details are
included in our Sustainability Report.
Sustainability 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
information regarding its composition
and activities can be found on page 86.
DeliVerinG ValUe
tHrOUGH steWarDsHiP
We look to maintain the highest levels of
ethical standards in our conduct and
encourage the same for our suppliers,
whilst working in full compliance with the
laws and regulations of our host countries.
We pride ourselves on operating in a way
which ensures that we respect human
rights and treat our workers and those
along our supply chains humanely, from
our labour practices to our security
measures on site, and everything in
between. We adhere to IFC Performance
Standards at both operations, are ISO
9001, 14001 and 45001 certified at Sasa
and look to comply with ISO at Kounrad.
MaintaininG HealtH anD saFetY
Our priority is to provide a safe and
healthy working environment for our
employees, contractors and visitors and
work together towards the goal of zero
harm in the workplace. In 2020, we set a
clear safety target for the Group of
achieving a 15% decrease in the lost time
injury frequency rate (‘LTIFR’) over last
five-year period. Zero lost time injuries
(‘LTIs’) were recorded during the year.
We have fully integrated health and
safety management systems at both
operations and use employee feedback
for continual improvement and
development of working conditions.
We believe that a healthy workforce is
paramount in achieving high levels of
productivity and have various
programmes to promote wellbeing and
safety (‘ltiFr’)
local community support
0.00
2019: 0.42
$0.5m
2019: $0.6m
2020 CaMl carbon
emission intensity
3.37tCO2-e
2019: 3.28 tCO2-e
monitor the health of our employees. The
challenges encountered on account of
COVID-19 have served to highlight the
importance of maintaining a robust
strategy to protect the health and
contributing towards the wellbeing of all
our employees and other personnel at
our operations. Keeping our employees
safe during the ongoing pandemic, whilst
maintaining production activities, is a
priority for the Company.
Wherever possible, we look to eliminate
occupational health risks brought about
by our operations. Fully equipped medical
centres operate 24 hours a day at both
sites, with dedicated, trained and
qualified medical staff. All employees
undergo annual medicals, specifically
oriented to their occupation.
FOCUsinG On OUr PeOPle
We are dedicated to treating all
employees fairly, recognising core labour
and human rights principles, fair wages
and supporting the right to freedom of
association and collective bargaining, as
well as respecting the right to be free of
harassment or intimidation in the
workplace. We look to promote our
Company culture and provide a positive,
stimulating and productive workplace,
where continuous employee
development is encouraged.
We are cognisant of the benefits of
broadening diversity and understand the
importance of ensuring that the cultural
values and customs of our employees and
local stakeholders are respected and equal
opportunities are supported. In 2020, 13%
of our employees were female, with 11%
representation on the Board. We aim to
ensure we have strong training and skills
development programmes in place, as well
as the succession plans to develop our
leaders of tomorrow. We appointed a Group
People Manager during 2020 who has
responsibility for driving future positive
change for our employees.
CarinG FOr tHe enVirOnMent
We take our environmental responsibilities
seriously and have comprehensive
environmental management systems. We
recognise our responsibility, as a
contributor of greenhouse gas (‘GHG’)
emissions, to identify and implement
programmes to minimise energy usage
where possible, as well as to mitigate and
adapt to the impacts of climate change
throughout the value chain. As such, we
will be working with external consultants
in 2021 to develop a Group climate
strategy. Our Streamlined Energy and
Carbon Reporting (‘SECR’) commentary
can be found within the Governance
Report on page 90.
We monitor water use and aim to minimise
freshwater withdrawal, whilst also carefully
managing discharge water quality. We are
committed to effectively and responsibly
managing tailings storage facilities at Sasa
and proactively working to reduce and
recycle non-mineral, hazardous and
non-hazardous materials waste and
preventing or reducing pollution. Following
the tailings storage facility 4 (‘TSF4’)
leakage in September 2020, CAML
management has worked closely with the
designers and local authorities to address
the contributory factors. Physical changes
have been made to the dam, as well as
some operational and monitoring changes
for the future (see the website for more
detail: www.centralasiametals.com/
sustainability/tailings/).
We aim to protect and promote
biodiversity and will ensure a responsible
approach to rehabilitation and closure
planning to ensure a sustainable legacy,
recognising the potential for an operation
to impact on the environment and local
society after the end life of the asset.
UnlOCKinG ValUe FOr OUr
COMMUnities
Our licence to operate is largely dependent
on the continued support of our local
communities and host countries. We
concentrate on developing positive,
constructive and professional relationships
with host governments and communities
close to our operations, investing resources
to understand their needs and promoting
close collaboration to respect human rights
and implement social investment
strategies. In 2020, we diverted much of
our $0.5 million social investment towards
addressing the challenges of COVID-19,
committing a total of $0.3 million to
support our communities in this regard.
We recognise our responsibility to create
shared value for all our stakeholders. By
hiring locally and providing fair wages and
benefits, we wish to contribute not only
to employees’ well-being, but also to the
economic strength of the communities in
which we operate.
By procuring from local supply chains,
paying taxes and royalties, providing
education and internship opportunities,
specifically at our Sasa Training Centre,
and local community investment, we aim
to contribute to socio-economic
development. We prioritise local
procurement at both operations.
34
34
Central asia Metals PlC
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
ANNUAL REPORT & ACCOUNTS 2020
35
35
PAGE HEADER Overview
strategic report
Governance
Financial statements
OPeratiOnal reVieW
PrODUCinG tHree Base
Metals sUstainaBlY
2020 was a successful year as we met our increased copper
production guidance at Kounrad. We also achieved our targets
for zinc at Sasa, and came within 1% of our lead guidance,
despite TSF4 related production shutdowns. Most importantly,
we recorded zero LTIs at either of our operations in 2020 and,
by the end of 2020, almost two years had passed since our last
LTI at Sasa and over two years since our last LTI at Kounrad.
sCOtt
YellanD,
CAML COO / SASA GENERAL DIRECTOR
PaVel
seMenCHenKO,
KOUNRAD GENERAL DIRECTOR
i aM VerY PleaseD WitH OUr OVerall
OPeratiOnal PerFOrManCe DUrinG 2020
DesPite tHe CHallenGes OF tHe GlOBal
COViD-19 PanDeMiC. in Q4 2020, i tOOK On tHe
rOle OF sasa’s General DireCtOr as Well
as MaintaininG MY CHieF OPeratinG OFFiCer
DUties. it is a CHallenGe i aM alreaDY
enJOYinG anD i Will Be sPenDinG MUCH OF
MY tiMe nOW in nOrtH MaCeDOnia. at
KOUnraD i aM aBlY sUPPOrteD BY General
DireCtOr, PaVel seMenCHenKO, anD His
teaM, as Well as OUr teCHniCal DireCtOr,
HOWarD niCHOlsOn, WHO is a WealtH OF
KnOWleDGe On OUr leaCHinG anD sX-eW
OPeratiOns in PartiCUlar
sasa 2020
zinc production
23,815t
See page 38 for more information on Sasa
sasa 2020
lead production
29,742t
See page 38 for more information on Sasa
Kounrad 2020
copper production
13,855t
See page 42 for more information on Kounrad
We HaVe HaD a VerY sUCCessFUl
Year at KOUnraD, HaVinG inCreaseD OUr
PrODUCtiOn GUiDanCe in Q4 2020 anD
tHen DeliVereD PrODUCtiOn at tHe tOP
enD OF tHat GUiDanCe. We HaVe risen tO
tHe CHallenGes OF COViD-19 at KOUnraD,
anD i aM PrOUD OF tHe teaM FOr tHe
aDJUstMents We HaVe MaDe tO OPeratiOns
tO trY as Best We Can tO lOOK aFter
tHe HealtH OF OUr eMPlOYees anD
COntraCtOrs. OUr CHaritaBle KOUnraD
FOUnDatiOn Has alsO HelPeD tHOse in
neeD in tHe lOCal COMMUnitY, as Well
as PrOViDinG MUCH neeDeD PCr testinG
eQUiPMent in OUr lOCal tOWn, BalKHasH
36
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
37
OPeratiOnal reVieW CONTINUED
Overview
strategic report
Governance
Financial statements
sasa
NORTH MACEDONIA
While 2020 has been dominated with the
challenges of COVID-19 and the TSF4 issue, the
mine has delivered strong production, good cost
control and has commenced implementation of
the Cut and Fill Project.
HOW We PrODUCe ZinC anD leaD
2020 zinc recovery
Production statistics
86.1%
2019: 86.5%
2020 lead recovery
94.3%
2019: 94.5%
Ore mined
Plant feed
Zinc grade
Zinc recovery
Lead grade
Lead recovery
Zinc concentrate
– Grade
– Contained zinc
Lead concentrate
– Grade
– Contained lead
Units
t
t
%
%
%
%
t (dry)
%
t
t (dry)
%
t
2020
2019
2018
826,421
820,215
3.37
86.1
3.85
94.3
47,583
50.0
23,815
41,289
72.0
29,742
817,714
820,491
3.29
86.5
3.77
94.5
47,104
49.6
23,369
40,366
72.3
29,201
803,101
804,749
3.31
84.6
3.90
93.6
46,128
48.9
22,532
40,317
72.9
29,388
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, 2020 payable production was 20,008 tonnes of zinc and 28,254 tonnes
of lead.
Payable base metal in concentrate sales from Sasa were 19,930 tonnes of zinc and
28,218 tonnes of lead.
During 2020 Sasa sold 341,633 ounces of payable silver to Osisko Gold Royalties in
accordance with its streaming agreement.
Sasa annual production
)
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k
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o
r
p
l
a
t
e
M
70
60
50
40
30
20
10
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
2020
Zn production
Pb production
Throughput
900
800
700
600
500
400
300
200
100
0
)
t
k
(
t
u
p
h
g
u
o
r
h
t
t
n
a
P
l
38
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
39
MINE Sub-level caving underground mine with ore transported to surface by shaft (70%) and by truck (30%)CRUSH AND SCREENJaw and cone crushersMILL Rod mills, spiral classifiers and ball mills. Ore milled to c.74 micronsFROTH FLOTATIONTwo concentrates produced – lead containing silver, and zincREMOVE MOISTUREThickened and pressed to de-waterSTORAGE Saleable concentrate products stored in sheds awaiting loadingTO MARKET Concentrate trucked to smeltersZINC AND LEAD PRODUCTION 2020 mined and processed ore was 826,421 tonnes and 820,215 tonnes respectively. The average head grades were 3.37% zinc and 3.85% lead. The average metallurgical recoveries were 86.1% for zinc and 94.3% for lead.Sasa produces a zinc concentrate and a separate lead concentrate. In 2020, Sasa produced 47,583 tonnes of zinc concentrate at an average grade of 50.0% and 41,289 tonnes of lead concentrate at an average grade of 72.0%.
OPeratiOnal reVieW CONTINUED
Overview
strategic report
Governance
Financial statements
40
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
41
MINING A total of 826,421 tonnes of ore were mined using the sub-level caving method during the year from the 990m and 910m working areas, representing record underground production. The ore from the underground operations is trucked to surface via the XIVb ramp (30%) and hoisted via the Golema Reka shaft (70%).Total ore development during the year totalled 3,047 metres at an average combined grade of 7.22% zinc and lead. Waste development for the year totalled 1,869 metres for 56,977 tonnes of waste, providing internal ramp access and crosscuts to the mining areas below the 910m level. A total of 198 metres of vertical development was completed during the year, providing internal passes and ventilation raises.Six new underground machines were purchased during the year (three loaders, two boomer drill rigs and one truck) following a review of the equipment and optimisation initiatives. During the year, a total of six boomers were equipped with telescopic drifters enabling mechanised ‘in-cycle’ support, eliminating the need for hand-held jack leg machines.Remote loading and charging systems were introduced during the year, utilising a line of site remote control system on two of the ST7 loaders and the introduction of the Can Blast explosive loading system for charging production holes.Underground communications were installed during the year and included: ´NewTrax equipment monitoring system, which enables more efficient analysis of utilisation and availability ´Battery backup in the event of power loss ´Bluetooth receivers ´CCTV cameras with recording capability were installed at key locations ´The IT team also commenced installation of a fibre network underground as well as 5GHz 802.11ac Wi-Fi access points throughoutPROCESSING Despite periods of reduced personnel due to COVID-19, the Sasa processing facility processed a total of 820,215 tonnes of ore during the year with an availability of 96.3% (2019: 94.7%). Commissioning of the tertiary crusher was completed in January 2020 and, since then, the crusher has operated well, producing a finer product size that will enable the grinding circuit to reach a capacity of 850,000 tonnes per year going forward. The metallurgy team also reinstated a regrind mill for the lead circuit and this, coupled with minor changes in control philosophy has also aided recoveries. Sasa’s metallurgical laboratory has now been operating successfully for one year and has provided valuable support in optimising lead and zinc recoveries. EXPLORATION During 2020, 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 4,268 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.Following the completion of the Svinja Reka infill drilling programme between the 830 and 750 levels and interpretation of the results, a Mineral Resource Estimate was completed at the end of June 2020 and a total of 710,367 tonnes of Inferred Resources were converted to Indicated Resources. A total of 2,528 metres were drilled at Kozja Reka to explore the potential mineralisation below the 830 level. The drilling programme will continue in 2021, 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 2020.2021 PRODUCTION GUIDANCE The 2021 production guidance for Sasa is for a mining 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. CUT AND FILL PROJECTOverviewDuring the year, CAML completed its technical and financial analysis and the Board agreed to transition the Svinja Reka operations at Sasa from the current sub-level caving mining method to cut and fill stoping. The cut and fill mining method involves filling mined voids with a backfill paste material containing tailings to provide support, rather than allowing the roof to cave as is the case with the current sub-level caving method. In order to achieve this, a backfill plant will be constructed, along with associated reticulation pipework to transport this material underground. This is then distributed underground to fill stopes. Given that a major component of the backfill material will be tailings generated from the Sasa processing plant, it is estimated that in excess of 40% of Svinja Reka’s life of mine tailings will be stored underground. Approximately 30% of tailings will be stored in the current TSF4, and CAML is advancing studies with a view to dry-stacking the remainder and therefore eliminating the need to construct further tailings dams in the future. In order to ensure efficient underground operations for the long term, a new decline will be developed from surface. The development of this decline, which was mentioned at the time of the H1 2020 results, has subsequently been approved by the Board. The decline, will be larger than the current access route and would offer increased ventilation, easier access for reticulation infrastructure and the ability to increase SVINJA REKA MINERAL RESOURCE ESTIMATESasa’s technical services team has updated the Mineral Resource Estimate (‘MRE’) for the Svinja Reka deposit as of 30 June 2020. GradesContained metalSvinja Reka MtPb (%)Zn (%)Ag(g/t)Pb (kt)Zn (kt)Ag(koz)Indicated12.74.73.325.758842110,463Inferred2.03.92.022.681421,508Total14.74.53.124.866946311,972Notes- Mineral Resources have an effective date of 30 June 2020. The Competent Person for the declaration of Mineral Resources is Jordan Angelov, MSc. MAIG. Jordan Angelov is a Member of the Australian Institute of Geoscientists and has some 20 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 Interim 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.- 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 or ounces. 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.SVINJA REKA ORE RESERVE STATEMENTThe following Ore Reserve Statement has been prepared by the Sasa technical team on the basis of a transition over four years comprising a two-year construction period followed by a two-year ramp-up period from the sub-level caving mining method to cut and fill. It takes into account the updated MRE and modifying recovery and dilution factors appropriate for each of the two mining methods. GradesContained metalSvinja RekaMtPb (%)Zn (%)Ag(g/t)Pb (kt)Zn (kt)Ag(koz)Probable10.74.03.022.34313207,671Total10.74.03.022.34313207,671Notes- Ore Reserves have an effective date of 30 June 2020.- 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 CAML. 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).- 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 metal prices used to assess the Ore Reserve estimate in the financial model are $2,250/t for zinc and $1,850/t for lead.- The standard adopted in respect of the reporting of Mineral Resources and Ore Reserves 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’).ore production to 900,000 tonnes per year in the medium term, while removing the ‘double handling’ aspect of the tracked, shaft haulage and conveyor configuration of the current 830 haulage level. This will become particularly important once mining operations progress to below the 830 level. A Capital Projects team has been formed at Sasa to ensure appropriate focus on this key project and ensure delivery. Production profileCut and fill stoping will commence in H2 2022, with approximately 90% of ore being extracted using this method by 2024, by which point an underground production rate of 900,000 tonnes should be achieved. Production guidance should be maintained at current levels throughout the construction period. In order to increase plant throughput to 900,000 tonnes, modifications will be made to the processing facilities. Specific options are still being considered, with a likely approach being to add another smaller mill as well as additional flotation capacity. Operating and capital costsIt is expected that operating costs will increase minimally, primarily as a result of the paste component of the operation, involving thickening of tailings, creation of paste and reticulation of the backfill product into the mined stopes. Once the ramp-up period commences in 2023, total site-based costs on a per tonne basis are likely to be in the order of 5% higher than that achieved in 2019. In 2021 and 2022, project capital expenditure required to transition the mine is expected to be $18-19 million. OPeratiOnal reVieW CONTINUED
Overview
Overview
strategic report
Governance
Governance
Financial statements
Financial statements
KOUnraD
KAZAKHSTAN
The Kounrad team was proud to meet safety, cost and increased
production targets despite the impacts that COVID-19 had on
restricting personnel interactions for health measures.
Additionally, the team was congratulated on achieving a
significant milestone on 18 April 2020, when Kounrad’s
100,000th tonne of copper was harvested.
HOW We PrODUCe COPPer
resOUrCes MaP
estiMateD reMaininG COPPer tO Be reCOVereD
Western
Dumps
c. 130,000t
Original
pit
eastern
Dumps
c.10,000t
Kounrad
village
Plant
Copper cathode purity
99.998%
2019: 99.998%
Plant availability
99.5%
2019: 99.6%
2020 CatHODe PrODUCtiOn
During the year, the SX-EW plant produced 13,855 tonnes of copper cathode, a slight
increase from the previous year of 13,771 tonnes. Total Kounrad copper production
since operations commenced in April 2012 is now 110,100 tonnes, averaging over
1,058 tonnes per month since start-up.
During 2020, copper was leached from the Eastern and Western Dumps, with both areas
performing in line with forecasts. This combined approach will continue into 2021, and
from the end of that year onwards, the contribution from the Eastern Dumps will decline
to approximately 20-25% of total output. Winter leaching of the Eastern Dumps was
suspended in early December 2020 and will restart in April 2021 and, over the winter
period, copper production will be generated solely from the Western Dumps.
KOUnraD COPPer PrODUCtiOn
)
t
(
n
o
i
t
c
u
d
o
r
p
l
a
u
n
n
A
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2012
2013
2014
2015
2016
2017
2018 2019
2020
Copper production
Cumulative copper production
120,000
100,000
80,000
60,000
40,000
20,000
0
)
t
(
n
o
i
t
c
u
d
o
r
p
l
a
u
n
n
a
e
v
i
t
a
u
m
u
C
l
42
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
43
IRRIGATION Irrigation of dumpsLEACHING Leaching of copper into PLS solutionEXTRACTION Extraction of copper from PLSSTRIPPING Stripping of copper from organic solutionELECTRO-WINNING Electro-winning of copper from electrolyteCOPPER CATHODE Production of copper cathode
OPeratiOnal reVieW CONTINUED
Overview
strategic report
strategic report
Governance
Financial statements
leaCHinG OPeratiOns
Both the Eastern and Western Dumps were
simultaneously leached during 2020, with
the production split being 37% and 63%
respectively. 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
2020 output from the Eastern Dumps of
5,355 tonnes. This takes the total quantity of
copper recovered from this resource area,
since operations commenced, to 77,731
tonnes or c.96% of that initially forecast at
the time of the IPO. Typically, the daily
average area under irrigation at the Eastern
Dumps during the year was 28 hectares.
This approach of leaching and rotating
around all the old, rested blocks will be
undertaken going forward with at least a
0.4 grammes per litre copper pick-up being
maintained for eight months each year.
44
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ANNUAL REPORT & ACCOUNTS 2020
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ANNUAL REPORT & ACCOUNTS 2020
45
PAGE HEADERDuring Q1 2021, an additional heavy-duty bulldozer will be purchased, which will be utilised in pushing down the Eastern inter-dump side walls and ripping the surface of the original access roads, after which irrigation piping will be laid. The Company estimates that these currently difficult-to-irrigate areas contain additional quantities of recoverable copper, from which we anticipate an extra 3,000 to 4,000 tonnes of copper in the years between 2021 and 2024. At the Western Dumps, the focus of irrigation remained on parts of Dump 16 and Dump 22 within the initial leach area (‘ILA’). During 2020, 8,729 tonnes of copper were recovered from these areas, contributing approximately 63% of the total Kounrad copper production. The average daily area under irrigation on the Western Dumps was 33 hectares of both fresh and previously leached material. With both dump areas simultaneously under active irrigation, the volume of raffinate pumped around the site averaged 1,334 cubic metres per hour (‘m3/hr’) versus 1,329 m3/hr in 2019. 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 2021, as and when appropriate.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. At an average of 8.75gpl of iron in the rich electrolyte, compared to 7.37gpl in 2019, power consumed per tonne of copper plated increased by 6% to 4,045 kWh per tonne. During Q2 2020, 1,567 anodes were renewed in the EW1 building, with a further 415 pieces arriving in December for scheduled replacement in Q1 2021. A further 750 pieces will be ordered for replacement in the EW2 building during Q3 2021.An extra 75m3 capacity tank was delivered to site in late December to enhance on-site storage capability for Escaid, which is a crucial reagent for the process.The focus for the operations team has been on continued safe, efficient plant operations and the tight control of all operating costs. Given the planned switch to almost all leaching from the Western Dumps by 2024, engineering studies have been finalised to implement a split irrigation and solution collection system to allow the operation of an Intermediate Leach System (‘ILS’), which should result in an increase in the copper grade of the PLS. Capital has been allocated to the first phase of this project in 2021, which will involve the installation of over 14 kilometres of water delivery pipeline and associated pumps. During 2022, the second phase will be completed in readiness for operations from Spring 2023 onwards. This involves the construction of various collection ponds and the installation of the top of dump distribution and irrigation system.Application rates of solution to the dumps were maintained at approximately 2.25 litres per square metre per hour (‘l/m2/hr’) throughout the year. Direct field experience has confirmed that materials in Dump 1A require a lower application rate of approximately 1.5l/m2/hr to achieve optimum solution penetration. Additionally, during 2021, a large-scale field test will be conducted with a low application rate of between 1.0 to 1.5l/m2/hr on Dump 2, in order to assess the potential exploitation of this fine and clay-rich material. Significant levelling and shaping earthworks were undertaken for six months on Dump 21 in readiness for leaching starting in the Spring of 2021.CAML’s external metallurgical consultant, PCMETS, continued with its valuable technical oversight of the operation. With three 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. This data confirms the necessity of the ILS approach to the leaching cycle, coupled with the use of ’rest’ periods as successfully proven at the Eastern Dumps.SX-EW PLANT The SX-EW plant continued to operate efficiently during 2020 and the overall operational availability throughout the year was in line with expectations at 99.5%.With the average Western Dumps copper grade of around 0.1%, the average PLS grade for the year was 2.10gpl, approximately 3% less than in 2019. To off-set this reduction the volume of PLS treated through the SX circuit averaged 1,084m3/hr, compared to 985m3/hr achieved in 2019. 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. Regular in-house and independent metallurgical analyses have consistently reported 2020 copper purity of around 99.998%. The Company continues to sell the majority of copper production through its off-take arrangements with Traxys, the terms of which are fixed until October 2022. 2021 PRODUCTION GUIDANCE The 2021 guidance for Kounrad’s copper cathode production remains between 12,500 and 13,500 tonnes. FinanCial reVieW
Overview
strategic report
Governance
Financial statements
DeliVerinG sHareHOlDer ValUe
CAML is pleased to report a strong set of
financial results, which demonstrate a
strong operational performance and
effective cost control. However, the results
reflect weak zinc and lead prices, particularly
during H1 2020, due to the COVID-19
pandemic, with gross revenue and EBITDA
lower than the prior year.
