Audited results for the twelve months ended 31 December 2022
PERTH, AUSTRALIA / ACCESSWIRE / March 16, 2023 / FULL YEAR 2022 RESULTS
MARTIN HORGAN, CEO, COMMENTED: 'Centamin made great progress in 2022, a year in which we celebrated the Sukari Gold Mine producing its 5 millionth ounce underpinning the quality of the orebody which has 6 million ounces in Mineral Reserves remaining and identified further upside potential. We spent the past year successfully progressing our reinvestment plan and remain on track to consistently return Sukari to production levels towards 500,000 ounces per annum from 2024.
'In 2022, the Company delivered guidance for both production and costs, despite global inflationary headwinds, and invested US$224 million in capital projects at Sukari such as our flagship 36MW Solar farm which is reducing both emissions and costs. We look forward to updating our stakeholders on our decarbonisation roadmap to 2030, later this quarter.
'In terms of growth, Sukari achieved its second successive year of reserve growth and across the wider portfolio, we commenced exploration work across our EDX portfolio in Egypt and progressed our Doporo PFS which is expected to be completed in the first half of 2023. The Company secured its inaugural sustainability linked debt facility with a group of leading international resource banks, adding financial flexibility to an already robust balance sheet and enable us to deliver our identified growth opportunities.'
- Revenue of US$788 million generated from sales of 438,638 oz at an average realised gold price of US$1,794/oz
- Adjusted EBITDA of US$319 million, at a 40% margin
- Profit before tax of US$171 million
- Basic earnings per share ('EPS') of 6.29 US cents per share
- US$43 million of gross cost-savings in 2022, for a cumulative US$116 million delivered of the US$150 million cost-saving target by 2023
- Capital structure review completed, establishing a capital allocation framework that balances growth and stakeholder returns
- Strong balance sheet with cash and liquid assets of US$157 million, as at 31 December 2022, excluding the US$150 million sustainability-linked revolving credit facility which was announced on 22 December 2022, and
- The Board has proposed a final dividend of 2.5 US cents per share, equating to US$29 million to be distributed to shareholders, subject to shareholder approval at the annual general meeting on 23 May 2023, bringing total distribution to shareholders for full year 2022 to US$58 million.
- Sukari gold production of 440,974 oz, a 6% increase on 2021 and in line with guidance
- Second consecutive year of meaningful growth of both resources and reserves
- Successfully navigated the transition from contractor to owner-operated at Sukari underground
- Commissioned 36MWDC solar plant, the largest global hybrid solar farm to power a gold mine
- Completed Egypt's first airborne geophysical survey across the full Sukari concession area, and
- Progressed Doropo PFS to imminent completion.
- Record safety performance of eight million hours worked without a Lost Time Injury at Sukari; previous record of 5 million for LTI free hours worked, driving an 83% improvement in LTIFR from 2021 and a 13% improvement in TRIFR
- Increased our Egyptian female representation to 34 employees (from zero) at Sukari; the introduction of female professionals at our sites has been supported and accompanied by diverse and inclusive workforce training
- ·Expanded workforce training programme with a 62% increase in training hours following roll-out of professional development framework for employees; ongoing focus to promote national employment in leadership position through the Group, and
- Commitment to 30% reduction in scope 1 and 2 emissions by 2030 remains on track; largest global hybrid solar farm to power a gold mine was commissioned at Sukari in 2022, reducing annual consumption of diesel fuel for power generation by 22%. Decarbonisation roadmap to be launched in Q1 2023.
- Gold production guidance range of 450,000 to 480,000 oz per annum weighted towards H2 (45:55)
- Cash cost guidance range of US$840-990/oz produced and AISC guidance range of US$1,250-1,400/oz sold, similar to the 2022 levels despite global inflationary pressures including higher fuel prices
- Capex guidance is US$225 million, weighted towards H1 (55:45), as the Company continues to identify growth and optimisation projects at Sukari, including development of a gravity circuit; expansion of the dump leach capacity; and commencement of the underground expansion. This also reflects inflationary pressures on the contracted waste-stripping programme specifically from higher fuel prices
- Exploration spend is budgeted at US$30 million, including US$23 million for the pre-development study work on the Doropo Project.