GaVin
Ferrar,
CHIEF FINANCIAL OFFICER
OVerVieW
The Group generated 2020 EBITDA of $95.7
million (2019: $108.6 million), representing a
decrease of 12% from the prior year due to
the decline in commodity prices and an
increase in Sasa’s concentrate treatment
charges. The EBITDA margin however
remained strong at 56% (2019: 60%)
which, given the global conditions, reflects
the Group’s ability to maintain low costs
across the operations.
Earnings per share (‘EPS’) from
continuing operations was 24.78 cents
(2019: 29.36 cents), 16% lower than the
previous year.
CAML generated $58.9 million (2019:
$69.8 million) of free cash flow. The
Group has continued to deleverage,
having repaid debt of $38.4 million during
the year (2019: $38.4 million). As at
31 December 2020, drawn overdraft
facilities totalled $9.7 million (2019: $0.9
million) resulting in net debt of $36.2
million (2019: $80.2 million).
Sasa’s 2020 EBITDA was $42.3 million
(2019: $59.6 million), with a margin of
46
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
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ANNUAL REPORT & ACCOUNTS 2020
47
51% (2019: 60%). Whilst sales volumes for both zinc and lead were higher during 2020 compared to 2019, zinc and lead prices declined during 2020 and treatment charges increased. Continued cost control has ensured that the mine continues to operate at approximately the 25th percentile of global producers on a C1 zinc equivalent cash cost basis.Kounrad’s EBITDA was $65.5 million (2019: $61.7 million), with a margin of 75% (2019: 76%). EBITDA increased year on year due to an increase in the average copper price received, effective cost control and a weakening of the local currency during the year. This enabled the operation to continue producing copper at costs well within the lowest industry quartile.INCOME STATEMENT Group profit before tax from continuing operations decreased by 12% to $59.8 million (2019: $67.8 million). This was primarily as a result of reduced revenue due to lower zinc and lead commodity prices and increased treatment charges, as low costs of production were maintained. Revenue CAML generated 2020 gross revenue of $170.3 million (2019: $180.8 million), which is reported after deduction of treatment charges, but before deductions of offtake buyer’s fees and silver purchases for the silver stream. Net revenue after these deductions was $160.1 million (2019: $171.7 million). Sasa A total of 19,930 tonnes (2019: 19,697 tonnes) of payable zinc in concentrate and 28,218 tonnes (2019: 27,875 tonnes) of payable lead in concentrate were sold during 2020.The zinc price achieved declined by 10% to an average of $2,253 per tonne (2019: $2,497 per tonne) and, for lead, the price achieved also declined by 10% to an average of $1,791 per tonne (2019: $2,001 per tonne), leading to a reduction in gross revenue generated from the mine. Revenue also declined due to higher treatment charges during the year of $22.2 million (2019: $13.6 million). Sasa generated 2020 gross revenue of $82.7 million (2019: $99.1 million). During 2020 the offtake buyer’s fee for Sasa was $0.9 million (2019: $1.1 million). Zinc and lead concentrate sales agreements have been arranged with Traxys through to 31 December 2022 for 100% of Sasa production. During 2020, additional smelters were identified in China and South Korea to diversify CAML’s customer base. Through these concentrate sales to new smelters, Sasa is benefitting from reduced treatment charges. However, Group selling and distribution costs increased to $2.6 million (2019: $1.8 million) reflecting the increased international shipping costs.Sasa has an existing silver streaming agreement with Osisko Gold Royalties whereby Sasa receives approximately $6 per ounce from its silver production for the life of the mine. Kounrad A total of 13,763 tonnes (2019: 13,100 tonnes) of copper cathode from Kounrad were sold as part of the Company’s offtake arrangement 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 97 tonnes (2019: 500 tonnes) were sold locally, a reduction from the prior year due to lower local demand as a result of COVID-19. Total Kounrad copper sales were 13,860 tonnes (2019: 13,600 tonnes).Revenue increased due to both higher sales volumes when compared to 2019 and a 4% increase in the average copper price received, which was $6,267 per tonne in 2020 (2019: $6,011 per tonne). This generated gross revenue for Kounrad of $87.7 million (2019: $81.7 million). During 2020, the offtaker’s fee for Kounrad was $2.5 million (2019: $2.4 million).2021 hedging Given the increased capital expenditure required to deliver the Sasa Cut and Fill Project, CAML has subsequent to year end, put in place hedging arrangements for a portion of its 2021 metal production. Kounrad’s Zero Cost Collar contract for 30% of copper production includes a put option of $6,900 per tonne and a call option of $8,380 per tonne. Sasa’s zinc and lead arrangements are swap contracts, with 30% of Sasa’s payable zinc production to be sold at $2,804 per tonne and 30% of its payable lead production to be sold at $2,022 per tonne.These arrangements ensure that CAML retains its leverage to strong copper, zinc and lead prices, while protecting a meaningful proportion of revenues during the higher capital expenditure period and continuing to rapidly deleverage.Cost of sales Group cost of sales for the year was $72.0 million (2019: $73.1 million). This includes depreciation and amortisation charges of $28.6 million (2019: $29.5 million).Sasa Sasa’s cost of sales for the year was lower than the previous year at $51.0 million (2019: $52.8 million) as spending was reduced where possible as commodity prices fell. During 2020, six new pieces of Epiroc underground equipment (three loaders, two boomers and a truck) arrived at site and this also resulted in lower expenditure on underground fleet materials such as spare parts and tyres. Cost of sales also reflects lower concession fees amounting to $2.4 million (2019: $2.6 million). This tax is calculated at the rate of 2% (2019: 2%) on the value of metal recovered during the year and the reduction resulted from the lower average zinc and lead prices during the year. FinanCial reVieW CONTINUED
Kounrad
Kounrad’s 2020 cost of sales was $21.0
million (2019: $20.3 million). This increase
year on year was due to higher sales
volumes and an increase in mineral
extraction tax (‘MET’) paid. MET is charged
by the Kazakhstan authorities at the rate
of 5.7% (2019: 5.7%) on the value of
metal recovered during the year. MET for
the year was $5.1 million (2019: $4.7
million) and an increase resulted from the
higher average copper price and higher
sales volumes during the year.
During the year, the Kazakhstan Tenge
depreciated against the US Dollar. The
average exchange rate for the year was
413 KZT/USD (2019: 383 KZT/USD), with
the Kazakhstan Tenge being worth on
average 7% less in US Dollar terms in
2020 compared to 2019. This resulted in
a benefit for the cost base, including
lower depreciation and amortisation
charges during the year of $3.9 million
(2019: $4.4 million).
C1 cash cost of production
C1 cash cost of production is a standard
metric used in the mining industry to
allow comparison across the sector. In
line with the industry standard, CAML
calculates C1 cash cost by including all
direct costs of production at Kounrad and
Sasa (reagents, power, production labour
and materials, as well as realisation
charges such as freight and treatment
charges) in addition to local
administrative expenses. Royalties,
depreciation and amortisation charges
are excluded from C1 cash cost.
C1 cash cost
Sasa zinc
equivalent C1 cash
cost ($/lb)
Kounrad copper C1
cash cost ($/lb)
Cu equivalent
production (t)
Group Cu
equivalent C1 cost
($/lb)
Fully inclusive Cu
equivalent cost of
production ($/lb)
2020
2019
0.50
0.47
0.51
0.52
29,082
31,233
1.15
0.94
1.63
1.50
Overview
strategic report
Governance
Financial statements
CASH FLOW
m
$
120
110
100
90
80
70
60
50
40
30
87.0
(14.7)
8.0
(4.8)
(8.5)
(13.9)
32.6
Cash at
1 January
2020
Generated
from
operations
Income
tax paid
Interest
paid
Purchase
of PPE
Drawdown
of overdrafts
Dividends
Repayment
of borrowings
Other
Cash at
31 December
2020
0.6
47.9
(38.4)
48
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ANNUAL REPORT & ACCOUNTS 2020
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ANNUAL REPORT & ACCOUNTS 2020
49
Sasa Sasa’s C1 zinc equivalent cash cost of production for 2020 was $0.50 per pound (2019: $0.47 per pound). The reason for the $0.03 per pound increase was due to higher realisation costs at Sasa, primarily due to increased treatment charges for 2020. The on-site costs, over which CAML has more control, were lower than 2019 at $39.2 per tonne (2019: $40.3 per tonne) demonstrating continued cost management.Kounrad Kounrad’s C1 cash cost of production remains firmly in the lowest quartile of the copper industry cost curve at $0.51 per pound (2019: $0.52 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 2020 C1 copper equivalent cash cost was $1.15 per pound (2019: $0.94 per pound). This number is calculated based on Sasa’s 2020 zinc and lead payable production, which equated to 15,227 copper equivalent tonnes (2019: 17,462 copper equivalent tonnes) added to Kounrad’s 2020 copper production of 13,855 tonnes (2019: 13,771 tonnes). The Group C1 cash cost on a copper equivalent basis has increased largely as a result of higher realisation costs at Sasa, primarily due to increased treatment charges, and lower copper equivalent production units due to lower lead and zinc prices.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 Kounrad and Sasa projects. The Group’s fully inclusive copper equivalent unit cost for the year increased to $1.63 per pound (2019: $1.50 per pound). The increase of $0.13 per pound reflects the higher Group C1 cash cost as explained above, however the impact of this increase was countered by lower finance costs and capital expenditure.Administrative expenses During the year, administrative expenses were higher at $19.0 million (2019: $18.3 million), largely due to employee pay increases across the Group and an increase in Kazakhstan withholding taxes paid.Finance costsThe interest payable on the debt financing with Traxys Europe S.A. reduced to LIBOR plus 4.00% with effect from 27 March 2020 (previously LIBOR plus 4.75%) and the 2020 average LIBOR rate also reduced to 0.63% (2019: 2.27%). The Group therefore incurred lower finance costs of $6.7 million (2019: $11.2 million) given the reducing debt balance and lower interest rate.TaxationWhile the Group profit before tax decreased in 2020, the group corporate income tax remained consistent at $16.0 million (2019: $15.9 million). This is due to higher tax paid in Kazakhstan in 2020 owing to an increase in profit before tax at Kounrad from improved copper commodity prices and cost control at a corporate income tax rate of 20%. The profit before tax at Sasa decreased significantly due to lower zinc and lead commodity prices and increased treatment charges in 2020 however North Macedonian corporate income tax is payable at a lower rate of 10% therefore this had less impact on total corporate income tax.Discontinued operationsThe Group continues to report the results of the 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. Shuak BV was dissolved in April 2020. BALANCE SHEET In reaction to the global market conditions, adjustments were made to the capital expenditure plan and savings and deferrals were identified. As a result, the initial 2020 capital expenditure guidance was reduced from $12.0 - $14.0 million to $9.0 – $11.0 million. During the year, there were additions to property, plant and equipment of $8.5 million (2019: $12.1 million). The additions were a combination of $1.3 million (2019: $1.8 million) Kounrad sustaining capital expenditure and $7.2 million (2019: $7.5 million) Sasa sustaining capital expenditure. Sasa’s TSF4 construction was completed in 2019 and therefore no construction costs were incurred during 2020 (2019: $1.9 million).During 2019, a full audit of Sasa’s underground mobile fleet was undertaken and a decision was made to undergo a phased process of replacing the current underground mobile plant with a new optimised fleet. During 2020, six new pieces of Epiroc underground equipment (three loaders, two boomers and a truck) arrived at site.As at 31 December 2020, current trade and other receivables were $8.9 million (31 December 2019: $6.3 million), which includes trade receivables from the offtake sales of $1.9 million (31 December 2019: $1.5 million) and $2.6 million in relation to prepayments (31 December 2019: $2.2 million). Non-current trade and other receivables were $3.8 million (31 December 2019: $3.4 million). As at 31 December 2020, a total of $3.3 million (31 December 2019: $3.1 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 recoverable amounts.As at 31 December 2020, current trade and other payables were $12.9 million (31 December 2019: $12.3 million).As at 31 December 2020, non-current and current borrowings were $32.3 million (31 December 2019: $69.5 million) and $48.1 million respectively (31 December 2019: $39.3 million) comprising of $70.7 million in corporate debt through Traxys Europe S.A. and the $9.7 million of North Macedonian overdraft facilities. The reduction in total borrowings of $28.4 million reflects debt repaid during the year of $38.4 million, net drawdowns on overdrafts of $8.0 million, finance charges of $1.2 million unwinding directly attributable fees and foreign exchange of $0.8 million on Macedonian Denar denominated overdrafts.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 4.00% with effect from 27 March 2020 (previously LIBOR plus 4.75%). Security is provided over the shares in CAML Kazakhstan BV, certain bank accounts and the offtake agreements between Traxys and each operation. The financial covenants of the debt which include the monitoring of gearing and leverage ratios are all continuously monitored by management and the Group is both currently compliant and forecast to continue to be compliant with significant headroom.The $5.0 million overdraft facility previously agreed with Komercijalna Banka AD Skopje with a fixed interest rate of 3.8% denominated in Macedonian Denar has been extended to July 2021 with the fixed interest rate reduced to a range of 2.4% to 2.5% dependent on conditions. In June 2020, a new one-year $5.0 million overdraft facility was agreed with Ohridska Banka A.D. Skopje with a fixed interest rate of 2.5% denominated in Macedonian Denar. Both facilities can be extended on an annual basis. These funds provide the Group with additional financial flexibility.As of 31 December 2020, the Group had cash in the bank of $47.9 million (31 December 2019: $32.6 million).During 2018, CMK Europe Limited (‘CMK Europe’), paid $5.9 million of withholding tax liability to the Public Revenue Office (‘PRO’) in North Macedonia. The liability related to the activities of CMK Europe prior to CAML’s ownership. In June 2020, CMK Europe received a judgement from the Higher Administrative Court of North Macedonia accepting its appeal and overturning the PRO ruling. The Court judgement instructed the PRO to repeat the withholding tax inspection for the year 2015 to 2017 taking into consideration the findings of the Court judgement. Management believes that a favourable outcome is probable, however, the contingent asset has not been recognised as a receivable at 31 December 2020 as receipt of the amount is dependent on the outcome of the reinspection.TSF4 incidentDuring 2020, $0.7 million was incurred as an expense in relation to the Sasa TSF4 incident, comprising dam repairs to the facility, environmental aspects for riverbed remediation and includes a €65,000 fine for the environmental impact associated with the leakage. There was also $0.2m capitalised in respect of infrastructure work and engineering improvements. A further $0.3 million is expected to be incurred in expenses to complete the remediation works during 2021. FinanCial reVieW CONTINUED
Overview
strategic report
Governance
Financial statements
50
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
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ANNUAL REPORT & ACCOUNTS 2020
51
CASH FLOWS The operational performance of both Kounrad and Sasa and the associated low costs of production resulted in strong cash flows for the Group in the context of the 2020 global health, economic and metal price challenges. Net cash flow generated from operations was $67.4 million (2019: $80.9 million). During the year, corporate debt repayments of $38.4 million were made (2019: $38.4 million), plus Group interest paid totalling $4.8 million (2019: $9.4 million). Net drawdowns on overdrafts during the year were $8.0 million (2019: $0.9 million). $1.6 million (2019: $3.0 million) of North Macedonia corporate income tax was paid in cash during the year in addition to a $4.0 million (2019: $3.9 million) non-cash payment offset against VAT receivable and overpaid corporate income tax from the prior year. $13.1 million (2019: $13.3 million) of Kazakhstan corporate income tax was paid during the year. Taking into account capital expenditure, CAML’s free cash flow for 2020 was $58.9 million (2019: $69.8 million).DIVIDEND 020406080100120140160180200220202020192018201720162015201420132012$mCumulative shareholder returns10.7p9.0p12.5p12.5p15.5p16.5p14.5p6.5p14.0pThe 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 sustaining capital expenditure. The dividends will only be paid provided there is sufficient cash remaining in the Group to meet the ongoing contractual debt repayments and that banking covenants are not breached.In light of COVID-19, the CAML Board took the decision not to recommend a final 2019 dividend. Total dividends paid to shareholders during the year of $13.9 million (2019: $32.2 million) therefore relate to the interim dividend for the year ended 31 December 2020 of 6.0 pence per Ordinary Share, which was delayed to December 2020 due to the leakage from Sasa’s TSF4. In conjunction with CAML’s 2020 annual results, the Board proposes a final 2020 dividend of 8 pence per Ordinary Share which represents 57% of free cash flow and is therefore above our stated policy. This demonstartes a strong end to 2020 for us and a positive start to 2021, particularly in terms of commodity prices. This brings total dividends (proposed and declared) for the year to 14 pence (2019: 6.5 pence) payable on 25 May 2021 to shareholders registered on 30 April 2021. This latest dividend will increase the amount returned to shareholders in dividends and share buy-backs since the 2010 IPO listing to $209.6 million.GOING CONCERN The Group meets its day-to-day working capital 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 2020. The prices of copper, zinc and lead were impacted in 2020 by concerns over global demand due to the outbreak of the COVID-19 pandemic. Looking forward, uncertainty remains regarding the global health and economic ramifications of COVID-19, although metal prices have improved significantly from their lows of H1 2020 with various government COVID-19 vaccine programmes now being implemented and fiscal stimulus expected to drive demand for raw materials.During 2020, both the Kounrad facility in Kazakhstan and the Sasa mine in North Macedonia continued to operate with no disruptions to production or sales volumes due to COVID-19. The Company put in place many measures during 2020 to try to ensure the health of its employees and contractors on both sites. The CAML Board has considered and debated a substantial range of possible scenarios on the Group’s operations, financial position and forecasts covering a period of at least the next 12 months. This analysis has considered 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. Management have performed reverse stress testing sensitivities to determine when profitability, liquidity or covenants break.The likelihood of the stress test scenarios occurring is considered to be remote and therefore no material uncertainty is considered to exist and the Directors have a reasonable expectation that the Group has existence for the foreseeable future, accordingly, the Directors continue to adopt the going concern basis in preparing the consolidated financial statements. NON-IFRS FINANCIAL MEASURESThe Group uses alternative performance measures, which are not defined by generally accepted accounting principles (‘GAAP’) such as IFRS. These measures are used by management, alongside the comparable GAAP measures, in evaluating the business performance. The measures are not intended as a substitute for GAAP measures and may not be comparable to similarly reported measures by other companies. The following non-IFRS alternative performance financial measures are used in this report:EBITDAEBITDA 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:2020$’0002019$’000Profit for the year43,69051,937Plus/(less): Income tax expense16,03515,911Depreciation and amortisation29,14830,080Foreign exchange loss/(gain) 690(377)Other income(535)(212)Other expenses 28481Finance income(116)(336)Finance costs 6,67311,153Loss/(profit) from discontinued operations70(53)EBITDA95,683108,584Gross revenueGross revenue is presented as the total revenue received from sales of all commodities after deducting the directly attributable treatment charges associated for the sale of zinc, lead and silver. This figure is presented as it reflects the total revenue received in respect of the zinc and lead concentrate and is used to reflect the movement in commodity prices during the year. The Board considers gross revenue, together with the reconciliation to net IFRS revenue to provide valuable information on the drivers of IFRS revenue.Net debtNet debt is a measure used by the Board for the purposes of capital management and 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 $3.6 million (31 December 2019: $4.0 million):31-Dec-20$’00031-Dec-19$’000Borrowings80,412108,768Cash and cash equivalents(44,231)(28,566)Net debt36,18180,202Free cash flowFree cash flow is a non-IFRS financial measure of the cash from operations less capital expenditure on property, plant and equipment and intangible assets and is presented as follows:2020$’0002019$’000Net cash generated from operating activities67,43980,853Less: Purchase of property, plant and equipment(8,497)(11,042)Less: Purchase of intangible assets(2)(21)Free cash flow58,94069,790On behalf of the Board GAVIN FERRARCHIEF FINANCIAL OFFICER 29 March 2021 risK ManaGeMent
iDentiFYinG anD
ManaGinG risKs
Overview
strategic report
Governance
Financial statements
risK ManaGeMent PrOCess
OUr risK ManaGeMent FraMeWOrK
BOarD OF DireCtOrs
aUDit COMMittee
sUstainaBilitY COMMittee
GrOUP risK COMMittee
seniOr ManaGeMent
sUstainaBilitY DePartMent
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.
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 management within
the Group is an ongoing
evolutionary process
and we have continued
to make significant
improvements during
the year in this key area
that is integrated into
our whole business.
While a disappointment and an area for
further development internally, our TSF4
incident did at least demonstrate the
robustness of our risk processes as this
was identified as one of our key
company risks.
Risk management is led by the executive
directors and senior management.
Throughout 2020, this team, formed as
the Risk Committee, met and reviewed
the significant risks which the Group
faced and how best to mitigate those
risks. The Chair of the Risk Committee
met with the Audit Committee and
reported on the material risks to the
business and what was being done to
mitigate them.
An area of ongoing work is to engage
the junior management at the sites to
identify and bring risks to the attention
of the senior management and Risk
Committee. Previously the Group had
utilised specialised software to assist
with risk recording and reporting, but
this was not successful and so its use
was ceased. Following feedback from
users, the risk reporting system has
been simplified and it is hoped that
engagement by junior management will
be improved.
During 2020, one of our Principal Risks
came to the fore as we suffered a
leakage from our TSF4. A detailed review
was immediately initiated, with significant
focus on deepening our understanding of
the risks associated with these facilities
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and further educating our employees on site. Whilst it has been an unfortunate incident, the business has emerged in a stronger position in this regard, with an increased knowledge and understanding of the risks associated with storing tailings. Insurance is a tool which we use for risk management and, in particular, the Independent External Audit reports we receive from these groups provide useful insight into risks, and typically help us to generate a mitigation action list. The insurance markets are becoming more difficult and costs associated with insurance continue to rise significantly. During 2020, we were able to keep our Group insurance costs at levels similar to previous years. This is due largely to the work that our local teams do in managing operational risks at site, which is recognised by the insurance markets. 2021 will see increased insurance scrutiny for the business due to global market changes and the TSF incident, but we remain confident that we will be able to demonstrate to the insurance markets the actions we continue to take to minimise risks.COVID-19The development of the COVID-19 pandemic has caused worldwide upheaval but, fortunately for the Group, it has had limited impact on our operational output given the risk-related procedures we put in place to maintain as best we could the health of our employees. In February, the Group began its COVID-19 response, following which a committee led by the Sustainability Director and the General Counsel was formed in March. Membership of this committee included management from both sites. Our top priority was to ensure as best we could the health and safety of our employees and contractors on site as the pandemic spread worldwide. Business continuity plans were developed, and preventative actions initiated. Whilst infections at the initial stages were mainly limited to China, an initial concern was the impact on our supply chains as global trade slowed. Our analysis showed that our risk management of our supply chains was robust and there was little more required to minimise the impact on our operations. At our sites we introduced social distancing where possible, increased use of PPE, modified the way in which workers are fed and how they are transported to and around site and have had a significant number of persons working from home (in particular those who are most vulnerable). During times of increased infections in the workforce, we reduced workforce numbers. We utilise a track and trace program when an infection is identified and use isolation of workers as a key measure to reduce transmission. Our efforts at site have meant that during 2020, we restricted positive cases at Kounrad to 39 and 47 at Sasa. Since period end, there have been further isolated cases but encouragingly these have not led to significant outbreaks.Our efforts and protocols are ever developing as we learn more about the pandemic. In particular, we are utilising testing as much as possible using both PCR and lateral flow tests to identify any cases of infections. As well as minimising visitor entry to site, we have strengthened prior quarantine for visitors to site from high-risk areas. The colder winter weather has brought its own challenges in temperature screening, requiring the construction of insulated rooms to automatically test body temperature on arrival to site at Kounrad.BoardThe Board responded to the challenges of COVID-19 pandemic by increasing the frequency of meetings to ensure that they were well appraised of the ongoing situation and able to offer advice and support to the management team as required. Spending on capital expenditure was reduced to a minimum as commodity prices fell and we extended our overdraft facilities to ensure sufficient cash liquidity if we were forced to curtail production for a prolonged period at one or both sites. risK ManaGeMent CONTINUED
PrinCiPal risKs anD UnCertainties
Overview
strategic report
Governance
Financial statements
OUr risK Heat MaP
3
9 10
h
g
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o
h
i
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Low
Consequence
1 Mining operations
2
3
4
5
6
7
8
9
tsF - Operations
leaching
environmental
sustainability
Governance
Health & safety
COViD-19
Commodity prices
10
treatment charges
11
tax
arrows indicate
movement
4
8
11
1
5
6
7
2
High
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.
sUstainaBilitY risKs
enVirOnMent - leaCHinG
4
sUstainaBilitY - tsF
5
COViD 19
8
KPis
KPis
KPis
responsibility
´ Sustainability Director
risk and impact
´ At Kounrad the most significant
environmental risk is the potential pollution
of the groundwater from operating an in-situ
dump leaching project.
Mitigation
´ At Kounrad, extensive groundwater
modelling and testing is conducted to
understand the interaction of leaching and
groundwater.
´ 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
´ As operations at Kounrad move
predominately to the western dumps,
increased assessment of the hydrogeology
is required, thereby increasing risk.
responsibility
´ Sustainability Director
risk and impact
´ Given the global health crisis there is
an ongoing risk of COVID-19 infection
brought to site by employees, contractors or
site visitors.
´ Infection of key workers or significant
numbers of staff may impact on the site’s
ability to sustain production.
´ Worldwide infections may have a global
impact on commodity prices and on
supply chains.
Mitigation
´ Increased use of PPE, site based testing, and
social distancing measures.
´ Track and trace measures with associated
testing and mandatory enforced isolation
periods.
risk movement
´ The impact of COVID 19 on our operations
currently poses a significant risk which is
being mitigated appropriately and adequately.
´ The expectation is that risk will decrease
over time as worldwide measures such as
vaccination programs take effect.
responsibility
´ Sustainability Director
´ COO
risk and impact
´ 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 tailings incident of 2020 has led to
changes in the site team’s approach to
tailings management systems and
procedures.
´ 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.
´ Work is being undertaken to implement
warning systems for the local community
in the event of a failure.
´ All of Sasa’s TSFs are of a ‘downstream’
construction type which is generally
regarded as the safest design option.
risk movement
´ The incident at the TSF has made the Group
re-evaluate the assessment and
identification of associated risks which, with
new findings, has resulted in a greater
appreciation of the risks. However,
improvements in the monitoring systems
and management classifies the risk
as stable.
54
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55
55
strategic objectives key:
Focus on safety and sustainability
Targeting low cost, high margins
Ensuring prudent capital allocation
Delivering growth
PAGE HEADEREMERGING RISKSAside from the emergence of the COVID-19 pandemic and the direct risks associated with it, the impact on world trade meant that some governments increased their pressure and scrutiny on the taxation of entities. Whilst taxation is not an emerging risk for the Group, the Group has seen an increase in scrutiny and application in Kazakhstan in particular. The Kazakh authorities are revisiting interpretations of taxation laws, which has led to the Group paying additional tax for prior financial years. Management of the risk is focussed on understanding developments in taxation within country and engaging with our advisors and the taxation authorities to ensure fairness and compliance. CLIMATE CHANGEClimate change is a key global risk for all individuals and businesses, and investors and other stakeholders are understandably increasing their scrutiny on company performance in this area. While CAML is a relatively small company, we are committed to doing what we can in this global effort. In Q4 2020, the senior management team made the decision to undertake some overarching work to develop a risk-based climate change strategy for the Company, which can be actioned and developed for the future and consultants to help with this work have been appointed. This work will be undertaken in H1 2021. RISK APPETITEThe Group’s appetite to risk has changed little since last year. We continue to focus on Health & Safety as an area where there is little risk appetite.Generally, the Group’s appetite to financial risk is more forgiving as we have a low-cost base upon which we operate. We put in place a meaningful hedge programme for 2021 production to lock in metal prices to cover the expected capital costs for 2021 while ensuring that CAML retains some leverage to copper, zinc and lead prices. PrinCiPal risKs anD UnCertainties CONTINUED
Overview
strategic report
Governance
Financial statements
sUstainaBilitY risKs CONTINUED
GOVernanCe
6
HealtH anD saFetY
7
OPeratiOnal risKs
leaCHinG OPeratiOns
3
MininG OPeratiOns
& PrOCessinG
1
tailinGs stOraGe FaCilities 2
KPis
KPis
KPis
KPis
KPis
responsibility
´ Sustainability Director
responsibility
´ Sustainability Director
risk and impact
´ There are multiple governance based risks
which may have an impact on the business.
´ The Group operates within a complex
regulatory environment which focuses on
accountability. Failure to comply with
regulations or failure to follow expected
social and business conduct could cause
reputational damage and potential
financial loss.
Mitigation
´ During 2020, the Group improved
communication and transparency on
governance with the production of its first
sustainability report.
´ The Group continues its engagement with
local authorities and communities to follow
good governance.
´ The Group has restructured its senior
personnel and conducted a risk assessment
to improve focus on good governance within
its sites and also along its
supply chains.
´ The Group maintains strong principles of
corporate governance supported by a
capable and experienced Board and
reinforced by several committees supporting
the Board in its role.
risk Movement
´ Whilst the likelihood of governance risks has
decreased slightly within the measures that
have been put in place, the overall potential
impact to the Group is considered to
be higher.
risk and impact
´ Mining operations by their very nature are
dangerous working environments. In
particular, working underground presents
significant challenges which, if not managed,
could lead to a loss of life.
Mitigation
´ The health and safety of our employees is the
primary objective which we aim to achieve.
Significant capital is deployed to ensure that
our employees have all the necessary
personal protective equipment.
´ At Sasa we have recruited a designated mine
instructor to our personnel to ensure our
workforce receive the best training possible
whilst ensuring these are in line with
international industry standards.
´ We are updating our underground mining
fleet and have added remote operating
capabilities to improve safety.
´ Further capital is being deployed in 2021 to
improve safety by the addition of new
equipment and more advanced methods.
risk movement
´ As we invest more in safer equipment and
continue to train and develop our employees,
the likelihood of this risk decreases although
the Group understands that managing this
risk must always remain at the forefront of
our daily activities.
responsibility
´ COO
responsibility
´ COO
risk and impact
´ Failure to identify long term storage capacity
for tailings could result in an inability to
process mined ore.
Mitigation
´ The transition of Sasa’s mining method to
Cut and Fill Stoping, as well as proposed
dry-stack tailings, will provide additional
tailings storage and augment the lifespan
of TSF4.
risk movement
´ Reassessed following the TSF 4 incident
to be an increase but investment in capital
development changes ensure the risk
is stable.
´ Transition away from the need for future TSF
construction further stabilises this risk.
risk and impact
´ A significant fire at one of our facilities
constitutes the single biggest potential
impact to our operations. The solvent
extraction facility at Kounrad contains highly
flammable solutions which if set alight would
be extremely difficult to extinguish. At Sasa,
a fire in the processing facility would have a
prolonged impact on our ability to operate.
´ The resource reserves and the positioning of
the ore bodies at Sasa present challenges
and have led to significant changes to the
methods of extraction.
Mitigation
´ Fire suppression systems have been
installed in the SX facility and in many other
key installations at the sites.
´ The mining method at Sasa is to change to a
cut and fill operation which aims to decrease
dilution and will result in over 40% of tailings
being stored underground.
risk movement
´ The risks discussed are generally stable but
should reduce over time as the mitigation
measures come into fruition.
responsibility
´ Technical Director
´ COO
risk and impact
´ The nature of in-situ leaching means that
grades and flows of copper-bearing solution
from dumps is dependent upon existing
geology of the dumps and the hydrogeology
of the ground. Should the flow and/or grade
drop, this could lead to a reduction in copper
cathode produced.
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.
´ 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
´ As operations focus on the Western Dumps,
different geological and hydrogeological
features will present future challenges.
´ The production of copper-bearing solution is
performing in line with technical
expectations.
strategic objectives key:
Focus on safety and sustainability
Targeting low cost, high margins
Ensuring prudent capital allocation
Delivering growth
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PAGE HEADER PrinCiPal risKs anD UnCertainties CONTINUED
Overview
Overview
strategic report
strategic report
Governance
Governance
Financial statements
Financial statements
GOVernanCe
BUsiness risKs
treatMent CHarGes
10
taX
11
COMMODitY PriCes
9
KPis
KPis
KPis
responsibility
´ CFO
responsibility
´ CFO
responsibility
´ CFO
risk and impact
´ Adverse movement in zinc and/or lead
treatment charges could have an 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. 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.
´ During 2020 and early 2021, Sasa through
its offtaker trialed small lots to market
in China, South Korea, and Germany to
take advantage of competitive
treatment charges.
risk movement
´ In early 2020 treatment charges
continued to increase. As the global
markets began to recover from the initial
COVID-19 pandemic shock, spot treatment
charges have declined.
risk and impact
´ Increased scrutiny of taxation measures by
the governments in our countries of
operation may lead to higher taxation being
imposed on the Group.
´ Revisiting interpretations on taxation
decisions may lead to the Group paying
increased taxation for previous
financial years.
´ Worldwide shift to the avoidance of using
offshore holding structures may lead to
increased taxation on the Group.
Mitigation
´ Focussing on understanding developments
within our countries of operation and
engaging with our advisers and
taxation authorities.
´ Updating aspects of the Group structure to
follow worldwide developments in the use of
holding companies.
risk movement
´ Increase as governments around the world
struggle fiscally in the economic downturn
attributable to COVID-19.
risk and impact
´ A significant decrease in copper, zinc or lead
commodity prices would negatively impact
Group revenues.
Mitigation
´ As a low cost producer of our metals, we are
able to withstand depressed commodity
prices for a period of time.
´ The Company established a hedging
programme to allow the Group to lock in
commodity prices in 2021. This programme
was utilised for 30% of 2021 production to
cover the expected capital costs for 2021.
risk movement
´ As commodity prices for base metals
have increased during the latter stages
of H2 2020 from lows seen at the
beginning of the COVID-19 pandemic,
this risk has decreased.
COntents
introduction to
Corporate Governance
Board of Directors
Board report
audit Committee report
nomination Committee report
remuneration Committee report
sustainability Committee report
Directors’ report
statement of Directors’
responsibilities
60
64
66
70
72
76
86
89
91
strategic objectives key:
Focus on safety and sustainability
Targeting low cost, high margins
Ensuring prudent capital allocation
Delivering growth
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59
PAGE HEADER
intrODUCtiOn tO COrPOrate GOVernanCe
Overview
strategic report
Governance
Financial statements
letter FrOM tHe CHairMan
The importance of good
governance has always
been recognised within
CAML. Its role in the
management of the
Company has never
been greater than in the
past year.
niCK
ClarKe,
CHAIRMAN
Dear Shareholder,
When I penned my letter to you in last
year’s annual report, none of us knew how
serious the COVID-19 pandemic was to
become. Nonetheless, we had prepared as
best we could for all eventualities. In
governance terms, this was the most
unusual period in the Company’s history.
The Board, along with senior management
and staff throughout the Company were
able to respond well to developments as
they transpired. I would like to thank my
Board colleagues, management, and all
throughout the Group for their great work
in ensuring that we continue as a strong
Company generating value for all of
our stakeholders.
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 bedrock of how 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 central to the manner in
which we have managed the business, and
we strive to ensure our ethos of strong
governance is embedded in every aspect of
our Company.
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 and as
our investors and other stakeholders
understandably prioritise Environmental,
Social and Governance (‘ESG’) aspects. This
has been a key area in which we have
sought to continue to improve over the
past year. Whilst strides have been made,
we continue to view good governance and
its reporting 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.
Amongst the developments over the past
year commented on elsewhere in this
report, I particularly want to highlight
the following:
1. COVID-19 clearly has had a massive
impact on the global economy as well as
on the health and wellbeing of people
around the world. After it became clear
how serious the COVID-19 pandemic
could become, the Board moved to
weekly calls and received regular updates
on the precautions put in place to protect
our staff. This ensured enhanced
monitoring of developments within the
business and beyond, and to provide
support and guidance to the
management team. The Board has also
managed the Company in such a way as
to sustain its continued strength of
operation. We continue to meet more
frequently than normal though weekly
update calls are not currently required.
2. We published our first separate
Sustainability Report in Q2 2020 to
enhance reporting and disclosure in this
area of critical importance. We are pleased
to report the investor response on this was
positive and feedback received is being
acted upon where appropriate in the
forthcoming second Sustainability Report,
which will be available on the Company’s
website at www.centralasiametals.com.
3. In March last year, we took the difficult
but prudent decision not to pay a final
dividend to ensure the Group was able to
weather the effects of the COVID-19
pandemic. I was pleased that after careful
consideration of the economic outlook, as
well as the position of the Company, we
were able to resume dividend payments,
which we did in December.
4. The unexpected and disappointing news
of the leakage at TSF4 in Sasa was reported
to the Board straight after its occurrence.
The Board then convened as quickly as
possible to review events and how these
were being addressed. It continued to
review matters on at least a weekly basis
until these had been resolved and future
plans to mitigate any recurrence were put
in place.
5. As part of the ongoing refreshment of
the Board, we are delighted that Mike
Prentis has accepted the position of
independent Non-Executive Director with
effect from 31 March. His investment and
capital markets expertise will bring great
value to the Board. Mike will also serve on
the Audit, Nomination and Sustainability
Committees and further details of the
process we followed for his appointment
are set out on page 73 of the Nomination
Committee report.
6. Nigel Hurst-Brown, our Deputy
Chairman, as mentioned in last year’s
report, agreed to stay on the Board to
ensure continuity through the then very
uncertain prospects that could result from
the COVID-19 pandemic. I would like to
thank him for doing so. Following a period of
transition for the Board and its
Committees, Nigel will step down from the
Board later this year.
7. I am pleased to report that Bob Cathery
has agreed to continue as Chairman of the
Remuneration Committee until later this
year when he has noted his intention to
step down from the Board. This is
important in terms of bedding in the new
Long-Term Incentive Plan (‘LTIP’) structure
and transitioning this role to a new Chair of
the Remuneration Committee.
8. Dr Gillian Davidson has been on the
CAML Board for a full year in 2020, and her
sustainability expertise was invaluable in
guiding us through the period of extreme
global health risk due to COVID-19 as well
as the environmental ramifications of the
unfortunate TSF4 incident, which we
collectively managed well.
9. Due to the uncertainty created by the
pandemic, the Remuneration Committee
deferred the 2020 LTIP awards until
December of last year while further
consideration was given to appropriate
performance measures in the context of
COVID-19. Further details are set out in
Bob’s Remuneration Committee
Chairman’s letter on page 76.
As we look forward to the coming year, we
do so with increased certainty, confidence
and optimism for the future. I would like to
thank all the Directors, the management
team and of course, our staff for their
ongoing work. We remain committed to all
our stakeholders and look forward to
reporting further developments over the
year ahead.
niCK ClarKe
NON-EXECUTIVE CHAIRMAN
29 March 2021
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 pages 66, 22-31
see pages 68-69
see pages 30-35, 86-88
see pages 52-58, 71
see pages 60-61
see pages 66, 68
see pages 74-75
see pages 68, 86-88
see page 62
see pages 68-69
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intrODUCtiOn tO COrPOrate GOVernanCe CONTINUED
Overview
strategic report
Governance
Financial statements
OUr aPPrOaCH tO GOVernanCe
In structuring its governance framework, CAML takes guidance from the principles of the QCA Code. 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.
Our governance arrangements are summarised below:
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, its Directors and
its operations.
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 leads the
process and 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,
oversees the annual internal review
process for evaluating the Board’s
performance and effectiveness and
assists the Board with its
progressive refreshment and
ongoing succession planning.
Sustainability Committee
Although not a QCA Code
requirement, we also have a
Sustainability Committee, chaired by
Dr Gillian Davidson. This Committee
comprises Executive and Non-
Executive Directors and closely
involves members of the senior
management team, including our
Sustainability Director. 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.
´ These 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
value for all our stakeholders through the
long-term success of the business.
QCA Code Principle:
Maintain governance structures
and processes that are fit for
purpose and support good
decision making by the board
KeY issUes anD
aCtiVities in 2020
stakeholders
see page 69
Diversity
see page 73
independence
see page 67
Culture
see page 68
risk and internal
control
see page 71
effectiveness review
see page 74
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63
BOarD OF DireCtOrs
Overview
strategic report
Governance
Financial statements
Committees
a Audit
n Nomination
r Remuneration
s Sustainability Committee
s Chair of Committee
appointed
skills and
experience
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
DaViD sWan,
NON-EXECUTIVE DIRECTOR
nUrlan ZHaKUPOV,
NON-EXECUTIVE DIRECTOR
Dr Gillian DaViDsOn,
NON-EXECUTIVE DIRECTOR
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 25
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 Chartered
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.
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.
Nurlan holds Bachelor’s and
Master’s degrees in
economics from the Moscow
State Institute for
International Relations.
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’).
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 also a non-executive
director of AIM-listed Sunrise
Resources plc and ASX-listed
Tigers Realm Coal Ltd.
Nurlan is chief executive officer
of Kazakhstan Investment
Development Fund Management
Company Ltd. (‘KIDF’) and an
independent non-executive
director of Zerde National
Infocommunication Holding.
Gillian is an independent
sustainability adviser 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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65
BOarD rePOrt
Overview
strategic report
Governance
Financial statements
BOarD COMPOsitiOn
1
1
1
4
Non-Executive Chairman
Executive Director
2
Independent Non-Executive
Director (male)
Independent Non-Executive
Director (female)
Non-Independent
Non-Executive Director
QCA Code Principle:
Establish a strategy and business
model which promotes long-term
value for shareholders
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67
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 STRENGTHSThe 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 64 to 65:Natural ResourcesSustainability Financial Governance, Risk and ControlsPeopleStrategy InternationalCapital MarketsNick Clarke✓✓✓✓✓✓Nigel Robinson✓✓✓✓✓✓Gavin Ferrar✓✓✓✓✓✓Nigel Hurst-Brown✓✓✓✓Robert Cathery✓✓✓✓Roger Davey✓✓✓✓✓✓✓Dr Gillian Davidson✓✓✓✓✓David Swan✓✓✓✓✓Nurlan Zhakupov✓✓✓✓THE ROLE OF OUR BOARDATTENDANCE 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 2020 is shown below. DirectorBoard (five meetings)2Audit (four meetings)Remuneration (three meetings)Nomination (one meeting)5Sustainability (five meetings)Nick Clarke 1 1Nigel Robinson Gavin Ferrar Nigel Hurst-Brown Robert Cathery 1 4Roger Davey 4 Dr Gillian Davidson 1David Swan 1 Nurlan Zhakupov 4 3 Meetings attended Non-attendance Non-committee member invited to attend some or all of a meeting1 Denotes Chairman status.2 The Board also met via video-conference on ten other occasions and in addition had regular update calls during the course of the year to closely monitor progress.3 Nurlan Zhakupov was unavoidably unable to attend one Sustainability Committee meeting due to it necessarily being arranged when Mr Zhakupov was required in connection with his KIDF role in Kazakhstan.4 Participated in wider discussions following consideration by the Succession Planning Committee.5 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.Following the Government guidance in response to the COVID-19 pandemic, it was not possible for Directors to attend the 2020 AGM in person – this meeting was attended by the Chairman and another individual appointed as proxy for a shareholder in order to meet the meeting quorum requirements. Shareholders were invited to submit questions in advance of the meeting.BOARD COMPOSITION We have a well-balanced Board, constituted as follows:Non-Executive Chairman: Nick Clarke.Two Executive Directors: Nigel Robinson and Gavin Ferrar. Six Non-Executive Directors: Five are considered fully independent: Nigel Hurst-Brown, Robert Cathery, Roger Davey, Dr Gillian Davidson and David Swan. One is based in Kazakhstan: Nurlan Zhakupov. Nurlan Zhakupov has previously received share awards from the Company and is therefore not considered to be fully independent.BOARD INDEPENDENCEIn 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 Roger Davey, Dr Gillian Davidson and David Swan to be independent Directors. Nigel Hurst-Brown and Robert Cathery are also considered to be fully independent by the Board despite their length of tenure due to their fully independent engagement in their roles in the Company. The Board believes that the combination of In leading the Company, the Board defines its purpose 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 skill set, personal attributes and wide range of experience in the mining industry, financial and operational aspects of businesses, public markets and of different geographies around the world. In previous years our Board would typically meet face-to-face at least five times a year and at other times where required for arising matters. During 2020 and at present, due to the ongoing restrictions on travel and gatherings in the context of COVID-19, the Board has been meeting via video-conference. Throughout 2020, in addition to the five main Board meetings held, we also had regular Board update meetings every one to two weeks to be able to closely monitor and consider matters in the Group and developments more widely during this period. A total of 15 formal Board meetings were held during the year in addition to the regular update meetings between the formal meetings. As well as the Executive Directors, senior management are invited to attend and present at meetings of the Board and its Committees where appropriate. The Board found the virtual meeting format enabled a sense of team to be maintained through this difficult period and, although this cannot fully replace in-person interactions, the ability to increase meeting frequency, particularly in dealing with critical or urgent matters, has been greatly beneficial to the Board’s effectiveness.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. We also hold specific Board sessions to focus on strategic matters in the Group as appropriate, usually on an annual basis. These strategy-specific sessions are also attended by local operational management as appropriate. In addition, Non-Executive as well as Executive Directors visit the Group’s operations when opportunities to do so arise. Despite the limitations on international travel imposed in the context of the COVID-19 pandemic, visits to the Group’s sites during 2020 by Group management took place where practical.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. BOarD rePOrt CONTINUED
Overview
strategic report
Governance
Financial statements
staKeHOlDer enGaGeMent aCtiVities
Q1
´ 2019 operational update
´ Preparations for 2019 Annual Report, presentation of annual results and 2020
Annual General Meeting
´ Executive Director attendance at two global mining investor conferences:
– Mining Indaba, Cape Town, February 2020
CEO speaks at BMO conference
– BMO Global Metals and Mining Conference, Miami, February / March 2020
Q2
´ Q1 2020 Operations Update (9 April 2020)
´ 2019 results announcement (1 April 2020) and 2019 results attended by
Executive Directors and Director of Corporate Relations
´ Annual Report publication
´ Engagement with proxy advisers in connection with publication of 2019 Annual
Report and Notice of 2020 AGM
´ Sustainability Report publication
´ Sustainability Report journalist briefing (CEO, CFO and Director of Corporate Relations)
´ Executive Director presents at Proactive One2One Virtual Forum
´ Annual General Meeting
´ Stakeholder Engagement project commenced, using consultants, ERM
´ Participation in Minex Forum (CEO and Director of Corporate Relations)
CEO presents at ShareSocUK webinar
Q3
´ H1 2020 Operations Update (9 July 2020)
´ 2020 interim results announcement (16 September 2020) and results attended
by Executive Directors and Director of Corporate Relations
´ CEO visit to Sasa following TSF4 incident – met with government, community
and employee stakeholders
Q4
´ Q3 2019 Operations Update (8 October 2020)
´ H1 2020 Dividend Update (11 November 2020)
´ CEO presents at Kazakhstan Global Investment Forum
´ CEO presents at Natural Resources Forum
´ Participation in Mines and Money online conference (CEO, CFO and Director
of Corporate Relations)
Executive Director gives a Company update at
Proactive One2One Virtual Conference
QCA Code Principle:
Seek to understand and meet
shareholder needs and expectations
QCA 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
stakeholders
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ANNUAL REPORT & ACCOUNTS 2020
69
independent Board members and our other Non-Executive Director, Nurlan Zhakupov, together with our Executive Directors, enhances the balance of views and personal qualities as well as strengthening the range of skills and depth of experience within the Board.BOARD CHANGESAs part of the ongoing succession planning for the Board, as mentioned in the Chairman’s letter, Nigel Hurst-Brown will be stepping down as a Director later this year. Robert Cathery also intends to step down from the Board during 2021 following completion of the transition to a new Chairman of the Remuneration Committee. As announced on 30 March 2021, Mike Prentis has been appointed to the Board effective 31 March 2021 as an independent Non-Executive Director. We believe Mike will add significant value and bring an additional independence of thinking, views and experience to the Board.SUPPORT TO DIRECTORSAll 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 70 to 71THE BOARD AND CULTUREOf 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, trade sanctions, the Modern Slavery Act, human rights, our code of conduct and whistleblowing which are implemented by our teams and regularly reviewed. The Board promotes the corporate culture of the Group with the support of the Sustainability Committee.SHAREHOLDER ENGAGEMENTAs 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. The Board welcomes the opportunity to understand the motivations behind voting decisions, as well as the ongoing feedback from our shareholders and other stakeholders, as this plays an important part in ensuring our long-term success.ANNUAL GENERAL MEETING ('AGM')As explained in my letter to shareholders included in the circular containing the notice of AGM, in light of the impact of the COVID-19 pandemic, the Board had to consider the best way to deal with arrangements for the Company’s 2020 AGM in line with the mandatory Government measures in place at the time of the meeting (which did not permit travel and imposed limitations on the number of people permitted to gather indoors). Recognising that the AGM is an important event for shareholders in the corporate calendar, the Company was committed to ensuring that shareholders could exercise their right to vote and ask questions in connection with the meeting and arrangements were put in place to facilitate this. Shareholders were invited to submit questions relevant to the business of the AGM in advance of the meeting and responses were provided by email as appropriate.The health and wellbeing of our employees, shareholders and stakeholders remains a priority for the Company and we intend to revert to our normal format of meeting for future AGMs when it is deemed safe to do so. A separate communication will be sent to shareholders and published on the Company’s website regarding the format of the Company’s 2021 AGM. Where appropriate, we also engage with our key shareholders on specific governance matters. Details of our stakeholder engagement activities during 2020 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. aUDit COMMittee rePOrt
Overview
strategic report
Governance
Financial statements
assistinG tHe BOarD in tHe
FUlFilMent OF its resPOnsiBilities
MEMBERS
David swan – Chairman
roger Davey
nigel Hurst-Brown
ACHIEVEMENTS IN 2020
Review and recommendation to the
Board for approval the Group’s half year
and annual results, including the report
from the CFO and from the Auditors.