2023 KEY MILESTONES
- June 2023: Doropo Project (Côte d'Ivoire) complete pre-feasibility study
- H2 2023: Sukari Gold Mine (Egypt) update Life of Mine Plan (NI 43-101), including underground expansion, and
- Announcements on the ongoing exploration programmes.
GROUP FINANCIAL SUMMARY
*In the 2021 Consolidated Statement of Comprehensive Income, Finance costs were included and disclosed in the line 'Other operating costs', in these financial statements they are now separately disclosed in their own line and as such 'Other operating costs' for 2021 have changed.
WEBCAST PRESENTATION AND CONFERENCE CALL
The Company will host a conference call and webcast presentation today, Thursday 16 March, at 08.30 GMT, to discuss the results with investors and analysts, followed by an opportunity to ask questions. Please find below the required participation details. A replay will be made available on the Company website.
To join the webcast: https://www.investis-live.com/centamin/63eb959d33aa1a120095c6ee/gqruu
Please allow a few minutes to register.
Dial-in telephone numbers:
PRINT-FRIENDLY VERSION of the results: www.centamin.com/investors/results-reports/
Centamin is an established gold producer, with premium listings on the London Stock Exchange and Toronto Stock Exchange. Following a period of 'reset' including a significant refresh of the Board and management team, the Company is now entering a growth phase, balanced with stakeholder returns. The Company's flagship asset is the Sukari Gold Mine ('Sukari'), Egypt's largest and first modern gold mine, as well as one of the world's largest producing mines. Since production began in 2009 Sukari has produced over 5 million ounces of gold, and today has 6.0Moz in gold Mineral Reserves. Through its large portfolio of exploration assets in Egypt and Côte d'Ivoire, Centamin is advancing an active pipeline of future growth prospects, including the Doropo project in Côte d'Ivoire, and has over 3,000km2 of highly prospective exploration ground in Egypt's Nubian Shield.
Centamin practices responsible mining activities, recognising its responsibility to deliver operational and financial performance and create lasting mutual benefit for all stakeholders through good corporate citizenship, including but not limited to in 2022, achieving new safety records (8m hrs LTI-free), commissioning of the largest hybrid solar farm for a gold mine (Sukari 36MWDC solar plant), sustaining a +95% Egyptian workforce and a +60% Egyptian supply chain at Sukari.
FOR MORE INFORMATION please visit the website www.centamin.com or contact:
The Company actively monitors the global geopolitical uncertainties and macroeconomics, such as global inflation, and guidance may be impacted if the supply chain, workforce or operation are disrupted.
Full year financial data points included within this report are audited.
This statement includes certain financial performance measures which are not GAAP measures as defined under International Financial Reporting Standards (IFRS). These include EBITDA and adjusted EBITDA, Cash costs of production, AISC, Cash and liquid assets, Free cash flow and adjusted Free cash flow. Management believes these measures provide valuable additional information for users of the financial statements to understand the underlying trading performance. An explanation of the measures used along with reconciliation to the nearest IFRS measures is provided in the Financial Review.
Profit after tax attributable to the parent
Centamin profit after the profit share split with the Arab Republic of Egypt.
Royalties are accrued and paid six months in arrears.
Cash and liquid assets
Cash and liquid assets include cash, bullion on hand and gold sales receivables.
Movements in inventory
Movement in inventory on ounces produced is the movement in mining stockpiles and ore in circuit while the movement in inventory on ounces sold is the net movement in mining stockpiles, ore in circuit and gold in safe inventory.
Gold produced is gold poured and does not include gold-in-circuit at period end.
All dividends are subject to final Board approval and final dividends are subject to shareholder approval at the Company's annual general meeting.