Worked with the Sustainability
Committee to obtain an external
assessment of the environmental
decommissioning plan and cost in
relation to the Group’s asset
retirement obligation.
Through the Risk Committee, oversaw
the setting and implementation of robust
risk policies and procedures relating to
risk management.
Ongoing review of the adequacy of the
internal control mechanisms in place.
Worked with BDO LLP in their second
year as Auditor to further develop the
audit plan, in particular in areas of
key focus.
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 materiality.
OBJeCtiVes FOr 2021
Continued development of processes and
further implementation of policies and
procedures relating to risk management.
Appropriate financial reporting
disclosures will continue to be reviewed
closely. And in the coming year particular
emphasis will be placed on the on the
emerging trend to extend the reporting
on and disclosure of the Group’s
environmental, social and
governance measures.
Further trends and new developments
coming from the FRC will be closely
monitored to ensure that our reporting is
relevant and up-to-date.
DaViD
sWan,
CHAIRMAN OF THE
AUDIT COMMITTEE
Dear Shareholder,
The Audit Committee’s main function is to
assist the Board in the fulfilment of its
responsibilities by overseeing key areas
such as financial reporting, regulatory
compliance and risk management. The
Audit Committee’s work is essential to
ensuring the effectiveness of the Group’s
internal controls and the integrity of its
financial accounts.
The Audit Committee has the responsibilty
of overseeing the Risk Committee which
reports into it on key business, operational,
and sustainability risks. During the past year
and in response to the global health crisis,
through effective planning and monitoring
the Group has implemented management
systems which have ensured minimal
impact on our employees and contractors
whilst maintaining sustained production
throughout.
Notwithstanding the occurrence of the
TSF 4 incident, it is important to note the
speed and effectiveness with which
management reacted and rectified the
problem. The presence of tailings facilities
risks had been highlighted to the Audit
Committee and it was reassuring to see
how diligently and openly management
have implemented all of the independent
recommendations and strengthened
procedures from lessons learned.
´ The Committee considered the asset
retirement obligations of Sasa and
Kounrad prepared by management
considering the key judgements made
in relation to future expected costs,
discount rates and life of mine. The
committee reviewed disclosures in
note 32 of the financial statements.
´ Independent experts have been
engaged in 2021 to undertake a
review and assessment of the asset
retirement obligation.
´ The committee reviewed the
disclosure in note 39 of the event
after the reporting period related to
the change in regulation affecting the
lining of TSF 3.2.
FinanCial rePOrtinG
The Audit Committee monitors the
accuracy and completeness of the financial
statements by reviewing them for
consistency and ensuring that they are duly
considered to be balanced, fair, and
understandable to shareholders as well as
compliant with regulatory and disclosure
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.
In particular, the Audit Committee was
mindful of the emerging best practices and
reporting around Covid-19 and engaged
with management to ensure a thorough
assessment was performed.
inDePenDenCe OF tHe aUDitOr
Following the tender process of 2019 as
described in last year’s report, and
subsequent appointment of BDO LLP as
Auditor, the Audit Committee reviewed, as
it does on an annual basis, the
independence, objectivity and
effectiveness of the external auditor.
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.
As mentioned in the Chairman’s letter on
page 61, Nigel Hurst-Brown who has been
a valued member of the Audit Committee
will be stepping down from the Board in
2021. Mike Prentis who will be joining the
Board as an independent Non-Executive
Director, effective 31 March, 2021, has
agreed to serve on the Audit Committee.
Mike brings with him 35 years of fund
management and City experience, and
we look forward to working with him on
this committee.
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.
´ 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 external audit.
We consider these roles to be key to the
long-term sustainability of the Group and
achievement of its ongoing success in
continuing to generate and preserve value
for our shareholders and other
stakeholders over the long term.
risK ManaGeMent
The Audit Committee has responsibility for
overseeing the Group’s risk management.
The Risk Committee, comprising senior
executive management, reports into the
Audit Committee . The Risk Management
Committee ensures that risk management
is addressed in an orderly and systematic
way and that risks identified as both high in
consequence and likelihood of occurrence
are brought to the attention of the Audit
Committee. The Audit Committee is then
responsible for taking the identified risks, as
appropriate, to the Board.
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.
WHistleBlOWinG
In addition to internal grievance
mechanisms, the Group maintains an
independently managed external
whistleblowing system, which extends to
all employees across each site, providing
them with the facility to confidentially
express any concerns. We believe that
such efforts to ensure open channels of
communication cultivate a truly sustainable
business with sound principles and strong
corporate governance practices.
DaViD sWan
CHAIRMAN OF THE AUDIT COMMITTEE
29 March 2021
QCA Code Principle:
Embed effective risk management,
considering both opportunities
and threats, throughout the
organisation
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SIGNIFICANT ISSUES CONSIDERED BY THE COMMITTEE IN RELATION TO THE 2020 FINANCIAL STATEMENTS ´ The Committee assessed management’s determination of cash-generating units and review of impairment triggers as at 31 December 2020. The Committee considered the key judgements 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 20 of the financial statements. ´The Committee assessed management’s going concern assessment by reviewing the cash flow forecasts to the end of 31 December 2022, considering the potential risks to the Group, assessing current and future compliance with debt covenants and being aware of the stress tests and the underlying assumptions which have been approved by the Board. The Committee reviewed disclosures related to the going concern basis of preparation in note 2 of the financial statements.
nOMinatiOn COMMittee rePOrt
tHe COMMittee Has Been OVerseeinG Plans FOr
reFresHMent anD sUCCessiOn OF tHe BOarD, in
PartiCUlar in relatiOn tO tHe lOnGer-serVinG
nOn- eXeCUtiVe DireCtOrs
MEMBERS
Chairman – nick Clarke
nigel Hurst-Brown
robert Cathery
roger Davey
Dr Gillian Davidson
David swan
nurlan Zhakupov
ACHIEVEMENTS IN 2020
OBJECTIVES FOR 2021
Appointment of new Non-Executive
Director, Mike Prentis.
Identified, using feedback from the
Board’s internal effectiveness review,
specific areas of expertise that could be
sought in potential candidates for future
Board appointments.
Continued with progressive succession
planning and ongoing refreshment of
the Board.
Continue with plans for the progressive
refreshment of the Board over the next
two to three years.
Ongoing development of succession
planning including for the role of
Chairman in the longer term.
Continue the annual self-evaluation
process and address any issues identified
from this.
niCK
ClarKe,
CHAIRMAN OF THE
NOMINATION
COMMITTEE
Dear Shareholder,
The Nomination Committee was
established in July 2018 and 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 at the top of the next page
shows the selection process for the
appointment of new Board members as
followed by the Nomination Committee.
Having assessed his suitability for the
role as an independent Non-Executive
Director, this is the process followed for
Mike Prentis, our most recent Board
appointment, effective 31 March.
inDUCtiOn anD OnGOinG sUPPOrt
anD DeVelOPMent
After a new Director is appointed, they
receive an induction to familiarise
themselves with the Company and its
business. In addition, all Directors have
unrestricted access to, and receive
regular updates from, management to
keep them abreast of the latest
developments. Directors have ongoing
access to resources as appropriate for
the update of their skills and knowledge.
Overview
strategic report
Governance
Financial statements
seleCtiOn PrOCess FOr tHe aPPOintMent OF neW BOarD MeMBers
steP 1
steP 2
steP 3
steP 4
steP 5
A longlist of
candidates meeting
the specification is
then identified.
A shortlist of
candidates
is selected by the
Nomination
Committee.
An appropriate
process is agreed for
the recruitment
utilising the
assistance of the
NOMAD and other
advisors to the
Company in
identifying and
initiating contact with
potential candidates.
with potential
candidates.
A specification for
candidates is
prepared setting out
the agreed key skills
and character profile
being sought to fit
with the current
balance, membership
and dynamics of
the Board.
Following interviews
carried out by
representatives of
the Nomination
Committee, the
preferred candidate
is recommended to
the Board by the
Nomination
Committee.
The preferred
candidate also meets
with the CEO and
CFO prior to Board
approval for the
appointment to
be made.
BOarD BalanCe
The Nomination Committee keeps the
balance of skills, strengths, diversity,
experience, independence, and tenure of
the Board under review. Over the past
year, this area has been looked at
particularly closely in the context of
succession plans for the coming years to
ensure the continued effectiveness of
the existing Directors as well as to avoid
substantial changes to the Board
composition taking place over a short
period of time.
Biographies of our current Board
members can be found on pages 64 to
65, and the composition and key
strengths of its members are set out on
pages 66 to 67.
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 also
have a gender mix. We feel that this
inclusive approach to recruitment
throughout the Company, not just at
Board level, enables us to maintain the
appropriate balance of skills, in particular
with regard to emerging trends and key
areas of focus in the sector in which we
operate. As our Board membership
continues to change, diversity will remain
a priority for the Nomination Committee.
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CONFLICTS OF INTERESTIt is a principle of law (enshrined in the Companies Act 2006) that a Director should avoid a situation in which his duty to the Company conflicts with his other duties/interests. Such conflicts may arise as a result of other involvements with significant shareholders, suppliers, or customers of the Group or otherwise. This is distinct from transactions or arrangements between the Company and the Director.There is no breach of this new statutory duty if the situation cannot reasonably be regarded as likely to give rise to a conflict of interest. In addition, such duty is not infringed if the matter has been specifically authorised by the remaining Directors. The Company’s Articles of Associated permit the Directors to give such authorisations in respect of any matter or circumstance which gives rise to, or may give rise to, a conflict. Any such conflicts or changes would be notified before they arise in order that they can be considered and, if appropriate, approved by the Board.SUCCESSION PLANNINGThe 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. During the year, given the global economic uncertainty and the Board needing to act as a highly experienced and focused unit to navigate through this, the Nomination Committee recommended that the Directors should remain in their current roles. Progressive succession plans were deferred and kept under review as conditions changed. This continuity provided the necessary stability at Board level to steer the Company through the unforeseen circumstances. As mentioned in my Chairman’s letter last year, Nigel Hurst-Brown and Robert Cathery have both indicated their willingness to be part of the progressive succession in the long-term interests of Board development. This progressive succession will be assured by future appointments to the Board. As mentioned on the previous page, Mike Prentis has joined the Board effective 31 March 2021 as an independent Non-Executive Director. Nigel Hurst-Brown will step down from the Board later this year and, following a transition of his role as Chairman of the Remuneration Committee, Robert Cathery intends to retire during 2021. Shareholders will be kept up to date on further developments in this area.
nOMinatiOn COMMittee rePOrt CONTINUED
Overview
strategic report
Governance
Financial statements
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
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. The Auditors’
comments were also included in the
report to the Board and, as with the other
responses, these were included on an
unattributed basis.
Areas of focus arising from outcomes of 2019 evaluation
Action in 2020 in response to outcomes of 2019 evaluation
Continued development of clear long-term strategy
Continued enhancement of activities in relation to
stakeholders
Ongoing development of risk management
Succession planning for the Board over the coming years
Business development and strategy updates given to every
main Board meeting by management to ensure focus on this
area is maintained.
The Board has maintained its strong commitment to the
interests of shareholders and other stakeholders and plays an
active role in determining external communication and
messaging. This was evident in, for example, the Company’s first
Sustainability Report.
The Risk Management Committee designated to oversee this
area has enhanced risk reporting procedures. Development of
risk management monitoring and management processes will
remain a key area of focus for continuous improvement. Further
details are set out in the report of the Audit Committee on
page 71.
This continues to be an area of ongoing development for the
Board. In 2020 a Succession Planning Committee was
established to progress work in this area. This Committee has
been overseeing plans for refreshment and succession of the
Board, in particular in relation to the longer-serving Non-
Executive Directors.
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75
QCA Code Principle:
Evaluate board performance based
on clear and relevant objectives,
seeking continuous improvement
RE-ELECTIONIn accordance with the Company’s Articles of Association, 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. In 2020, Nigel Robinson, Gavin Ferrar, Nigel Hurst-Brown, Robert Cathery, Dr Gillian Davison and I offered ourselves for reappointment in this manner and were all duly appointed, each receiving more than 98% of the proxy votes lodged in advance of the meeting.This year, David Swan and Nurlan Zhakupov are required to retire and be reappointed in this manner. Following review of their performance and commitment to their roles, the Committee is satisfied with the continued effectiveness of each Director and recommends their reappointment to the Board subject to shareholder approval at the 2021 AGM. In addition, as Mike Prentis will have been appointed to the Board since the last AGM, he will accordingly retire and seek reappointment at this meeting.EFFECTIVENESS REVIEWIn line with the QCA Code, and following on from our internal effectiveness review carried out last year, the Committee, led by me as Chairman, completed our annual 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 2019 evaluation and actions taken in response to these are shown in the table below:The 2020 internal evaluation process was again facilitated by the Company Secretary and followed a similar format to that of prior years. 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. As well as the Directors, the Company’s Auditors (BDO LLP) provided responses on the performance of the Audit Committee. In line with the QCA Code, the Board’s review of performance was based on clear and relevant objectives, seeking continuous improvement.As a result of the assessment, areas identified for focus over the coming year included: ´continued focus on and development of long-term standing strategy; ´ongoing enhancement of activities with stakeholders; ´continued development of risk management; and ´succession planning for the Board over the coming years.COMING YEARWe will report to you again next year on the results of our ongoing succession planning and other activities we intend to carry out during 2021.NICK CLARKECHAIRMAN OF THE NOMINATION COMMITTEE29 March 2021
ReMUNeRatiON COMMittee RePORt
Overview
Strategic Report
Governance
Financial Statements
iN 2020, aFteR CaReFUl CONSiDeRatiON, taKiNG aCCOUNt OF
SHaReHOlDeR FeeDBaCK aND CONSUltatiON WitH OUR
SUStaiNaBilitY COMMittee, We aDOPteD NeW MeaSUReS
FOR tHe ltiP
MEMBERS
ACHIEVEMENTS IN 2020
OBJECTIVES FOR 2021
Chairman – Robert Cathery
Nigel Hurst-Brown
David Swan
ROBeRt
CatHeRY,
CHAIRMAN OF THE
REMUNERATION
COMMITTEE
Further enhanced the structure of the
Long-Term Incentive Plan including the
introduction of sustainability performance
measures.
Continued to develop transparency of
reporting in executive remuneration with
the inclusion of a remuneration policy and
implementation report in the Company’s
FY2019 annual report.
Continued to take account of investor
views when considering executive
remuneration.
Ensured the balance between long - and
short-term incentives aligned with the
Group’s overall strategy.
Monitor operation of new LTIP structure
and targets.
Continue to take account of investor views
on remuneration.
Continue to develop and keep under
review short- and long-term incentive
targets appropriate to the economic
environment.
Continue to work with the Sustainability
Committee on sustainability matters.
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 (‘LTIP’).
Inevitably, 2020 has been a challenging
year for setting long-term targets, as in so
many other ways. Having all but decided
on the new LTIP structure by March, we
had to relook the performance targets in
the context of the COVID-19 pandemic.
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 new targets under our LTIP which
we have changed since my report
last year.
´ The reporting format which we
adopted last year as part of CAML’s
overall aim to increase transparency in
our governance work.
´ Other elements of the remuneration
of our Executive Directors.
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 return (‘TSR’), which
combines share price changes and
dividends. Obviously, TSR during the
course of this year has been substantially
affected 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, we transitioned the
structure of the LTIP in 2019 and put in
place arrangements to ensure this
continued to act as an effective incentive
for the management team.
Key terms for 2020 LTIP awards
These terms are unchanged since 2019:
´ The awards were granted over shares with the face value of 150% of salary
´ The awards will not vest until the third year after the date of grant (on 31st March to
ensure consistent vesting dates for each award)
Implementation
As I mentioned last year, 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.
Whilst these were good first steps in the
development of the LTIP during that year,
we recognised last year there was more
work to do. In 2020, after careful
consideration, taking account of
shareholder feedback and consultation
with our Sustainability Committee, we
adopted new measures for the LTIP as
shown in the table to the right.
´ Awards will vest only to the extent that performance targets measured over three
years are achieved
´ Targets will be in relation to the following performance conditions – new for 2020:
Proportion
of award
Performance measure
50% The ‘tSR Performance target’
Relative TSR measured over a period of three calendar years relative to the
constituents of the AIM Basic Resources Index. Vesting on the following basis:
´ for below median performance, no part of this portion of the award will vest.
´ for median performance, 25% of this portion of the award with vest.
´ for between median and upper quartile performance, between 25% and
100% of this portion of the award will vest (on a straight-line scale).
´ on achievement of above upper quartile performance, 100% of this portion
of the award will vest.
25% The ‘Sustainability Performance target’
The sustainability targets are based on the Remuneration Committee’s
assessment, taking account of the views of the Sustainability Committee, of
the Group’s overall performance against targets in the following specific areas:
´ Health and Safety – nil fatalities and improvement on the LTIFR average of
the previous five-year period
´ Environment – nil severe or major environmental incidents at either site
´ Community – nil severe or major community incidents at either site
2021 ltiP taRGetS
The 2021 LTIP targets will follow a similar structure to the 2020 awards, as set out
above, with such adjustments as the Remuneration Committee considers appropriate.
iNVeStOR FeeDBaCK
Whilst due to the pandemic, it was not possible for us to meet with investors face-to-
face, we did take account of their previous feedback on the 2019 targets. In particular,
we changed from the use of absolute TSR to relative TSR for the LTIP. We also
concluded that operational targets such as production and costs were best set
annually under the annual bonus arrangements.
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ReMUNeRatiON COMMittee RePORt CONTINUED
Overview
Strategic Report
Governance
Financial Statements
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 2020 and none
are intended in 2021.
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.
level
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.
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 an
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
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OTHER ELEMENTS OF REMUNERATIONAs 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. Nigel Robinson and Gavin Ferrar were awarded inflationary increases in salary effective from 1 January 2020 in line with increases in staff pay across the Group as a whole. Due to the ongoing global economic uncertainty as a result of the COVID-19 pandemic and relatively low inflation rates, salary increases are not planned for this year. As a result, Nigel Robinson’s salary as CEO remains at £365,000 per annum and Gavin Ferrar’s salary as CFO is £300,000 per annum. The maximum possible 2021 bonus for Executive Directors remains at the same level as 2020 at 100% of salary. Details of the annual bonus for 2020 and 2021 are shown on page 82.Nick Clarke transitioned from Executive Chairman to Non-Executive Chairman with effect from 1 January 2020. For 2020 only, Nick received an additional fee of £10,000 as he relinquished the executive benefit package. Following the completion of this transition, effective 1 January 2021, he now receives fees of £175,000 per annum. In addition, from and including last year, Nick no longer receives an annual bonus or new LTIP awards.TRANSPARENCY IN REPORTINGOur 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, 2020 and are following 2021. 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 2020 and for 2021.Following this letter is a table summarising our remuneration policy. Whilst variations are possible, this is the policy that we followed in 2019, 2020 and are following 2021. 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 2020 and for 2021.CONCLUSIONWe hope that shareholders agree that further development of the LTIP performance measures in conjunction with the annual bonus measures strike an appropriate balance. I always welcome engagement with investors and I am happy to answer any questions or receive any feedback that shareholders may have.ROBERT CATHERYCHAIRMAN OF THE REMUNERATION COMMITTEE29 March 2021 ReMUNeRatiON COMMittee RePORt CONTINUED
Overview
Strategic Report
Governance
Financial Statements
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Element and purposeAnnual Bonus PlanTo 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 operationAnnual 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.LevelThe normal maximum of Annual Bonus Plan outcome for an Executive Director is 100% of base salary per annum. Performance measuresThe 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 incentivesTo 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 operationAwards 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.LevelThe 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 measuresThe 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.Element and purposeChairman and other Non-Executive Director feesTo enable the Company to recruit and retain a Chairman and Non-Executive Directors of the highest calibre, at the appropriate cost.Policy and operationThe 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.LevelThe 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 awardsShare 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 measuresN/AChanges from previous policyNo material changes.IMPLEMENTATION REPORTDirectors’ 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 2020:2020 Basic salary/ fees $’0002020 Annual bonus $’0002020 Pension $’0002020 Benefits in kind $’0002020Total $’0002019 Total $’000Executive Directors:Nigel Robinson4683782912887904Gavin Ferrar38531223–720725Non-Executive Directors: Nick Clarke227––13240648Nigel Hurst-Brown129–––129129Robert Cathery104–––104102Nurlan Zhakupov72–––7295David Swan104–––104102Roger Davey97–––97101Dr Gillian Davidson104–––1048Directors’ aggregate emoluments1,69069052252,4572,812* Effective from 30 September 2020, Nurlan Zhakupov waived the emoluments he was entitled to from the Company for the remainder of the year amounting to $25,000 following his appointment as Chief Executive Officer of the Kazakhstan Investment Development Fund (‘KIDF’) Management Company Ltd.The benefits receivable by Executive Directors include private medical and dental insurance.The aggregate emoluments of the highest paid Director totalled $887,000 (2019: $904,000). 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 page 82. ReMUNeRatiON COMMittee RePORt CONTINUED
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During the year Nigel Robinson exercised 350,000 shares for a total share option gain of $1,032,000, Gavin Ferrar exercised 300,000 shares for a total gain of $870,000 and Nurlan Zhakupov exercised 40,000 shares for a gain of $117,000. See the Directors’ option awards table below.Salaries for Executive Directors for 2021 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.2021Salary£’0002020 Salary£’000Nigel Robinson (Chief Executive Officer)365365Gavin Ferrar (Chief Financial Officer)300300Annual bonus measuresThe table below sets out the performance measures and weightings between these:Metric2021 Weighting2020 WeightingProductionProduction across all operations40%40%Financial/OperationalC1 cash cost and unit cost of mined ore20%20%Health and Safety, Environmental and Community20%20%Personal performanceIndividual assessment 20%20%Executive Directors can earn up to a maximum bonus potential of 100% of salary based on these measures. In 2020, each Executive Director earned 76% (2019: 91%) of the maximum bonus potential.Directors’ option awards As at 1 Jan 2020Number1Granted/awardedNumber2DividendsNumberLapsedNumberExercisedNumberAs at 31 Dec 2020Number1Exercisable at 31 Dec 2020Number1Nick Clarke1,699,378–54,754––1,754,1321,494,608Nigel Robinson1,065,109247,28934,317–(350,000)996,715554,062Gavin Ferrar888,169203,25218,951–(300,000)810,372338,467Nurlan Zhakupov260,185–7,093–(40,000)227,278227,278Total3,912,841450,541115,115–(690,000)3,788,4972,614,4151 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. 2 Before any adjustments for accrued dividends.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 2020 are subject to two performance targets. Of each Award, 75% was to be subject to a performance target relating to the performance of the Company’s total shareholder return (‘TSR’) relative to the constituents of the AIM Basic Resources Index over a period of three years (the ‘TSR Performance Target’). The other 25% of each Award was to be subject to a sustainability target, (the ‘Sustainability Performance Target’). Awards do not vest until the third year from the year of grant. Further details of the TSR and Sustainability Performance Targets are set out on page 77. ´Options granted in 2019 are subject to a performance target. The performance target relates to the level of absolute TSR compound annual growth rate of the value of the Company’s shares over the performance period of three years. Awards do not vest until the third year from the year of grant.DIRECTORS’ INTERESTSThe 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:DirectorShares held as at 31 Dec 2020Shares held as at 31 Dec 2019Nick Clarke (Chairman)11,379,6441,342,887Nigel Robinson (Chief Executive Officer)1646,715646,715Gavin Ferrar (Chief Financial Officer)––Nigel Hurst-Brown (Deputy Chairman)909,065909,065Robert Cathery21,355,2542,105,254Roger Davey––Dr Gillian Davidson––David Swan3,0003,000Nurlan Zhakupov––Total Directors’ interests5,043,6785,006,9211 Of these shares, the numbers set out below 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. - Nick Clarke: 1,342,887 - Nigel Robinson: 646,7152 530,254 (2019: 1,355,254) shares held in the name of Robert Cathery; 425,000 (2019: 250,000) shares held by Elizabeth Cathery, the wife of Robert Cathery and a Person Closely Associated to Mr Cathery; and 400,000 (2019: 500,000) shares held jointly by Robert and Elizabeth Cathery in the Cathery Family Trust, a Person Closely Associated to Mr Cathery, are included in the above amounts. 2021 LTIP KPISThe plans and performance measures for the LTIP grants planned to be made in 2021 are commented upon on page 77.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.2021 and 2020 Fee £’000*Nick Clarke (Non-Executive Chairman)1175Nigel Hurst-Brown (Deputy Chairman)100Robert Cathery280Roger Davey75Gillian Davidson380David Swan480Nurlan Zhakupov575* The amounts as set out in the table above are paid in £ and reported in US$ on page 81. 1 For 2020 only, Nick Clarke was paid an additional £10,000 as he relinquished the executive benefit package has as he transitioned from Executive Chairman to Non-Executive Chairman.2 This comprises a base fee of £75,000 and £5,000 Committee Chair fee for the role of Chairman of the Remuneration Committee. 3 This comprises a base fee of £75,000 and £5,000 Committee Chair fee for the role of Chair of the Sustainability Committee. 4 This comprises a base fee of £75,000 and £5,000 Committee Chair fee for the role of Chairman of the Audit Committee. 5. Effective 30 September 2020 Nurlan Zhakupov waived his annual Non-Executive Director fee following his appointment as Chief Executive Officer of the Kazakhstan Investment Development Fund (KIDF) Management Company Ltd. Further details on the Non-Executive Director and Non-Executive Chairman letters of appointment are set out under ‘Service Contracts’.SERVICE CONTRACTSExecutive DirectorsThe 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. ReMUNeRatiON COMMittee RePORt CONTINUED
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The date of each Executive Director’s service agreement is:NameDate of service contractNigel Robinson24 September 2010Gavin Ferrar4 December 2017The 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 DirectorsEach 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 month’s 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 83) 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.IncentivesIf a leaver is deemed to be a ‘good leaver’, e.g. leaving through disability or otherwise at the discretion of the CommitteeIf a leaver is leaving for other reasonsOther exceptional cases, e.g. change in controlAnnual Bonus PlanThe Committee has the discretion to determine the annual bonus which will typically be limited to the period actually worked.No awards made.The Committee has the discretion to determine the annual bonus.LTIPReceive 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.All awards will normally lapse.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.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 APPOINTMENTSThe 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 GROUPPay 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.CONSIDERATION OF SHAREHOLDERS’ VIEWSThe 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. SUStaiNaBilitY COMMittee RePORt
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aS a COMPaNY, ONe OF OUR CORe ValUeS iS OUR
ReSPONSiBilitY FOR SUStaiNaBle DeVelOPMeNt aND
tHiS iS OF GReat iMPORtaNCe iN tHe DeCiSiON-MaKiNG
PROCeSS at eVeRY leVel OF tHe BUSiNeSS
Continue to develop reporting on
sustainability matters, building further on
the enhancements to disclosures made
during 2020.
Further develop CAML’s sustainability
strategy and targets.
Ensure our COVID-19 related approaches
and procedures remain relevant and
appropriate.
Maintain ongoing stakeholder engagement.
Develop a Group climate change strategy.
Continue to progress our work towards
reporting in line with the Global industry
standard on tailings management (‘GISTM’)
within the required timeframes.
MEMBERS
ACHIEVEMENTS IN 2020
Chair – Dr Gillian Davidson
Nigel Robinson
Roger Davey
Nurlan Zhakupov
GilliaN
DaViDSON,
CHAIR OF THE
SUSTAINABILITY COMMITTEE
Produced our first separate Sustainability
Report for the 2019 financial year to
enhance reporting and disclosure in this
area of critical importance.
Introduced sustainability performance
measures to our Long-Term Incentive Plan
award targets to link Executive
compensation to the Company’s ESG goals.
Moved to electronic shareholder
communications where possible.
Successfully navigated the challenges of
COVID-19 to ensure where possible the
welfare of our employees and contractors.
Introduced a new role of Group People
Manager to streamline our human
resources approach across the Group.
Dear Shareholder,
2020 was my first full year as Chair of the
Committee, having commenced this role
on joining the Board at the end of 2019. As
a Company, one of our core values is our
responsibility for sustainable development
and this is of great importance in the
decision-making process at every level of
the business. With this clear purpose, our
aim is to positively affect our employees
and local communities, while minimising
any adverse impacts on the natural
environment. Sustainability covers an
extensive range of aspects, specifically
responsible stewardship, health safety and
wellbeing, our people, the environment
and our communities. We endeavour to
ensure these areas are fully integrated
within our operations. I am pleased to
report that there has been good progress
this year in sustainability matters
throughout the Group, with enhanced
reporting, shareholder engagement, new
initiatives and increased focus on
community development.
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.
QCA Code Principle:
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
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Whilst sustainability activity within CAML is first and foremost focussed on its operational sites at Kounrad and Sasa, the management team, with the guidance of the Committee, aims to ensure that the high sustainability standards that we set for ourselves are observed throughout the Group.The Sustainability Committee, tasked with overseeing ESG matters in the Group, has been in place since 2012. The Committee (which was formerly known as the CSR Committee) was established in recognition of the significance of activities in this area which form a core part of the Company’s strategy and values. The Committee also plays an important role in ensuring our business and sustainability priorities are integrated and aligned. 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. COVID-19 RESPONSEDuring 2020, the COVID-19 pandemic brought a fresh set of challenges to companies globally. CAML’s response to this period of uncertainty and increased risk to all aspects of the business was swift and measures were taken to prioritise the welfare of employees and contractors in the UK, Kazakhstan and North Macedonia. The Committee oversaw the Group’s detailed action plan to minimise the risk to employees and operations and was given regular updates as matters progressed. The measures included management control, social distancing, hygiene measures, disinfection and testing. Regular team meetings were held to specifically focus on the COVID-19 situation and updates were given regarding its development and status in each country and site. For further details please see page 27.THE ROLE OF OUR SUSTAINABILITY COMMITTEE The Committee typically meets on a quarterly basis and during 2020 it held its four main meetings via videoconference. In addition, regular update meetings were held between the formal meetings to oversee various matters as they arose, particularly to monitor the developing COVID-19 situation, and later in the year for management of the incident at TSF4. At every quarterly 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 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 and liaises closely with Nick Shirley, our Sustainability Director, who coordinates all site-based health and safety, environment and social activities and ensures that the Board is updated on matters from every meeting. ACTIVITIES DURING THE YEAR ´Reviewed and considered regular reports on: –Health and safety; –Environmental matters; –Local community projects. ´Considered specific sustainability aspects of the Group’s operation as they arose, determining appropriate action. ´Maintained a strong focus on enhancing health and safety. Involvement/oversight of the Group’s COVID-19 response. ´Continued to review and develop risk management and training, including the continued and valuable involvement of local teams. ´Group Policies: –Reviewed completion of an audit of all Group policies currently in place. –Introduced a Group Human Rights Policy and worked with the legal team on raising awareness, implementation of, and training on this. ´Commenced work on establishing a Sasa charitable foundation whose articles, donations and annual budget would be kept under review by the Committee. ´Confirmed various staff members undertook Global Reporting Initiative ‘GRI’ training. ´Supported the Board in its management of the response and remediation of the TSF4 leak, including key operational management attendance at the seven specific Board meetings held to address this matter. ´Worked with the Remuneration Committee to develop and agree appropriate sustainability KPIs to ensure CAML’s long-term goals and ESG metrics were linked to Executive Director remuneration incentives. ´Explored renewable energy options for the Sasa and Kounrad sites. SUStaiNaBilitY COMMittee RePORt
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SUSTAINABILITY REPORT Following the publication of our first standalone Sustainability Report in Q2 2020, the CEO and Director of Corporate Relations held meetings with many larger shareholders to collect their feedback on our inaugural publication. The feedback was overwhelmingly positive and some helpful suggestions were made, which the team have tried to act upon in the forthcoming second Sustainability Report. One area which was internally identified as an area for improvement was that of formal stakeholder engagement to ascertain material topics for reporting. Therefore, an independent stakeholder engagement process was undertaken during 2020 with consultants, ERM, to ascertain stakeholder views and re-visit CAML’s material sustainability topics.We are proud of the Group’s accomplishments to date in terms of corporate social responsibility, particularly in relation to our ongoing partnership with the communities in which we work. 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 32 to 35 and, as mentioned above, in our separate Sustainability Report.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 REFERENCEWe 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 ENGAGEMENTThe Sustainability Committee supports the Board as it seeks to build good relationships through ongoing dialogue with stakeholders including workforce, local communities, investors, supply chain and customers, NGOs and governments and continuously aims to understand their needs, interests and expectations. Where appropriate we implement the findings of this invaluable engagement and take feedback into consideration in our decision-making process. The Directors meet with shareholders and stakeholders, including workforce representatives, community leaders and government officials where appropriate. Details of stakeholder engagement activities during the year can be found on page 69 and further details are also set out in the s172 statement on pages 30 to 31.SUSTAINABILITY TARGETS The Sustainability Committee has been working with the Remuneration Committee to implement changes to the Company’s Long-Term IncentivePlan. The aim was to develop ESG performance targets that align with the Company’s long-term strategy and purpose, tying Executive compensation to ESG goals and help drive business sustainability. Further details are included in the report of the Remuneration Committee on page 77.THE FUTURE FOR SUSTAINABILITYI look forward to reporting to you again in next year’s Annual Report on developments in our work in this crucial area as we continue to integrate our efforts in this area into our sustainable business model.DR GILLIAN DAVIDSONCHAIR OF THE SUSTAINABILITY COMMITTEE29 March 2021The Directors present their report and the audited consolidated financial statements for the year ended 31 December 2020.Details of significant events since the balance sheet date are contained in note 39 to the financial statements.PRINCIPAL ACTIVITIESCentral 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 central Kazakhstan and 100% of the Sasa zinc-lead mine in North Macedonia. 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 BUSINESSA review of the current and future development of the Group’s business is given in the Strategic Report on pages 6 to 58 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.DIVIDENDSThe 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 uncertainty regarding the potential impact of COVID-19 on the global economy and CAML’s operations in H1 2020, the Company decided it would be prudent to focus on preserving cash and did not recommend a 2019 final dividend. A 2020 interim dividend of 6 pence per Share was paid on 11 December 2020.The Directors recommend a final dividend for the year ended 31 December 2020 of 8 pence per Share payable, subject tothe approval of shareholders, on 25 May 2021, to those shareholders on the Company’s register on 30 April 2021. This will take the total dividend for 2020 to 14 pence per share.DIRECTORS AND DIRECTORS’ INTERESTSThe 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 (Non-Executive Chairman)Nigel Robinson (Chief Executive Officer)Gavin Ferrar (Chief Financial Officer)Nigel Hurst-Brown (Deputy Chairman)Robert CatheryRoger DaveyDr Gillian Davidson David SwanNurlan Zhakupov Biographical details of the current Directors are set out on pages 64 to 65. 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 page 76.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, David Swan and Nurlan Zhakupov are required to retire and be reappointed in this manner. In addition, as mentioned in the Chairman’s letter on page 61, Mike Prentis has been appointed to the Board effective 31 March. As this appointment has taken place since the last AGM, he will accordingly also retire and seek reappointment at this meeting.DIRECTORS’ INDEMNITY INSURANCEDuring the year, Directors’ and Officers’ liability insurance was maintained for Directors and other Officers of the Group.SUBSTANTIAL SHAREHOLDINGAt 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).No. of Shares% of voting rights1BlackRock Investment Management (UK) Limited218,159,61910.32FIL Investment International14,924,1728.48JO Hambro Capital Management Limited14,704,6288.35JPMorgan Asset Management (UK) Limited38,947,7075.08Polar Capital LLP6,783,6223.851 At 29 March 2021, 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 2020: BlackRock Investment Management (UK) Limited held 17,501,720 Shares representing 9.94% of the voting rights in the Company at that time.3. As at 31 December 2020: JPMorgan Asset Management (UK) Limited held 6,945,073 Shares representing 3.95% of the voting rights in the Company at that time. DiReCtORS’ RePORt CONTINUED
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The Company received no notifications of interests indicating a different whole percentage holding at 31 December 2020 other than as shown in the footnotes to the substantial shareholder table on page 89.CHANGES IN SHARE CAPITALIn January 2020, 40,000 Shares were moved out of treasury to satisfy the exercise of options under the Company’s share option schemes.As at 31 December 2020, 176,498,266 Shares were in issue including the 471,647 Shares held in treasury pending their cancellation or possible use in the Company’s share option schemes.AGM NOTICEA separate communication will be sent to shareholders and published on the Company’s website regarding the Company’s 2021 AGM.STREAMLINED ENERGY AND CARBON REPORTING (‘SECR') FOR BUSINESSESSECR regulations came into effect on 1 April 2019. CAML is classified as a large, unquoted company given it has greater than 250 employees, annual turnover greater than £36 million and a balance sheet larger than £18 million. This classification means that a company must report its UK energy consumption and resultant carbon emissions as well as a suitable intensity ratio if it has UK energy usage above 40 megawatt hours (‘MWh’).CAML’s UK operations comprise solely a London-based head office and electricity usage is significantly below 20MWh. Therefore, CAML is classified as a ‘low energy user’ and as such, SECR disclosures have not been included in these financial statements.However, CAML does disclose in its annual Sustainability Reports the energy consumption, as well as Scope 1 and Scope 2 emissions and an intensity calculated on a per tonne of copper equivalent basis, for its operations in Kazakhstan and North Macedonia. The 2020 Sustainability Report containing the most up to date information will be published in Q2 2021.SECTION 172 STATEMENTA statement of how the Board has performed its duties under section 172 of the Companies Act 2006 (‘the Act’) can be found on pages 30 to 31 of the Strategic Report.AUDITORS AND DISCLOSURE OF INFORMATION TO AUDITORSEach 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 2021 AGM.POLITICAL DONATIONSDuring the year the Group did not make any political donations.CORPORATE GOVERNANCEThe Governance Report can be found on pages 59 to 88. 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 behalfGAVIN FERRARCHIEF FINANCIAL OFFICER29 March 2021The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicablelaw 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’) in conformity with the requirements of the Companies Act 2006 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 in conformity with the requirements of the Companies Act 2006 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 ´prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.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 BoardGAVIN FERRARCHIEF FINANCIAL OFFICER29 March 2021 Overview
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OPINION ON THE FINANCIAL STATEMENTSIn 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 2020 and of the Group’s profit for the year then ended; ´the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006; ´the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and ´the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.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 2020 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated 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 accounting standards in conformity with the requirements of the Companies Act 2006. 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).BASIS FOR OPINIONWe 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. IndependenceWe remain 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. CONCLUSIONS RELATING TO GOING CONCERNIn auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Going concern was considered to be a Key Audit Matter as the Directors’ assessment of the potential impacts of COVID-19 on the Group’s operations, and likelihood of stress case scenarios materialising that would threaten liquidity and covenant tests occurring, is subject to significant judgment. Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to continue to adopt the going concern basis of accounting and in response to the Key Audit Matter included: ´We discussed the potential impact of COVID-19 with management and the Audit Committee including the impact on operations to date and their assessment of continued risks and uncertainties associated with areas such as the Group’s workforce, supply chain, customer offtake and commodity prices that are relevant to the Group’s business model and operations. We considered this against 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 reasonably possible given the potential impacts of COVID-19 and the level of uncertainty. This included consideration of the Group’s trading to date through the pandemic and the extent and likelihood of production or pricing disruption required to break covenants and liquidity. ´We evaluated management’s base case cash flow and covenant compliance forecast and critically assessed the assumptions including production, commodity pricing, treatment charges and costs/capex. ´We compared performance against budget in FY 2020 (pre/post COVID-19) and FY 2021 year to date trends to assess the quality of management’s budgeting process. ´We compared forecast commodity prices to spot prices together with consideration of broker consensus pricing ranges. We compared forecast refinery treatment charges to third party agreements. ´We evaluated the forecast production and cost levels against 2020 and FY 2021 year to date actuals and confirmed that planned capital expenditure is consistent with the life of mine plan. ´We reviewed the terms of debt facilities and covenants to confirm that they are appropriately modelled within the forecast. ´We reviewed the adequacy of going concern and COVID-19 related disclosures in the financial statements. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group and the Parent Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.OVERVIEWCoverage97% (2019: 97%) of Group profit before tax100% (2019: 100%) of Group revenue95% (2019: 95%) of Group total assetsKey audit matterCarrying value of Sasa mining assetsGoing Concern2020✓✓2019✓✓MaterialityGroup financial statements as a whole$3.0m (2019: $3.5m) based on 5% (2019: 5%) of profit before tax.Parent company standalone financial statements$1.5m (2019: $1.7m) capped at 50% of group materiality (2019: capped at 50% of Group materiality).AN OVERVIEW OF THE SCOPE OF OUR AUDITOur Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. We determined that there were five significant components and all of these were subject to a full scope audit (two in North Macedonia, two in Kazakhstan and the Parent Company). The audits of the North Macedonian and Kazakh significant components were performed in North Macedonia and Kazakhstan, respectively by local BDO network member firms. The audits of the parent company and the Group consolidation were performed in the United Kingdom by the Group audit team. The Group audit team 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 performed by the Group audit team.Our involvement with component auditorsFor the work performed by component auditors, we determined the level of involvement needed in order to be able to conclude whether sufficient appropriate audit evidence has been obtained as a basis for our opinion on the Group financial statements as a whole. Our involvement with component auditors included the following:The Group audit team was actively involved in the direction and supervision of the audits performed by the component auditors along with the consideration of findings and determination of conclusions drawn.As part of our audit strategy, we issued detailed group audit instructions to component auditors detailing the audit procedures to be performed, we held virtual meetings with management and the component auditors during the planning and execution phases of the audit; and we performed a detailed review of the component audit files. inDePenDent aUDitOR’S RePORt CONTINUED