This announcement (including information incorporated by reference) contains 'forward-looking statements' and 'forward-looking information' under applicable securities laws (collectively, 'forward-looking statements'), including statements with respect to future financial or operating performance. Such statements include 'future-oriented financial information' or 'financial outlook' with respect to prospective financial performance, financial position, EBITDA, cash flows and other financial metrics that are based on assumptions about future economic conditions and courses of action. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as 'believes', 'expects', 'expected', 'budgeted', 'forecasts' and 'anticipates' and include production outlook, operating schedules, production profiles, expansion and expansion plans, efficiency gains, production and cost guidance, capital expenditure outlook, exploration spend and other mine plans. Although Centamin believes that the expectations reflected in such forward-looking statements are reasonable, Centamin can give no assurance that such expectations will prove to be correct. Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of the management of Centamin about future events and are therefore subject to known and unknown risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. In addition, there are a number of factors that could cause actual results, performance, achievements or developments to differ materially from those expressed or implied by such forward-looking statements; the risks and uncertainties associated with direct or indirect impacts of COVID-19 or other pandemic, general business, economic, competitive, political and social uncertainties; the results of exploration activities and feasibility studies; assumptions in economic evaluations which prove to be inaccurate; currency fluctuations; changes in project parameters; future prices of gold and other metals; possible variations of ore grade or recovery rates; accidents, labour disputes and other risks of the mining industry; climatic conditions; political instability; decisions and regulatory changes enacted by governmental authorities; delays in obtaining approvals or financing or completing development or construction activities; and discovery of archaeological ruins. Financial outlook and future-ordinated financial information contained in this news release is based on assumptions about future events, including economic conditions and proposed courses of action, based on management's assessment of the relevant information currently available. Readers are cautioned that any such financial outlook or future-ordinated financial information contained or referenced herein may not be appropriate and should not be used for purposes other than those for which it is disclosed herein. The Company and its management believe that the prospective financial information has been prepared on a reasonable basis, reflecting management's best estimates and judgments at the date hereof, and represent, to the best of management's knowledge and opinion, the Company's expected course of action. However, because this information is highly subjective, it should not be relied on as necessarily indicative of future results. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information or statements, particularly in light of the current economic climate and the significant volatility, the risks and uncertainties associated with the direct and indirect impacts of COVID-19. Forward-looking statements contained herein are made as of the date of this announcement and the Company disclaims any obligation to update any forward-looking statement, whether as a result of new information, future events or results or otherwise. Accordingly, readers should not place undue reliance on forward-looking statements.
Company No: 109180
It is a pleasure to report on the tremendous progress Centamin made over 2022 - a year in which we celebrated a memorable milestone with the Sukari Gold Mine producing it's 5 millionth ounce. This achievement is rare for most gold mines and testament to the scale and quality of the Sukari orebody. What is more remarkable is that Sukari has a further 6 million ounces in Mineral Reserves, equating to a 14-year life of mine, with further upside potential as we have demonstrated by adding nearly two million ounces of gross Mineral Reserves over the last two years. We remain confident in delivering more geological growth, both at Sukari and across the wider portfolio.
As custodians of this world class asset, Centamin recognises the business and societal importance in building a responsible culture that values and supports people, creating opportunity through jobs, infrastructure, education, alongside developing our assets and delivering strong shareholder returns. We practise responsible mining activities and take pride in setting the example for our growing industry within Egypt and as we continue to develop our exploration projects in Côte d'Ivoire. In addition to paying in excess of US$800 million to Egypt in profit share and royalties since production began, over 95% of our workforce are employed locally to the country of operation - 78% of which are in leadership positions at Sukari - and 68% of total procurement is spent domestically to the country of operation. We are living and breathing our stated company purpose 'to create opportunity through responsible mining'.
2022 was another busy year with progress made against our stated plans. We completed the second year of our three-year Sukari reset plan to return the asset to production levels towards 500,000 ounces per annum from 2024.
Against a challenging macroeconomic backdrop, the Centamin team successfully navigated the transition from contractor to owner-operated within the Sukari underground and delivered production, costs and capital projects in line with 2022 guidance. Sukari produced 440,974 ounces of gold and with US$224 million invested in adjusted sustaining and non-sustaining growth capital projects as we continued the reinvestment programme to optimise the asset for the longer term. At the same time we implemented further initiatives that will deliver more gold at better costs while reducing our carbon emissions over the remaining substantial mine life, most notably with the commissioning of the Sukari 36MWDC solar plant.