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Key audit mattersKey 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) that 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 conclusions related to going concern section, we have determined the matter described below to be the key audit matters to be communicated in our report.Key audit matter How the scope of our audit addressed the key audit matterCarrying value of Sasa mining assets (as detailed in note 20)The Sasa cash generating unit (“CGU”) includes goodwill of $23.4m and the Group is required by applicable accounting standards to perform an annual impairment test.Management prepared a discounted cash flow valuation model the details of which are disclosed in note 20.The appropriateness of judgments 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.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. Our specific procedures included the following: ´We compared 2020 performance for key metrics against budget to assess the quality and accuracy of management’s forecasting. Where significant variances were identified, we obtained an understanding of the causes, evaluated mitigating actions and assessed the extent to which the forecasts incorporate relevant risks of the factors recurring. ´We compared the forecast pricing assumptions to 2020 actuals and independently sourced broker consensus data. ´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 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 resource to reserve conversion against empirical data such as updated drilling results and previous conversion trends and reviewed the reconciliation of movements in ore reserves and resources against the previous Reserves and Resources Statement. ´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 operating costs and capital expenditure. ´In placing reliance on management’s experts we performed procedures to evaluate their competence, objectivity and independence. ´We used our internal valuation experts to evaluate the appropriateness of the discount rate used by management. ´We reviewed management’s sensitivity analysis and performed our own sensitivity analysis over individual key inputs including pricing, treatment charges, expenditure and discount rate together with a combination of sensitivities over such inputs in order to assess the potential impact on headroom. ´We evaluated the adequacy of the disclosures given in note 20 regarding assumptions and sensitivities.OUR APPLICATION OF MATERIALITYWe 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. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. 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. Based on our professional judgment, we determined materiality for the financial statements as a whole and performance materiality as follows:Group financial statementsParent company financial statements2020 $m2019 $m2020 $m2019 $mMateriality3.03.51.51.7Basis for determining materiality5% of profit before tax50% of Group materialityRationale for the benchmark appliedProfit before tax was determined an appropriate basis as the Group is profit oriented and as such this is the financial metric of most interest to the users of the financial statements. Capped at 50% (2019: 50%) of Group materiality given the assessment of the components’ aggregation risk.Performance materiality2.12.21.051.1Basis for determining performance materialityPerformance materiality was set at 70% of the above materiality level. The increase against 2019 reflected our understanding gained from the first year audit and considering the level of adjustments arising in the prior year audit.Performance materiality was set at 65% of the above materiality level. Whilst some of the indicators pointed towards a higher performance materiality percentage, as it was a first year audit, a more prudent approach was taken.Performance materiality was set at 70% of the above materiality level. The increase against 2019 reflected our understanding gained from the first year audit and considering the level of adjustments arising in the prior year audit.Performance materiality was set at 65% of the above materiality level. Whilst some of the indicators pointed towards a higher performance materiality percentage, as it was a first year audit, a more prudent approach was taken.Component materialityWe set materiality for each component of the Group based on a percentage of between 20% and 80% of Group materiality dependent on our assessment of the risk of material misstatement in the group financial statements. Component materiality ranged from $600,000 to $2,400,000 (2019: $500,000 to $2,000,000, based on either 5% of profit before tax or a percentage of between 50% and 60% of Group materiality). In the audit of each component, we further applied performance materiality levels of 70% of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated and to sufficiently address aggregation risk.Reporting threshold We agreed with the Audit Committee that we would report to them all individual audit differences in excess of $60,000 (2019: $70,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.OTHER INFORMATIONThe directors are responsible for the other information. The other information comprises the information included in the Annual Report and Accounts 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. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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. inDePenDent aUDitOR’S RePORt CONTINUED
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OTHER COMPANIES ACT 2006 REPORTINGBased on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below. Strategic report and Directors’ report In our opinion, based on the work undertaken in the course of the audit: ´the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and ´the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the Group and 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.Matters on which we are required to report by exceptionWe 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.RESPONSIBILITIES OF DIRECTORSAs explained more fully in the Statement of Directors’ Responsibilities, 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 STATEMENTSOur 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.Extent to which the audit was capable of detecting irregularities, including fraudIrregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. We obtained an understanding of the legal and regulatory framework applicable to the Group. We considered the associated mining, environmental and taxation laws and regulations of North Macedonia and Kazakhstan to be the most relevant to the audit given the Geographical areas of focus of the Group. We assessed compliance with these laws and regulations through: ´Discussion with the management; ´Testing the financial statement disclosures to supporting documentation; ´Making enquiries of Management as to whether there was any correspondence from regulators in so far as the correspondence related to the Financial Statements. In particular this included evaluation of the impact of the tailings dam discharge in the year including evaluation of correspondence with regulators, verification of costs incurred in the remedial works and assessment of the extent of remaining costs to complete the works. ´We involved tax specialists from our local BDO network member firms in Kazakhstan and North Macedonia to evaluate the Group’s compliance with relevant tax legislation considered of most significance to the Group’s operations.We assessed the susceptibility of the financial statements to material misstatement, including fraud and considered areas of the financial statements subject to elevated potential fraud risks.Our procedures included: ´Performing procedures targeted at these risks eg: revenue, through including cut off procedures and obtaining third party confirmations of revenue from the Group’s offtakers. ´In addressing the risk of management override of controls, performing targeted journal entry testing based on identified characteristics the audit team considered could be indicative of fraud, for example unusual journal entries to revenue and cash. ´Critically assessing areas of the Financial Statements which include judgment and estimates, as set out in note 4 to the financial statements and in the key audit matters noted above. ´Testing consolidation entries to confirm their validity. ´Obtaining an understanding of the laws and regulations applicable to the Group Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.USE OF OUR REPORTThis 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, UK 29 March 2021BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). cOnSOliDateD incOme Statement
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GroupNote2020$’0002019$’000Continuing operations Revenue6160,130171,748 Presented as: Gross revenue1 6170,335180,815 Less: Silver stream purchases6(6,796)(5,556) Offtake buyers’ fees6(3,409)(3,511) Revenue160,130171,748Cost of sales7(72,037)(73,098)Distribution and selling costs8(2,566)(1,823)Gross profit85,52796,827Administrative expenses9(18,992)(18,323)Other expenses10(28)(481)Other income11535212Foreign exchange (loss)/gain(690)377Operating profit66,35278,612Finance income15116336Finance costs16(6,673)(11,153)Profit before income tax59,79567,795Income tax 17(16,035)(15,911)Profit for the year from continuing operations43,76051,884Discontinued operations(Loss)/profit for the year from discontinued operations 22(70)53Profit for the year43,69051,937Profit attributable to: – Non-controlling interests2060 – Owners of the parent 43,67051,87743,69051,937Earnings per share from continuing and discontinued operations attributable to owners of the parent during the year (expressed in cents per share) $ cents$ centsBasic earnings per shareFrom continuing operations1824.7829.36From discontinued operations(0.04)0.03From profit for the year24.7429.39Diluted earnings per shareFrom continuing operations 1824.0728.54From discontinued operations(0.04)0.03From profit for the year 24.0328.571 Gross revenue is a non-IFRS financial measure which is used by management, alongside the comparable GAAP measures, in evaluating the business performance. The measures are not intended as a substitute for GAAP measures and may not be comparable to similarly reported measures by other companies.The above Consolidated Income Statement should be read in conjunction with the accompanying notes.GroupNote2020$’0002019$’000Profit for the year43,69051,937Other comprehensive income/(expense):Items that may be subsequently reclassified to profit or loss:Currency translation differences 2726,975(11,019)Other comprehensive income/(expense) for the year, net of tax26,975(11,019)Total comprehensive income for the year70,66540,918Attributable to: – Non-controlling interests2060 – Owners of the parent70,64540,858Total comprehensive income for the year70,66540,918Total comprehensive income/(expense) attributable to equity shareholders arises from: – Continuing operations70,73540,865 – Discontinued operations(70)53 70,66540,918The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes. stateMents OF FinanCial POsitiOn
as at 31 December 2020
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GroupCompanyNote2020$’0002019$’0002020$’0002019$’000AssetsNon-current assetsProperty, plant and equipment19418,045406,387638838Intangible assets2056,64058,676––Deferred income tax asset38236266––Investments21––5,4915,491Other non-current receivables233,8423,389–– 478,763468,7186,1296,329Current assetsInventories247,8307,283––Trade and other receivables238,9456,276326,655342,083Restricted cash253,6414,0133,4413,824Cash and cash equivalents2544,23128,56632,67317,834 64,64746,138362,769363,741Assets of disposal group classified as held for sale2258219––64,70546,357362,769363,741Total assets543,468515,075368,898370,070Equity attributable to owners of the parentOrdinary shares261,7651,7651,7651,765Share premium26191,537191,184191,537191,184Treasury shares26(3,840)(6,526)(3,840)(6,526)Currency translation reserve 27(73,498)(100,473)––Retained earnings278,103250,480102,68770,086 394,067336,430292,149256,509Non-controlling interests(1,315)(1,324)––Total equity392,752335,106292,149256,509GroupCompanyNote2020$’0002019$’0002020$’0002019$’000LiabilitiesNon-current liabilitiesBorrowings 3132,32069,47332,32069,473Silver streaming commitment3019,24620,755––Deferred income tax liability3826,19926,089––Lease liability432496387471Provisions for other liabilities and charges326,9999,027–– 85,196125,84032,70769,944Current liabilitiesBorrowings 3148,09239,29538,40038,400Silver streaming commitment301,5732,140––Trade and other payables2912,89512,3055,4244,965Lease liability248252218252Provisions for other liabilities and charges322,68746–– 65,49554,03844,04243,617Liabilities of disposal group classified as held for sale222591––65,52054,12944,04243,617Total liabilities150,716179,96976,749113,561Total equity and liabilities543,468515,075368,898370,070The 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 $48,526,000 (2019: $38,637,000).The Financial Statements on pages 100 to 139 were authorised for issue by the Board of Directors on 29 March 2021 and were signed on its behalf by Gavin Ferrar.GaVin FerrarCHIEF FINANCIAL OFFICER cOnSOliDateD Statement OF cHanGeS in eQUitY
for the year ended 31 December 2020
cOmPanY Statement OF cHanGeS in eQUitY
for the year ended 31 December 2020
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Attributable to owners of the parentNoteOrdinary shares $’000Sharepremium $’000Treasuryshares $’000Currency translation reserve $’000Retained earnings $’000Total $’000Non-controlling interests $’000Totalequity $’000Balance as at 1 January 2019 1,765191,184(6,526)(89,454)230,281327,250(1,384)325,866Profit for the year ––––51,87751,8776051,937Other comprehensive expense – currency translation differences 27–––(11,019)–(11,019)–(11,019)Total comprehensive income–––(11,019)51,87740,8586040,918Transactions with owners Share based payments28––––1,0851,085–1,085Exercise of options 28––––(599)(599)–(599)Dividends36––––(32,164)(32,164)–(32,164)Total transactions with owners, recognised directly in equity––––(31,678)(31,678)–(31,678)Balance as at 31 December 20191,765191,184(6,526)(100,473)250,480336,430(1,324)335,106Profit for the year––––43,67043,6702043,690Other comprehensive income – currency translation differences 27–––26,975–26,975–26,975Total comprehensive income–––26,97543,67070,6452070,665Transactions with owners Share based payments28––––964964–964Exercise of options 2–3532,686–(3,039)–––Disposal of subsidiaries21––––(122)(122)(11)(133)Dividends36––––(13,850)(13,850)–(13,850)Total transactions with owners, recognised directly in equity–3532,686–(16,047)(13,008)(11)(13,019)Balance as at 31 December 2020 1,765191,537(3,840)(73,498)278,103394,067(1,315)392,752The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.Company NoteOrdinary Shares $’000Share premium $’000Treasury shares $’000Retained earnings $’000Total equity $’000Balance as at 1 January 2019 1,765191,184(6,526)63,127249,550Profit for the year–––38,63738,637Total comprehensive income –––38,63738,637Transactions with owners Share based payments28–––1,0851,085Exercise of options 28–––(599)(599)Dividends36 –––(32,164)(32,164)Total transactions with owners, recognised directly in equity–––(31,678)(31,678)Balance as at 31 December 20191,765191,184(6,526)70,086256,509Profit for the year–––48,52648,526Total comprehensive income –––48,52648,526Transactions with owners Share based payments28–––964964Exercise of options 28–3532,686(3,039)–Dividends36 –––(13,850)(13,850)Total transactions with owners, recognised directly in equity–3532,686(15,925)(12,886)Balance as at 31 December 20201,765191,537(3,840)102,687292,149The above Company Statement of Changes in Equity should be read in conjunction with the accompanying notes. cOnSOliDateD Statement OF caSH FlOWS
for the year ended 31 December 2020
nOteS tO tHe Financial StatementS
for the year ended 31 December 2020
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Note2020$’0002019$’000Cash flows from operating activitiesCash generated from operations3387,020105,143Interest paid(4,837)(9,445)Corporate income tax paid (net of refunds)(14,744)(14,845)Cash flow generated from operating activities 67,43980,853Cash flows from investing activities Purchase of property, plant and equipment(8,497)(11,042)Proceeds from sale of property, plant and equipment350233Deferred consideration paid–(6,500)Purchase of intangible assets(2)(21)Interest received15116336Decrease in restricted cash25372363Net cash used in investing activities (7,661)(16,631)Cash flows from financing activities Drawdown of overdraft319,105895Repayment of overdraft31(1,110)–Repayment of borrowings 31(38,400)(38,400)Dividends paid to owners of the parent36(13,850)(32,164)Receipt/(settlement) on exercise of share options 28 10(589)Net cash used in financing activities (44,245)(70,258)Effect of foreign exchange gain on cash and cash equivalents821Net increase/(decrease) in cash and cash equivalents15,615(6,035)Cash and cash equivalents at the beginning of the year2528,67234,707Cash and cash equivalents at the end of the year25 44,28728,672 Cash and cash equivalents at 31 December 2020 includes cash at bank and on hand included in assets held for sale of $56,000 (31 December 2019: $106,000) (note 22). The Consolidated Statement of Cash Flows does not include the restricted cash balance of $3,641,000 (2019: $4,013,000) (note 25).The brought forward cash and cash equivalents as at 1 January 2020 has been reclassified to exclude the overdrafts drawdown of $895,000. The overdraft arrangements are not repayable on demand and therefore represents a form of financing and not a component of cash and cash equivalents.The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.1. GENERAL INFORMATIONCentral 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 a 75% equity interest in Copper Bay Limited which is currently held for sale. 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 POLICIESThe 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 preparationThe Group’s Consolidated Financial Statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. 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 2020. 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 concernThe Group sells and distributes its copper cathode product primarily through an offtake arrangement with Traxys Europe S.A. (‘Traxys’) 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 offtake 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 2020. The prices of copper, zinc and lead were impacted in 2020 by concerns over global demand due to the outbreak of the COVID-19 pandemic. Looking forward, uncertainty remains regarding the global health and economic ramifications of COVID-19, although metal prices have improved significantly from their lows of H1 2020 with various government COVID-19 vaccine programmes now being implemented and fiscal stimulus expected to drive demand for raw materials. During 2020, both the Kounrad facility in Kazakhstan and the Sasa mine in North Macedonia continued to operate with no disruptions to production or sales volumes due to COVID-19. The Company put in place many measures during 2020 to try to ensure the health of its employees and contractors on both sites. Overview
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NOTES TO THE FINANCIAL STATEMENTS CONTINUEDfor the year ended 31 December 20202. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUEDThe CAML Board has considered and debated a substantial range of possible scenarios on the Group’s operations, financial position and forecasts covering a period of at least the next 12 months. This analysis has considered 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. Management have performed reverse stress testing sensitivities to determine when profitability, liquidity or covenants break. The financial covenants of our debt which include the monitoring of gearing and leverage ratios are all continuously monitored by management and the Group is both currently compliant and forecast to continue to be compliant with significant headroom.The likelihood of the stress test scenarios occurring is considered to be remote and therefore no material uncertainty is considered to exist and the Directors have a reasonable expectation that the Group has existence for the foreseeable future, accordingly, the Directors continue to adopt the going concern basis in preparing the consolidated financial information. Please refer to notes 6, 25 and 29 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 2020: The definition of material has been amended for IAS 1 and IAS 8 to align the definition across standards and is effective 1 January 2020. The new definition clarifies the definition of material whereby if omitting, misstating or obscuring it could reasonably be expected to influence decisions of the primary users of financial statements. The amendments to the definition of material will not have a significant impact on the financial statements. The definition of a business per IFRS 3 has also been amended to determine when an entity acquires a business or a group of assets. This amendment is effective from 1 January 2020 and will therefore affect all future business combinations however there is no impact on the current reporting period.Interest Rate Benchmark Reform – IBOR ‘phase 1’ (Amendments to IFRS 9, IAS 39 and IFRS 7) that is the first part to a two-phase project which considers relief to hedge accounting in the period before the IBOR reform. These amendments are mandatorily effective for periods beginning 1 January 2020 and must be applied retrospectively however there is no impact on the current reporting period. New standards, interpretations, and amendments not yet effectiveCertain new accounting standards and interpretations have been published that are not mandatory for 31 December 2020 reporting periods and have not been early adopted by the Group. These standards include:Interest Rate Benchmark Reform – IBOR ‘phase 2’ (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) that addresses issues that might affect financial reporting after the reform of an interest rate benchmark including its replacement with an alternative benchmark rate. These amendments are mandatorily effective for periods beginning 1 January 2021. IAS 37 - Onerous Contracts – Cost of Fulfilling a Contract amending the standard regarding costs a company should include as the cost of fulfilling a contract when assessing whether a contract is onerous. These amendments are mandatorily effective for periods beginning 1 January 2022.IAS 16 - Property, Plant and Equipment - Proceeds before Intended Use regarding proceeds from selling items produced while bringing as asset into the location and condition necessary for it to be capable of operating in the manner intended by management. These amendments are mandatorily effective for periods beginning 1 January 2022.IAS 1 – Presentation of Financial statements – The classification of liabilities as current or non-current basing the classification on contractual arrangements at the reporting date. These amendments are effective for periods beginning 1 January 2023.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.Basis of consolidationThe Group Financial Statements consolidate the Financial Statements of CAML and the entities it controls drawn up to 31 December 2020.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. GoodwillThe excess of the consideration transferred of a business combination, 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. Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated statement of comprehensive income. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date.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 interestsNon-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 reportingOperating 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. The Group’s segmental reporting reflects the operational focus of the Group. The Group has been organised into geographical and business units based on its principal business activities of mining production, having two reportable segments as follows: ´Kounrad (production of copper cathode) in Kazakhstan ´Sasa (production of lead, zinc and silver) in North MacedoniaIncluded within the unallocated segment are corporate costs for CAML PLC which includes the Group debt held with Traxys and other holding companies within the Group which are not separately reported to the Board nOteS tO tHe Financial StatementS CONTINUED
for the year ended 31 December 2020
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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 currency of the primary economic environment in which they operate are initially
recorded at the rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities denominated in foreign
currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. Exchange differences arising
on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss.
Exchange gains and losses arising on the retranslation of monetary financial assets are treated as a separate component of the
change in fair value and recognised in profit or loss. Exchange gains and losses on non-monetary OCI financial assets form part of
the overall gain or loss in OCI recognised in respect of that financial instrument.
On consolidation, the results of overseas operations are translated into USD at rates approximating to those ruling when the
transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those
operations, are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net
assets at opening rate and the results of overseas operations at actual rates are recognised in other comprehensive income and
accumulated in the foreign exchange reserve.
On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that
operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the profit or
loss on disposal.
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.
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.
– not depreciated
Depreciation is provided on all property, plant and equipment on a straight-line basis over its total expected useful life. As at
31 December 2020 the remaining useful lives were as follows:
´ Construction in progress
´ Land
´ Plant and equipment
´ Mining assets
´ Motor vehicles
´ Office equipment
´ Right of use assets
– term of lease agreement
– over 2 to 10 years
– over 2 to 10 years
– over 5 to 21 years
– over 2 to 21 years
– not depreciated
Mineral rights are depreciated on a Unit of Production basis (‘UoP’), in proportion to the volume of ore mined 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
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
´ 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.
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.
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.
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.
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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.
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 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.
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.
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.
Those sales of zinc and lead made abroad to China and Korea are sold under CIF where legal title transfers when the goods are
loaded onto the ship and leave the port. However, part of the transaction price is allocated to a distinct ‘shipping and insurance’ as
we are responsible for arranging the freight and insurance on behalf of customer. This amount is not material to the Group so no
adjustment has been made to the financial statements.
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 offtake 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.
The Company may mitigate commodity price risk by fixing the price in advance for its copper cathode with the offtake 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.
The Group reports both a gross revenue and revenue line. Gross revenue is reported after deductions of treatment charges but
before deductions of offtakers 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.
Deferred income tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated
statement of financial position differs from its tax base, except for differences arising on:
´ The initial recognition of goodwill,
´ The initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction
affects neither accounting or taxable profit, and
´ Investments in subsidiaries and joint arrangements where the Group is able to control the timing of the reversal of the difference
and it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against
which the difference can be utilised. The amount of the asset or liability is determined using tax rates that have been enacted or
substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/(assets) are settled/
(recovered). When there is uncertainty concerning the Group’s filing position regarding the tax bases of assets or liabilities, the
taxability of certain transactions or other tax-related assumptions, then the Group:
´ Considers whether uncertain tax treatments should be considered separately, or together as a group, based on which approach
provides better predictions of the resolution;
´ Determines if it is probable that the tax authorities will accept the uncertain tax treatment; and
´ If it is not probable that the uncertain tax treatment will be accepted, measure the tax uncertainty based on the most likely amount
or expected value, depending on whichever method better predicts the resolution of the uncertainty. This measurement is required
to be based on the assumption that each of the tax authorities will examine amounts they have a right to examine and have full
knowledge of all related information when making those examinations.
Deferred income tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
´ The same taxable group company, or
´ Different group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and
settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are
expected to be settled or recovered.
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NOTES TO THE FINANCIAL STATEMENTS CONTINUEDfor the year ended 31 December 2020 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
Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the
consolidated statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account
by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market
vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a
charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for
failure to achieve a market vesting condition or where a non-vesting condition is not satisfied. An option pricing model is used to
measure the fair value of the options.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to the consolidated statement of comprehensive income over the
remaining vesting period.
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
Impairment provisions for current and non-current trade receivables are recognised based on the ‘simplified approach’ within IFRS
9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the
non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising
from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net,
such provisions are recorded in a separate provision account with the loss being recognised in profit or loss. On confirmation that
the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
Impairment provisions for receivables from subsidiaries and loans to subsidiaries are recognised based on the ‘general approach’
within IFRS 9. The methodology used to determine the amount of the provision is based on whether there has been a significant
increase in credit risk since initial recognition of the financial asset with the assessment also taking into account the ability of the
subsidiary to repay the receivable or loan in the event that it was called due. For those where the credit risk has not increased
significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income
are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross
interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with
interest income on a net basis are recognised. Lifetime expected credit losses are the expected credit losses that result from all
possible default events over the expected life of the loan whereas twelve month expected credit losses are a portion of lifetime
expected credit losses that represent the expected credit losses that result from default events that are possible within twelve
months of the reporting date.
From time to time, the Group elects to renegotiate the terms of trade receivables due from customers with which it has previously
had a good trading history. Such renegotiations will lead to changes in the timing of payments rather than changes to the amounts
owed and, in consequence, the new expected cash flows are discounted at the original effective interest rate and any resulting
difference to the carrying value is recognised in the consolidated statement of comprehensive income (operating profit).
Overview
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Financial Statements
Financial Statements
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 offtake 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.
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. There are no pension
plan assets.