Financially, based on an annual realised gold price of US$1,794/oz, we generated gross revenues of US$788 million. We were not immune to the global inflationary cost pressures experienced in 2022 but our prudent approach to forecasting and ongoing cost-savings programme enabled us to maintain our 2022 cost guidance throughout the year and deliver within the stated range. All-in sustaining costs were US$1,399/oz sold and cash costs were US$913/oz produced and we continue to seek opportunities to further improve our cost profile going forward. EBITDA for the year was US$319 million, up 9%, and with a continued strong EBITDA margin of 40%.
Sukari Value Maximisation
Geologically, we continue to unlock the mineral resource potential within the Sukari orebody and the wider 160km2 Sukari Concession area. Our improved geological understanding resulted in the second consecutive year of meaningful growth of both resources and reserves at unchanged cut-off grades. The open pit Mineral Reserve gain replaced annual depletion for the first time since 2015, while the underground Mineral Reserves of 1.2 million ounces represents a threefold increase since 2020, net of mining depletion, further supporting our underground expansion plans for benefit from 2024.
The Mineral Resource Management team, responsible for the orebody stewardship, has developed a rolling five-year exploration plan focussed on unlocking the potential of the orebody, targeting resource to reserve conversion and further extensional growth.
Beyond the orebody, the Exploration team has been focussed on delineating potential satellite deposits to provide additional ore feed to the Sukari mill over the life of mine. A highlight of the 2022 exploration programme was completing Egypt's first airborne geophysical survey across the full Concession area. Introducing this tried and tested first principles exploration tool has given us a geological dataset which we can utilise across our wider Eastern Desert Exploration ('EDX') blocks across the Egyptian Nubian shield.
Operationally, total material moved outperformed with the open pit accelerated waste stripping programme and the underground transition to owner-mining both delivering increased operating flexibility and further safety, cost and productivity gains.
The open pit mining operation delivered another record year of material moved of 136 million tonnes, through a combination of our own mining fleet and contracted waste-stripping programme. The benefits of this investment were evident through 2022 as open pit mining flexibility increased from one operating area in 2020 to four operating areas as we exited 2022. In parallel to the increase in tonnes mined in the open pit, owner fleet optimisations have delivered a 18% productivity gain in total mined tonnes per hour since 2020. This has included the full implementation of the high productivity truck trays, improvement in haul cycle planning and road condition maintenance.
The underground mine went through a significant period of change during the year. Following an international tender process in 2021 planned to coincide with the expiry of the underground mining contract in late 2021, the decision was taken to switch to an owner mining model based on the extended underground mine life and expected cost savings and productivity gains. During Q1 2022 the underground team implemented the handover plan as the contractor exited the business and the Sukari team assumed full responsibility for operations from Q2 2022. Performance improved over 2022 as operations bedded down and new equipment was delivered to site with productivity gains and cost savings realised over the period compared to the contracting costs. With this transition now complete, the operations have begun 2023 in excellent shape as we seek to maximise underground production.
Introducing paste-fill within the underground in 2023 will enable us to maximise ore extraction in a safer manner while providing further cost and productivity gains over and above the current method of cemented waste rock fill. Construction of the paste-fill plant progressed as expected in 2022 and we expect to start commissioning in Q2 2023.
With the underground reserve life growing from three to approximately ten years since 2021 and an active pipeline of further growth targets identified, we carried out an independent underground option study to assess the potential to increase the mining rates. The study concluded that underground ore mining could sustainably be increased from the current life of mine average of 1Mt per annum to a 1.5Mt per annum with low project execution risk and low capital intensity. Work in 2023 will focus on fully engineering and planning this expansion option for implementation in 2024.