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NOTES TO THE FINANCIAL STATEMENTS CONTINUEDfor the year ended 31 December 2020 3. Financial inStRUmentS – RiSK manaGement
The Group’s activities expose it to a variety of financial risks; market price 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.
In $’000 equivalent
10% increase in copper, zinc and lead price
10% decrease in copper, zinc and lead price
Overview
Strategic Report
Strategic Report
Governance
Financial Statements
Financial Statements
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.
Estimated effect on earnings and equity
2020
$’000
18,230
(18,230)
2019
$’000
18,853
(18,853)
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
2020
412.95
54.02
1.13
0.78
2019
Movement
382.75
54.96
1.12
0.79
8%
(2%)
1%
(1%)
2020
420.71
50.24
1.23
0.74
2019
Movement
381.18
54.95
1.12
0.76
10%
(9%)
10%
(3%)
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.
The Group’s exposure to foreign currency risk based on US Dollar equivalent carrying amounts at the reported date:
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 receivables
Trade and other payables
net exposure
Group
2020
eUR
208
–
(398)
(190)
Group
2019
EUR
94
–
(609)
(515)
USD
2,637
285
(15)
2,907
USD
2,419
1
–
2,420
GBP
2,397
–
(2,542)
(145)
GBP
2,220
–
(429)
1,791
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 2020, if the foreign currencies had weakened/strengthened by 10% against the US Dollar, post-tax Group profit
for the year would have been $205,000 lower/higher (2019: $194,000 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 2020. Post year end, the Group has put in place hedging arrangements with ING, a relationship bank for a portion of its 2021
metal production. Kounrad’s Zero Cost Collar contract for 30% of copper production includes a put option of $6,900 per tonne
and a call option of $8,380 per tonne. Sasa’s zinc and lead arrangements are Swap contracts, with 30% of Sasa’s zinc production
to be sold at $2,804 per tonne and 30% of its lead to be sold at $2,022 per tonne.
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 2020 (2019: nil).
Future expected payments:
Trade and other payables within one year
Borrowings payable within one year (note 31)
Borrowings payable later than one year but not later than five years (note 31)
Lease liability payable within one year
Lease liability payable later than one year but not later than five years
Group
31 Dec 20
$’000
9,221
50,443
34,514
432
248
94,858
31 Dec 19
$’000
8,981
44,684
76,304
252
496
130,717
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.
Consistent with others in the industry, the Group monitors capital on the basis of the following gearing ratio:
Net debt
Future expected payments:
Cash and cash equivalents excluding restricted cash
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
25
31
31
31
2020
$’000
44,231
(9,692)
(38,400)
(32,320)
(36,181)
2019
$’000
28,566
(895)
(38,400)
(69,473)
(80,202)
392,752
335,106
9%
24%
116
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117
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDfor the year ended 31 December 2020
3. FinanCial instrUMents - risK ManaGeMent CONTINUED
Changes in liabilities arising from financing activities
The total borrowings as at 1 January 2020 were $108,768,000 (1 January 2019: $144,949,000). During the year, total repayments
were $38,400,000 (2019: $38,400,000). During the year, there were drawdowns on our unsecured overdrafts of $9,105,000
(2019: $895,000) and repayments of $1,110,000 (2019: $nil). Other changes amounted to $2,049,000 (2019: $1,324,000) leading
to a closing debt balance of $80,412,000 (2019: $108,768,000). See note 31 for more details.
The cash and cash equivalents including cash at bank and on hand in assets held for sale brought forward were $28,672,000 (2019:
$34,707,000) with a net $15,615,000 inflow (2019: $6,035,000 outflow) during the year and therefore a closing balance of
$44,287,000 (2019: $28,672,000).
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 25 and on its trade and other receivables as set out in note
23. The Group sells a minimum of 95% of Kounrad’s copper cathode production to the offtake partner which pays on the day of
dispatch and during the year 100% of Sasa’s zinc and lead concentrate was sold to Traxys which assumes the credit risk.
For banks and financial institutions, only parties with a minimum rating of BBB- are accepted. 98% of the Group’s cash and cash
equivalents including restricted cash at the year-end were held by banks with a minimum credit rating of A- (2019: 98%). The rest of the
Group’s cash was held with a mix of institutions with credit ratings between A to BB- (2019: A to BB).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 is considered immaterial (note 23).
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 2020, 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 $843,000 (2019: $1,343,000) 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 $28,896,000 of cash balances on short-term deposit as at 31 December 2020 (2019: $14,494,000). The average
fixed interest rate on short-term deposits during the year was 0.3% (2019: 0.6%).
Categories of financial instruments
Financial assets
Cash and receivables:
Cash and cash equivalents including restricted cash (note 25)
Trade and other receivables
Group
31 Dec 20
$’000
47,872
5,058
52,930
31 Dec 19
$’000
32,579
2,980
35,559
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 31)
Borrowings payable later than one year but not later than five years (note 31)
Lease liability within one year
Lease liability payable later than one year but not later than five years
Group
31 Dec 20
$’000
9,221
48,092
32,320
432
248
90,313
31 Dec 19
$’000
8,981
39,295
69,473
252
496
118,497
Trade and other payables excludes the silver streaming commitment, corporation tax, social security and other taxes as they are
not considered financial instruments.
Overview
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Governance
Financial statements
Financial statements
4. CritiCal aCCOUntinG estiMates anD JUDGeMents
The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated
based on historical experience and other factors, including expectations of future events that are believed to be reasonable under
the circumstances. In the future, actual experience may differ from these estimates and assumptions. The following are 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 respective CGUs. The key assumptions used
in the Group’s impairment assessments are disclosed in note 20.
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 $948,000 (2019: $781,000)
on the provision for environmental rehabilitation, and an impact of $948,000 (2019: $781,000) on the statement of
comprehensive income. A 5% change in cost on the Group’s rehabilitation estimates would result in an impact of $460,000 (2019:
$420,000) on the provision for environmental rehabilitation.
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 June 2020.
Tax
significant accounting judgements
Management make judgements in relation to the recognition of various taxes payable and receivable by the Group and VAT
recoverability for which the recoverability and timing of recovery is assessed. This includes judgement on the contingent asset
disclosed of $5.9m withholding tax receivable following a judgement from the Higher Administrative Court of North Macedonia
accepting its appeal. Management believes that a favourable outcome is probable, however, the contingent asset has not been
recognised as a receivable at 31 December 2020 as receipt of the amount is dependent on the outcome of the re-inspection. 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.
118
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ANNUAL REPORT & ACCOUNTS 2020
119
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDfor the year ended 31 December 2020 4. CritiCal aCCOUntinG estiMates anD JUDGeMents CONTINUED
TSF4 Leakage
significant accounting judgements
In September 2020 there was a short-term leakage of tailings from TSF4 which required structural dam repairs, engineering
improvements to the facility as well as environmental work for riverbed remediation. Management made judgements for the
accounting treatment for the repair and remediation work. IAS 16 indicates that repairs and maintenance expenses after
construction are generally not capitalised when used to restore an asset to a previous operating condition or to keep an asset in its
current operating condition. Repair work should be capitalised when it increases the usefulness and efficiency of the equipment or
enhances its useful life or some economic benefit to the Company. It has been determined by management that most of the repair
and remediation work of $0.7m will not bring any additional economic benefits to the Group and has therefore been expensed
during the year. However, there were some costs identified during the work that led to engineering improvements and therefore
$0.2m has been capitalised according to IAS 16. As at 31 December 2020 no material future costs are anticipated to be incurred
attributable to the leakage.
5. seGMental inFOrMatiOn
The segmental results for the year ended 31 December 2020 are as follows:
Gross revenue
Silver stream purchases
Offtake buyers’ fees
Revenue
eBitDa
Depreciation and amortisation
Foreign exchange gain/(loss)
Other income (note 11)
Other expenses (note 10)
Finance income (note 15)
Finance costs (note 16)
Profit/(loss) before income tax
Income tax
Kounrad
$’000
87,667
–
(2,546)
85,121
65,473
(4,007)
221
166
(3)
9
(162)
sasa
$’000
Unallocated
$’000
82,668
(6,796)
(863)
75,009
42,347
(24,890)
(889)
359
(5)
–
(586)
–
–
–
–
(12,137)
(251)
(22)
10
(20)
107
(5,925)
61,697
16,336
(18,238)
Profit for the year after tax from continuing operations
Loss from discontinued operations
Profit for the year
Depreciation and amortisation includes amortisation on the fair value uplift on acquisition of Sasa and Kounrad of $17.7m.
The segmental results for the year ended 31 December 2019 are as follows:
Gross revenue
Silver stream purchases
Offtake buyers’ fees
Revenue
eBitDa
Depreciation and amortisation
Foreign exchange (loss)/gain
Other income (note 11)
Other expenses (note 10)
Finance income (note 15)
Finance costs (note 16)
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
99,107
(5,556)
(1,087)
92,464
59,564
(25,308)
698
30
(441)
1
(263)
–
–
–
–
(12,700)
(239)
(152)
–
–
326
(10,784)
57,063
34,281
(23,549)
total
$’000
170,335
(6,796)
(3,409)
160,130
95,683
(29,148)
(690)
535
(28)
116
(6,673)
59,795
(16,035)
43,760
(70)
43,690
Total
$’000
180,815
(5,556)
(3,511)
171,748
108,584
(30,080)
377
212
(481)
336
(11,153)
67,795
(15,911)
51,884
53
51,937
Overview
strategic report
strategic report
Governance
Financial statements
Financial statements
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 2020 are as follows:
Segmental assets
Additions to non-current assets
Segmental liabilities
31 Dec 20
$’000
66,562
435,141
58
41,707
543,468
31 Dec 19
$’000
76,118
411,899
219
26,839
515,075
31 Dec 20
$’000
1,255
7,265
–
4
8,524
31 Dec 19
$’000
1,850
9,432
–
870
12,152
31 Dec 20
$’000
(11,142)
(62,792)
(25)
(76,757)
31 Dec 19
$’000
(11,017)
(55,269)
(91)
(113,592)
(150,716)
(179,969)
Kounrad
Sasa
Assets held for sale (note 22)
Unallocated including corporate
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 stream purchases
Offtake buyers’ fees
revenue
2020
$’000
87,110
80,652
557
2,016
2019
$’000
78,848
97,199
2,860
1,908
170,335
180,815
(6,796)
(3,409)
160,130
(5,556)
(3,511)
171,748
Kounrad
The Group sells and distributes its copper cathode product primarily through an offtake arrangement with Traxys, which has been
retained as CAML’s offtake partner through to September 2022. The offtake 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 offtake 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. The Company may mitigate
commodity price risk by fixing the price in advance for its copper cathode sales with the offtake 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 2020, the Group sold 13,763 tonnes (2019: 13,100 tonnes) of copper through the offtake arrangements. Some of the
copper cathodes are also sold locally and during 2020, 97 tonnes (2019: 500 tonnes) were sold to local customers.
Sasa
The Group sells Sasa’s zinc and lead concentrate product to smelters through an offtake arrangement with Traxys which has been
fixed through to 31 December 2022. The commitment is for 100% of the Sasa concentrate production. The agreements with the
smelters 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, two months or three months following delivery to the buyer and subject to final adjustment for
assaying results.
The Group sold 19,930 tonnes (2019: 19,697 tonnes) of payable zinc in concentrate and 28,218 tonnes (2019: 27,875 tonnes) of
payable lead in concentrate.
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 $5.69/oz, significantly below market value and arising from the silver stream commitment inherited on acquisition
(note 30).
Depreciation and amortisation includes amortisation on the fair value uplift on acquisition of Sasa and Kounrad of $19.4m.
120
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121
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDfor the year ended 31 December 2020 7. COst OF sales
Group
Reagents, electricity and materials
Depreciation and amortisation
Silver stream commitment (note 30)
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
2020
$’000
18,321
28,587
(2,017)
7,488
14,931
4,352
375
72,037
2020
$’000
2,224
30
3
13
296
2,566
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
The above distribution and selling costs are those incurred at Kounrad and Sasa in addition to the costs associated with the offtake
arrangements.
9. aDMinistratiVe eXPenses
Group
Employee benefit expense
Share based payments
Consulting and other services
Auditors remuneration (note 12)
Office-related costs
Taxes and duties
Depreciation and amortisation
total from continuing operations
total from discontinued operations (note 22)
10. OtHer eXPenses
Group
Other expenses
Loss on disposal of property, plant and equipment
11. OtHer inCOMe
Group
Gain on disposal of property, plant and equipment
Other income
2020
$’000
9,352
964
6,166
381
923
658
548
18,992
83
19,075
2020
$’000
28
–
28
2020
$’000
306
229
535
2019
$’000
8,867
1,085
6,084
378
1,271
77
561
18,323
170
18,493
2019
$’000
–
481
481
2019
$’000
–
212
212
Overview
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Governance
Financial statements
Financial statements
12. 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 BDO LLP the Company’s auditors and its associates for other services:
– The audit of Company’s subsidiaries
Fees payable to BDO LLP the Company’s auditors and its associates for other services:
– Other assurance services
Fees payable to PWC LLP the previous Company’s auditors for the audit of the parent company and
Consolidated Financial Statements
Fees payable to PWC LLP the previous Company’s auditors and its associates for other services:
– Other assurance services
13. eMPlOYee BeneFit eXPense
The aggregate remuneration of staff, including Directors, was as follows:
Group
Wages and salaries
Social security costs and similar taxes
Staff healthcare and other benefits
Other pension costs
Share based payment expense (note 28)
Total for continuing operations
Total for discontinuing operations (note 22)
2020
$’000
190
139
52
–
–
381
2020
$’000
18,019
2,569
2,168
2,990
964
26,710
74
26,784
2019
$’000
160
144
–
36
38
378
2019
$’000
16,242
2,426
2,123
2,315
1,085
24,191
75
24,266
The total employee benefit expense includes an amount of $1,346,000 (2019: $1,316,000) which has been capitalised within
property, plant and equipment.
Company
Wages and salaries
Social security costs
Staff healthcare and other benefits
Other pension costs
Share based payments (note 28)
Key management remuneration is disclosed in the Remuneration Committee report.
14. 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 16 (2019: 15).
2020
$’000
5,464
1,137
413
161
964
8,139
2020
number
905
5
133
1,043
2019
$’000
5,391
934
533
165
1,085
8,108
2019
Number
901
8
130
1,039
122
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ANNUAL REPORT & ACCOUNTS 2020
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ANNUAL REPORT & ACCOUNTS 2020
123
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDfor the year ended 31 December 2020
15. FinanCe inCOMe
Group
Bank interest received
16. FinanCe COsts
Group
Provisions: unwinding of discount (note 32)
Interest on borrowings (note 31)
Lease interest expense and bank charges
total for continuing operations
total for discontinuing operations (note 22)
17. inCOMe taX
Group
Current tax on profits for the year
Deferred tax credit (note 38)
income tax expense
2020
$’000
116
116
2020
$’000
528
6,060
85
6,673
–
6,673
2020
$’000
16,998
(963)
16,035
2019
$’000
336
336
2019
$’000
329
10,779
45
11,153
57
11,210
2019
$’000
17,234
(1,323)
15,911
Taxation for each jurisdiction is calculated at the rates prevailing in the respective jurisdictions.
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 income tax
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
income tax expense
2020
$’000
59,795
9,473
26,180
(22,469)
2,851
16,035
2019
$’000
67,795
21,964
19,854
(27,194)
1,287
15,911
Corporate income tax is calculated at 19% (2019: 19%) of the assessable profit for the year for the UK parent company, 20% for
the operating subsidiaries in Kazakhstan (2019: 20%) and 10% (2019: 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.
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.
Overview
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Governance
Financial statements
Financial statements
18. 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 26).
Profit from continuing operations attributable to owners of the parent
(Loss)/profit from discontinued operations attributable to owners of the parent
Profitable attributable to owners of the parent
2020
$’000
43,740
(70)
43,670
2020
no.
2019
$’000
51,824
53
51,877
2019
No.
Weighted average number of Ordinary Shares in issue
176,498,266 176,498,266
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
2020
$ cents
2019
$ cents
24.78
(0.04)
24.74
29.36
0.03
29.39
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
2020
$’000
43,740
(70)
43,670
2020
no.
2019
$’000
51,824
53
51,877
2019
No.
Weighted average number of Ordinary Shares in issue
176,498,266 176,498,266
Adjusted for:
Share options
Weighted average number of Ordinary Shares for diluted earnings per share
Diluted earnings/(loss) per share
From continuing operations
From discontinued operations
From profit for the year
5,215,770
5,076,397
181,714,036 181,574,663
2020
$ cents
24.07
(0.04)
24.03
2019
$ cents
28.54
0.03
28.57
124
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ANNUAL REPORT & ACCOUNTS 2020
125
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDfor the year ended 31 December 2020 19. PrOPert Y, Plant anD eQUiPMent
Group
Cost
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 2019
17,317
113,232
1,415
Additions
Disposals
Change in estimate – asset retirement
obligation (note 32)
Transfers
Exchange differences
at 31 December 2019
Additions
Disposals
Change in estimate – asset retirement
obligation (note 32)
Transfers
Exchange differences
at 31 December 2020
accumulated depreciation
at 1 January 2019
Provided during the year
Disposals
Exchange differences
at 31 December 2019
Provided during the year
Disposals
Exchange differences
at 31 December 2020
10,566
(214)
–
(12,951)
(345)
481
(732)
3,664
12,951
(941)
–
–
–
–
11
1,947
1,084
(32)
–
–
(14)
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
8,399
(41)
–
(18,441)
447
49
(1,623)
448
18,441
829
–
–
–
–
(134)
74
(39)
–
–
(146)
–
–
–
58
–
–
–
27,228
8,522
(1,703)
448
–
28,282
4,737
146,799
1,292
2,874
677
369,029
525,408
–
–
–
–
–
–
–
–
–
32,996
9,964
(237)
127
42,850
10,702
(1,620)
(1,666)
50,266
225
89
–
2
316
115
–
(30)
401
1,110
891
852
471
(27)
5
1,301
343
(39)
(73)
1,532
1,684
1,342
–
–
–
–
–
–
–
–
–
21,204
17,801
–
–
55,277
28,325
(264)
134
39,005
83,472
16,159
–
–
27,319
(1,659)
(1,769)
55,164
107,363
619
677
302,796
406,387
313,865
418,045
Net book value at 31 December 2019
net book value at 31 December 2020
14,373
4,737
85,805
96,533
The Company had $638,000 of office equipment at net book value as at 31 December 2020 (2019: $838,000).
Overview
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strategic report
Governance
Financial statements
Financial statements
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
2020
$’000
171
24
195
45
2019
$’000
323
19
342
45
As at 31 December 2020 there are no indications of impairment with the fair value of the assets exceeding the net book value.
20. intanGiBle assets
Group
Cost
at 1 January 2019
Additions
Disposals
Exchange differences
at 31 December 2019
Additions
Disposals
Exchange differences
at 31 December 2020
accumulated amortisation
at 1 January 2019
Provided during the year
Disposals
Exchange differences
at 31 December 2019
Provided during the year
Disposals
Exchange differences
at 31 December 2020
Mining
licences and
permits
$’000
Computer
software and
website
$’000
Goodwill
$’000
Total
$’000
31,179
37,634
519
69,332
–
–
(507)
–
–
(140)
30,672
37,494
–
–
881
–
–
(1,334)
31,553
36,160
–
–
–
–
–
–
–
–
7,537
1,940
–
15
9,492
1,864
–
(274)
11,082
21
(12)
1
529
2
(253)
(7)
271
484
55
(12)
–
527
10
(253)
(22)
262
21
(12)
(646)
68,695
2
(253)
(460)
67,984
8,021
1,995
(12)
15
10,019
1,874
(253)
(296)
11,344
The decrease in estimate in relation to the Kounrad asset retirement obligation of $160,000 (2019: increase of $783,000) is due
to a adjusting the provision recognised at the net present value of future expected costs using latest assumptions on inflation rates
and discount rates (note 32).
Net book value at 31 December 2019
net book value at 31 December 2020
30,672
31,553
28,002
25,078
2
9
58,676
56,640
The increase in estimate in relation to the Sasa asset retirement obligation of $608,000 (2019: increase of $2,881,000) 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 (note 32).
During the year there were total disposals of plant, property and equipment at cost of $1,703,000 (2019: $978,000) with
accumulated depreciation of $1,659,000 (2019: $264,000). The Group received $350,000 (2019: $233,000) consideration for
these assets and therefore a gain of $306,000 was recognised in other income (note 11) (2019: loss of $481,000 recognised in
other expenses).
The Company had nil computer software and website costs at net book value as at 31 December 2020 (2019: nil).
Impairment assessment
Kounrad project
The Kounrad project located in Kazakhstan has an associated goodwill balance of $8,154,000 (2019: $8,999,000). 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.
126
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ANNUAL REPORT & ACCOUNTS 2020
127
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDfor the year ended 31 December 2020 Overview
strategic report
strategic report
Governance
Financial statements
Financial statements
19. PrOPertY, Plant anD eQUiPMent CONTINUED
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.
21. inVestMents
Shares in Group undertakings:
The key economic assumptions used in the review were a five-year forecast average nominal copper price of $6,851 per tonne
(2019: $6,372 per tonne) and a long-term price of $6,724 per tonne (2019: $6,595 per tonne) and a discount rate of 8% (2019:
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 $23,399,000 (2019: $21,673,000). 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
2020. 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.
At 31 December 2020, 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 9.13% (2019: 8.07%) was applied to calculate the
present value of the CGU. The discount rate was supported by a detailed WACC calculation considering both the country and
company risk premiums The key economic assumptions used in the review were a five-year forecast average nominal zinc and lead
price of $2,391 (2019: $2,220) and $2,093 (2019: $1,986) per tonne respectively and a long-term price of $2,291 (2019: $2,358)
and $2,095 (2019: $1,900) per tonne respectively. Management forecasts factor in a decrease in Zinc and lead treatment charges
which are currently high but are forecast to return 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
when applied in isolation would result in a breakeven position:
Long-term zinc price reduced by 12%
Long-term lead price reduced by 7%
Discount rate increased to 11%
Production decreased by 5%
Treatment charges increased by 30%
Operational expenditure increased by 9%
Capital expenditure increased by 45%
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.
Company
31 Dec 20
$’000
5,491
23
(23)
5,491
31 Dec 19
$’000
5,491
2,800
(2,800)
5,491
at 1 January
Investment in Shuak BV
Impairment of investment in Shuak BV
at 31 December
Investments in Group undertakings are recorded at cost which is the fair value of the consideration paid, less impairment.
Details of the Company holdings are included in the table below:
Subsidiary
Registered office address
Activity
CAML Kazakhstan BV
Sary Kazna LLP
Kounrad Copper
Company LLP
Copper Bay Limited
Copper Bay (UK) Ltd
Copper Bay Chile
Limitada
Minera Playa Verde
Limitada
CAML MK Limited
CMK Resources
Limited
CMK Mining B.V.
CMK Europe SPLLC
Skopje
Rudnik SASA DOOEL
Makedonska Kamenica
Ken Shuak LLP
Shuak BV
* Fully diluted basis
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
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
Cannon’s Court, 22 Victoria St,
Hamilton HM12, Bermuda
Prins Bernhardplein 200
1097 JB Amsterham, The Netherlands
Ivo Lola Ribar no. 57-1/6, 1000 Skopje,
North Macedonia
28 Rudarska Str, Makedonska
Kamenica, 2304, North Macedonia
Business Centre No. 2, 4 Mira Street,
Balkhash, Kazakhstan
Herikerbergweg 238, 1101 CM
Amsterdam, The Netherlands
Holding
Company
Kounrad project
(SUC operations)
Kounrad project
(SX-EW plant)
Holding Company
CaMl %
2020
100
100
100
75*
Non-controlling
interest %
2020
–
–
–
CAML %
2019
Date of
incorporation
100 23 Jun 08
100
6 Feb 06
100 29 Apr 08
25
75*
29 Oct 10
Holding Company
75*
25
75*
9 Nov 11
Holding Company
Exploration
– Copper
Seller of zinc and
lead concentrate
Holding Company
Holding Company
Holding Company
Sasa project
Shuak project
(exploration)
Holding Company
75*
75*
100
100
100
100
100
10
–
25
25
–
–
–
–
–
90
–
75*
12 Oct 11
75*
20 Oct 11
100
5 Sep 17
100 19 June 15
100 30 June 15
100
10 July 15
100 22 June 05
80
5 Oct 16
80 20 Sep 16
CAML MK
For the year ended 31 December 2020, 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 year ended 31 December 2020. 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.
128
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ANNUAL REPORT & ACCOUNTS 2020
129
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDfor the year ended 31 December 2020 21. inVestMents CONTINUED
Shuak
In February 2020, the Group reduced its effective interest in Ken Shuak LLP from 80% to 10% and in April 2020 liquidated Shuak
BV. The Group will not be required to contribute towards future costs of the project.
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.
Non-controlling interests
Balance at 1 January
Profit attributable to non-controlling interest
Disposal of subsidaries
Balance at 31 December
31 Dec 2020
$’000
31 Dec 2019
$’000
1,324
(20)
11
1,315
1,384
(60)
–
1,324
Non-controlling interests were held at year end by third parties in relation to Copper Bay Limited, Copper Bay (UK) Limited, Copper
Bay Chile Limitada and Minera Playa Verde Limitada. During the year the Group reduced its effective interest in Ken Shuak LLP from
80% to 10% and in April 2020 liquidated Shuak BV and therefore these are treated as a disposal of non-controlling interest.
22. assets HelD FOr sale
The assets and liabilities of the Copper Bay entities continue to be presented as held for sale in the Statement of Financial Position
as the Company progresses it’s sale process with a party currently holding exclusive due diligence rights. The exploration assets
and property, plant and equipment held in Copper Bay were fully written off in prior periods. The results of the Copper Bay entities
for the year ended 31 December 2020 and the comparative year ended 31 December 2019 are shown within discontinued
operations in the Consolidated Income Statement.
Assets of disposal group classified as held for sale:
Cash and cash equivalents
Trade and other receivables
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:
(Loss)/profit from discontinued operations:
General and administrative expenses
Foreign exchange gain
Finance costs
(loss)/profit from discontinued operations
Cash flows of disposal group classified as held for sale:
Operating cash flows
total cash flows
31 Dec 20
$’000
31 Dec 19
$’000
56
2
58
106
113
219
31 Dec 20
$’000
31 Dec 19
$’000
25
–
25
2020
$’000
(97)
27
–
(70)
2020
$’000
(50)
(50)
73
18
91
2019
$’000
(170)
280
(57)
53
2019
$’000
48
48
Overview
strategic report
strategic report
Governance
Financial statements
Financial statements
23. traDe anD OtHer reCeiVaBles
Current receivables
Receivable from subsidiary
Loans due from subsidiaries
Trade receivables
Prepayments and accrued income
VAT receivable
Other receivables
non-current receivables
Prepayments
VAT receivable
Group
Company
31 Dec 20
$’000
31 Dec 19
$’000
31 Dec 20
$’000
31 Dec 19
$’000
–
–
1,928
2,627
1,260
3,130
8,945
760
3,082
3,842
–
–
1,493
2,195
1,101
1,487
6,276
441
2,948
3,389
444
325,496
–
353
92
270
326,655
–
–
–
381
341,005
–
387
90
220
342,083
–
–
–
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.
The loan due from subsidiaries is owed by CAML MK Limited, a directly owned subsidiary for $325,496,000 (2019: $301,179,000),
which accrues interest at a rate of 5% per annum and is repayable on demand. There was another loan as at 31 December 2019 of
$39,826,000 which was owed by CMK Mining B.V, a subsidiary, however this was repaid in full during the year. The loan has 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 early ahead of the current repayment plans. The expected future cash flows arising from the asset
exceed the intercompany loan value under various scenarios considered which are outlined in the intangible assets impairment
assessment so it is believed this loan can be repaid and the expected credit loss is immaterial.
As at 31 December 2020, the total Group VAT receivable was $4,342,000 (2019: $4,049,000) which includes an amount of
$3,396,000 (2019: $3,086,000) of VAT owed to the Group by the Kazakhstan authorities. In 2020, the Kazakhstan authorities
refunded $235,000 and a further $247,000 was received in February 2021 and this has been classified as current trade and other
receivables as at 31 December 2020. 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 recoverable and by a continued
dialogue with the authorities for cash recovery and further offsets.
24. inVentOries
Group
Raw materials
Finished goods
31 Dec 20
$’000
6,986
844
7,830
31 Dec 19
$’000
6,431
852
7,283
The Group did not have any slow-moving, obsolete or defective inventory as at 31 December 2020 and therefore there were no
write-offs to the Income Statement during the year (2019: nil). The total inventory recognised through the Income Statement was
$4,808,000 (2019: $4,955,000).
130
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Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
131
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDfor the year ended 31 December 2020
25. 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 20
$’000
15,335
28,896
44,231
3,641
47,872
31 Dec 19
$’000
14,072
14,494
28,566
4,013
32,579
31 Dec 20
$’000
3,777
28,896
32,673
3,441
36,114
31 Dec 19
$’000
3,340
14,494
17,834
3,824
21,658
The restricted cash amount of $3,641,000 (2019: $4,013,000) is held at bank to cover corporate debt service compliance and
Kounrad subsoil user 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 31 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)
Cash at bank and on hand in assets held for sale (note 22)
Balance per statement of cash flows
26. sHare CaPital anD PreMiUM
Group
31 Dec 20
$’000
44,231
56
44,287
31 Dec 19
$’000
28,566
106
28,672
at 1 January 2019 and 31 December 2019
Exercise of options
at 31 December 2020
Number of
shares
176,498,266
–
176,498,266
Ordinary
Shares
$’000
1,765
–
1,765
Share
premium
$’000
191,184
353
191,537
Treasury
shares
$’000
(6,526)
2,686
(3,840)
The par value of Ordinary Shares is $0.01 per share and all shares are fully paid. During the year there was an exerciae of share
options by employees and directors which were settled using both trust and treasury shares. The proceeds of disposal of trust and
treasury shares exceeded the purchase price by $353,000 and has been recognised in share premium.
at 1 January 2019 and 31 December 2019
Disposal of treasury shares
at 31 December 2020
Treasury shares
No.
Trust shares
No.
Eemployee benefit
trust shares
No.
511,647
(40,000)
1,621,783
(1,005,467)
2,436,317
–
471,647
616,316
2,436,317
27. 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 2020, a non-cash currency translation gain of $26,975,000 (2019: loss of $11,019,000) was recognised
within equity.
Overview
strategic report
strategic report
Governance
Financial statements
Financial statements
28. 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 share option scheme has an exercise price of effectively nil for the participants.
The share options granted during 2012 until 2018 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.
Share options granted in 2020 vest after three years depending on a combination of the 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 2022 relative to the mining index of companies as well
as sustainability performance targets.
The fair value at grant date of the 2019 and 2020 grants are 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 2020 was $2,136,000 in total which is
recognised over the vesting period commencing 16 December 2020 until 31 March 2023. As the share options were granted on,
and vesting commenced on the 16 December 2020, the charge for the current year is immaterial. For the 2019 share options
$483,000 (2019: $362,000) was expensed for the year ended 31 December 2020. An additional dividend related share option
charge of $308,000 (2019: $723,000) was recognised and also additional costs associated when share options were exercised of
$173,000 (2019: $nil). 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 18) includes these additional awards but they are excluded from the disclosures in this note.
In total, an amount of $964,000 (2019: $1,085,000) has been expensed within employee benefits expense from continuing
operations for share based payment charges for the year ended 31 December 2020.
The model inputs for options granted during the year included:
Vesting period
Exercise price
Grant date:
Expiry date:
Share price at grant date
Expected price volatility of the Company’s shares
Risk-free interest rate
31 Dec 2020
31 Dec 2019
2 years 3 months
$0.01
16 December 2020
15 December 2030
$3.02
16%
0.55%
3 years
$0.01
30 May 2019
29 May 2029
$2.71
15%
1.84%
As at 31 December 2020, 4,420,348 (2019: 4,182,729) options 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
Non-vesting
at 31 December
2020
2019
average exercise
price in $ per
share option
Options
(number)
Average exercise
price in $ per
share option
0.01
0.01
0.01
–
0.01
4,182,729
1,039,126
(801,507)
–
4,420,348
0.01
0.01
0.08
0.01
0.01
Options
(number)
3,311,600
1,124,877
(156,627)
(97,121)
4,182,729
133
132
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ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDfor the year ended 31 December 2020 28. sHare BaseD PaYMents CONTINUED
Non-vesting shares relates to options granted for which the performance targets were not met. Out of the outstanding options of
4,420,348 (2019: 4,182,729), 1,932,717 options (2019: 2,149,192) were exercisable as at 31 December 2020 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 $3.26 (2019: $2.73) 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:
Grant – vest
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
16 Dec 20
Expiry date
of option
Option exercise
price $
2020
2019
Share options (number)
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
16 Dec 30
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
76,032
36,801
143,064
160,000
212,121
338,940
482,872
806,515
1,124,877
1,039,126
100,000
60,155
196,355
214,354
358,948
533,157
642,376
952,507
1,124,877
–
31. BOrrOWinGs
Secured: Non-current
Bank loans
Secured: Current
Bank loans
Unsecured: Current
Bank overdraft
Total Current
total borrowings
The carrying value of loans approximates fair value:
Traxys Europe S.A.
Bank overdrafts
4,420,348
4,182,729
The movement on borrowings can be summarised as follows:
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.
29. traDe anD OtHer PaYaBles
Trade and other payables
Accruals
Corporation tax, social security and other taxes
Group
Company
31 Dec 20
$’000
4,652
4,569
3,674
31 Dec 19
$’000
3,917
5,064
3,324
12,895
12,305
31 Dec 20
$’000
131
4,142
1,151
5,424
31 Dec 19
$’000
179
4,581
205
4,965
The carrying value of all the above payables is equivalent to fair value.
All Group and Company trade and other payables are payable within less than one year for both reporting periods.
30. silVer streaMinG COMMitMent
The carrying amounts of the silver streaming commitment for silver delivery are as follows:
Current
Non-current
Group
Company
31 Dec 20
$’000
1,573
19,246
20,819
31 Dec 19
$’000
2,140
20,755
22,895
31 Dec 20
$’000
31 Dec 19
$’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.
Overview
strategic report
strategic report
Governance
Financial statements
Financial statements
Group
Company
31 Dec 20
$’000
31 Dec 19
$’000
31 Dec 20
$’000
31 Dec 19
$’000
32,320
69,473
32,320
69,473
38,400
38,400
38,400
38,400
9,692
48,092
80,412
895
39,295
108,768
–
38,400
70,720
–
38,400
107,873
Carrying amount
Fair value
31 Dec 20
$’000
70,720
9,692
80,412
31 Dec 19
$’000
107,873
895
108,768
31 Dec 20
$’000
70,720
9,692
80,412
Group
Company
31 Dec 20
$’000
108,768
(38,400)
4,813
1,247
(4,794)
9,105
(1,110)
783
80,412
31 Dec 19
$’000
144,949
(38,400)
9,455
1,324
(9,455)
895
–
–
108,768
31 Dec 20
$’000
107,873
(38,400)
4,627
1,247
(4,627)
–
–
–
70,720
31 Dec 19
$’000
107,873
895
108,768
31 Dec 19
$’000
144,949
(38,400)
9,455
1,324
(9,455)
–
–
–
107,873
Balance at 1 January
Repayment of borrowings
Finance charge interest
Finance charge unwinding of directly attributable fees
Interest paid
Drawdown of overdraft
Repayment of overdraft
Foreign exchange
Balance at 31 December
During the year, $38,400,000 (2019: $38,400,000) of the principal amount of Group debt was repaid as well as a further
$4,794,000 (2019: $9,455,000) interest.
The Group holds one corporate debt package with Traxys repayable on 4 November 2022. Interest was 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 offtake agreement as well as over the Sasa offtake agreement.
The financial covenants of the debt which include the monitoring of gearing and leverage ratios are all continuously monitored by
management and the Group is both currently compliant and forecast to continue to be compliant with significant headroom.
The $5,000,000 overdraft facility previously agreed with Komercijalna Banka AD Skopje with a fixed interest rate of 3.8%
denominated in Macedonian Denar previously repayable in July 2020 was extended for a further year to 30 July 2021 with the fixed
interest rate reduced from 3.8% down to a range of 2.4% to 2.5% dependent on conditions. This overdraft as at 31 December
2020 was $4,809,000 (31 December 2019: $895,000).
In June 2020 a new one year $5,000,000 overdraft facility was agreed with Ohridska Banka A.D. Skopje with a fixed interest rate
of 2.5% denominated in Macedonian Denar repayable on 26 June 2021. This overdraft as at 31 December 2020 was $4,883,000
(31 December 2019: nil).
As at 31 December 2020, 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).
134
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
Central asia Metals PlC
ANNUAL REPORT & ACCOUNTS 2020
135
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDfor the year ended 31 December 2020
31. BOrrOWinGs CONTINUED
The different levels have been defined as follows:
´ Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
´ Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as
prices) or 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).
32. PrOVisiOns FOr OtHer liaBilities anD CHarGes
Group
at 1 January 2019
Change in estimate
Settlements of provision
Unwinding of discount (note 16)
Exchange rate difference
at 31 December 2019
Change in estimate
Settlements of provision
Unwinding of discount (note 16)
Exchange rate difference
at 31 December 2020
Non-current
Current
at 31 December 2020
Asset
retirement
obligation
$’000
4,428
3,664
–
329
(23)
8,398
448
–
528
(178)
9,196
6,572
2,624
9,196
Employee
retirement
benefits
$’000
196
39
(32)
–
(4)
199
43
(23)
–
20
239
203
36
239
Other
employee
benefits
$’000
165
36
(11)
–
(4)
186
47
(19)
–
21
235
224
11
235
Legal
claims
$’000
327
–
(30)
–
(7)
290
351
(631)
–
6
16
–
16
16
Total
$’000
5,116
3,739
(73)
329
(38)
9,073
889
(673)
528
(131)
9,686
6,999
2,687
9,686
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%
(2019: 8.07%). The decrease in estimate in relation to the asset retirement obligation of $160,000 (2019: increase of $783,000) is
due to adjusting the provision recognised at the net present value of future expected costs using an inflation rate of 3.86%
(2019: 4.13%).
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 2020 terms using a discount rate of 4.94% (2019: 7.25%). 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 $608,000 (2019: increase of $2,914,000) 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. See note 39 for subsequent events related to the asset retirement obligation.
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.
Overview
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Financial statements
Financial statements
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
2020 actuary assumptions are used as follows:
Discount rate: 3.0%
Expected rate of salary increase: 2.4%
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. The Group reviews outstanding legal cases following developments in the legal proceedings and at each reporting date, in
order to assess the need for provisions and disclosures in its financial statements. Among the factors considered in making
decisions on provisions are the nature of litigation, claim or assessment, the legal process and potential level of damages in the
jurisdiction in which the litigation, claim or assessment has been brought, the progress of the case (including the progress after the
date of the financial statements but before those statements are issued), the opinions or views of legal advisers, experience on
similar cases and any decision of the Group’s management as to how it will respond to the litigation, claim or assessment.
33. CasH GenerateD FrOM OPeratiOns
Group
Profit before income tax including discontinued operations
Adjustments for:
Depreciation and amortisation
Silver stream commitment
(Gain)/loss on disposal of property, plant and equipment
Foreign exchange gain/(loss)
Share based payments
Finance income
Finance costs
Changes in working capital:
Inventories
Trade and other receivables
Trade and other payables
Provisions for other liabilities and charges
Cash generated from operations
Note
2020
$’000
2019
$’000
59,725
67,847
11
28
15
16
24
23
29
32
29,148
(2,017)
(306)
690
964
(116)
6,673
(546)
(7,009)
46
(232)
30,080
(2,285)
481
(377)
1,085
(336)
11,153
246
(1,738)
(940)
(73)
87,020
105,143
The increase in trade and other receivables of $7,009,000 includes movement in Sasa VAT receivable balance which during the
year is offset against the corporate income tax payments during the year.
34. COMMitMents
Significant expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows:
Group
Property, plant and equipment
Other
31 Dec 20
$’000
3,046
194
3,240
31 Dec 19
$’000
851
340
1,191
35. COntinGent asset
During 2018, CMK Europe SPLLC Skopje (‘CMK Europe’), paid $5.9 million of withholding tax liability to the Public Revenue Office
(‘PRO’) in North Macedonia. The liability related to the activities of CMK Europe prior to CAML’s ownership. In June 2020, CMK
Europe, received a judgement from the Higher Administrative Court of North Macedonia accepting its appeal. The Court judgement
instructed the PRO to repeat the withholding tax inspection for the period 2015 to 2017 taking into consideration the findings of
the Court judgement. Management believes that a favourable outcome is probable, however, the contingent asset has not b een
recognised as a receivable at 31 December 2020 as receipt of the amount is dependent on the outcome of the reinspection.
36. DiViDenD Per sHare
In line with the Company dividend policy, the Company paid $13,850,000 in 2020 (2019: $32,164,000) which consisted of a 2020
interim dividend of 6.0 pence per share (2019: interim dividend of 6.5 pence per share and a final dividend for 2018 of 8.0 pence
per share).
136
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137
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDfor the year ended 31 December 2020 Overview
strategic report
strategic report
Governance
Financial statements
Financial statements
Deferred tax liability due within 12 months
Deferred tax liability due after 12 months
Deferred tax liability
All deferred tax assets are due after 12 months.
31 Dec 2020
$’000
(963)
(25,236)
(26,199)
31 Dec 2019
$’000
(1,345)
(24,744)
(26,089)
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 $12,016,000 (2019: $7,417,000) as there is
insufficient evidence of future taxable profits within the entities concerned. Unrecognised losses can be carried forward indefinitely.
At 31 December 2020, the Group had other deferred tax assets of $1,071,000 (2019: $2,810,000) 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
2020 and 2019, respectively.
Company
At 31 December 2020 and 2019 respectively, the Company had no recognised deferred tax assets or liabilities.
At 31 December 2020, the Company had not recognised potential deferred tax assets arising from losses of $12,016,000 (2019:
$7,417,000) as there is insufficient evidence of future taxable profits. The losses can be carried forward indefinitely.
At 31 December 2020, the Company had other deferred tax assets of $1,071,000 (2019: $2,810,000) in respect of share-based
payments and other temporary differences which had not been recognised because of insufficient evidence of future taxable profits.
39. eVents aFter tHe rePOrtinG PeriOD
Subsequent to year end, additional information was received in March 2021 which is likely to lead to a reduction of the future costs
in relation to the Sasa asset retirement obligation. This is owing to notification regarding a potential amendment to the
environmental requirements in relation to the remedial work for TSF 3-2. Based upon this update, management are reviewing the
impact to the provision and will perform a full assessment in 2021 of the restoration and relevant costs connected with the mine,
TSF 3-2 and TSF4 under the anticiapted revision to the requirements of the current legislating entities overseeing mining and
related activities in North Macedonia, based on a plan to be approved by the Ministry of the Environment as well as in accordance
with international best practices.
In January CAML put in place hedging arrangements for a portion of its 2021 metal production. Kounrad’s Zero Cost Collar contract
for 30% of copper production includes a put option of $6,900 per tonne and a call option of $8,380 per tonne. Sasa’s zinc and lead
arrangements are swap contracts, with 30% of Sasa’s payable zinc production to be sold at $2,804 per tonne and 30% of its
payable lead production to be sold at $2,022 per tonne. These arrangements ensure that CAML retains its leverage to strong
copper, zinc and lead prices, while protecting a meaningful proportion of revenues during the higher capital expenditure period and
continuing to rapidly deleverage. The impact of this hedge in 2021 is currently expected to be immaterial given the current
commodity prices.
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139
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDfor the year ended 31 December 202037. RELATED PARTY TRANSACTIONSKey management remuneration Key management remuneration comprises the Directors’ remuneration, including Non-Executive Directors, disclosed in the Remuneration Committee Report.2020 Basic salary/ fees $’0002020 Annual bonus $’0002020 Pension $’0002020 Benefits in kind $’0002020 Employers NI$’0002020Total $’0002019 Total $’000Executive Directors:Nigel Robinson46837829122581,1451,009Gavin Ferrar38531223–214934811Non-Executive Directors: Nick Clarke227––1330270735Nigel Hurst-Brown129–––16145143Robert Cathery104–––13117115Nurlan Zhakupov72––––7295David Swan104–––13117115Roger Davey97–––12109113Dr Gillian Davidson104–––141189Directors’ aggregate emoluments1,69069052255703,0273,145During the year, Directors exercised a total of 690,000 options for a total share option gain of $2,019,000, see Directors’ option awards table in the implementation report.Kounrad foundationThe Kounrad foundation, a vehicle through which Kounrad donates to the community, was advanced $198,000 (2019: $195,000). This is a related party by virtue of common Directors.38. DEFERRED INCOME TAX ASSET AND LIABILITY GroupThe movements in the Group’s deferred tax assets and liabilities are as follows:At 1 January 2020$’000Currency translation differences $’000(Debit)/credit to income statement $’000At 31 Dec 2020 $’000Other temporary differences(190)27(390)(553)Deferred tax liability on fair value adjustment on Kounrad Transaction(6,428)599328(5,501)Deferred tax liability on fair value adjustment on CMK acquisition (19,205)(1,729)1,025(19,909)Deferred tax liability, net(25,823)(1,103)963(25,963)Reflected in the statement of financial position as:31 Dec 20$’00031 Dec 19$’000Deferred tax asset236266Deferred tax liability(26,199)(26,089)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 $1,353,000 during the year (2019: $1,436,000) to reflect the tax consequences of depreciating and amortising the recognised fair values of the assets during the year. At 1 January 2019$’000Currencytranslation differences $’000(Debit)/credit to income statement $’000At 31 December 2019 $’000Other temporary differences(77)–(113)(190)Deferred tax liability on fair value adjustment on Kounrad Transaction (6,681)(51)304(6,428)Deferred tax liability on fair value adjustment on CMK acquisition(20,912)5751,132(19,205)Deferred tax liability, net(27,670)5241,323(25,823) GlOssarY OF teCHniCal terMs
DireCtOrs, seCretarY anD aDVisOrs
Overview
strategic report
strategic report
Governance
Financial statements
Financial statements
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
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ANNUAL REPORT & ACCOUNTS 2020
141
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Sackville House
40 Piccadilly
London W1J 0DR
United Kingdom
www.centralasiametals.com