Growth & Diversification
Eastern Desert Exploration ('EDX')
Prior to the commencement of fieldwork our team completed remote desktop assessment of the three exploration blocks spanning 3,000km2, which enabled a quick and focussed start to the fieldwork programme. Our strategy remains twofold: 1) identify potential deposits within trucking distance of the Sukari mill and 2) explore for significant discoveries which could support standalone operations. Utilising a predominantly Egyptian staffed team, exploration commenced in May 2022 on the Nugrus block, which is adjacent to the Sukari Concession area, before moving to the Um Rus and Najd blocks to the north. Geochemical reconnaissance work using BLEG sampling was carried across the license areas, followed by more detailed soil sampling, mapping of known artisanal workings and combined with the remote sensing work, has generated several targets for drill testing during the balance of 2023.
In parallel with the exploration work, Centamin has been part of an industry group working with the Egyptian government to finalise the exploitation terms. Good progress has been made and we anticipate finalisation of the exploitation terms in H1 2023.
We believe our Doropo Project in Côte d'Ivoire has the potential to be a mine which can significantly increase overall group production, while making a material contribution to the wider Ivorian economy and its people.
Having completed the 124,000 metre drilling campaign, we upgraded the resource and constrained it within economic open pit shells for the first time. The resultant 2.5Moz of Indicated Resources is at an average grade of 1.52g/t, representing an 22% increase in grade estimated for the 2021 PEA. Encouragingly we continue to identify additional mineralisation targets within the Mineral Resource area and regionally, across the broader license holding that have the potential to further grow the gold endowment and further increase the life of the project.
Metallurgical test work carried out in 2022 identified an opportunity to simplify the processing flowsheet by removing the flotation and regrind circuit, which could have a positive impact on the economics of the project and will be included in the PFS.
The environmental, social impact assessment work continued through 2022, assessing the environmental and social baselines which will enable the project design and layout to be developed in a way which is sympathetic to the local conditions while enabling the project to be assessed in line with international good practice.
The PFS is near completion and we are excited to share those results and commence the Definitive Feasibility Study to enable the project to meet its permitting timeline.
For Centamin, 2022 was a landmark year for progress against our ESG priorities.
We finished 2022 having achieved a new safety record of eight million hours worked without a Lost Time Injury at Sukari, breaking the previous record of 5 million for LTI free hours worked and at the time of writing this we are currently at 9.1 million LTI-free. This has driven an 83% improvement in LTIFR from 2021, and we recorded a 13% improvement in TRIFR. This excellent achievement reflects management's on-going focus on safety in the workplace and I believe that safety performance is a good proxy for operational ability - a safe mine is a well-run mine and while we are proud of this achievement, we will not allow complacency to distract us from striving to further improve on this result into 2023 and beyond.
Diversity & Inclusion
We believe diversity and promoting inclusion is an ethical imperative for a sustainable business. At Centamin we promote a culture of belonging throughout the business, where everyone is respected, valued and empowered to excel within the workplace, and importantly, by creating an inclusive culture that reflects the diversity of the countries in which we operate. In 2021, Centamin welcomed changes to the Egyptian legal and regulatory framework that removed restrictions to the employment of women in the mining sector. Through broad and concerted leadership, we are proud to have increased our Egyptian female representation to 34 employees (from zero) at Sukari and on our Egyptian Eastern Desert Exploration blocks ('EDX'), as we seek to improve our gender balance in Egypt and across the Group. I would also like to give specific mention to our trailblasing colleague, Sara Mohamed Elsayed, who was the first Egyptian female employee at a mine site. Sara joined Sukari in 2021 as Environmental Superintendent and was named one of the 100 Global Inspirational Women in Mining for 2022.
The Introduction of female professionals at our sites has been supported and accompanied by workforce training on the benefits of a diverse and inclusive workplace, employee engagement to identify and resolve barriers to the advancement of women, including something as basic as female PPE to maximise the comfort and safety of all employees. These efforts represent a significant milestone in the history of Sukari and the Egyptian mining sector more broadly.
We have sought to create an environment in which our people can develop and thrive and in 2022 there was a 62% increase in workforce training hours. At Sukari we have put in place a professional development framework that aims to establish a shared understanding of the required skills to achieve proficiency in each and every role; the critical behaviours for successful performance at Centamin; and ultimately the objective to develop and promote our local workforce through the organisation. Increased levels of training was provided to support the progression of our employees to a proficient level, including certified leadership training to our management and supervisory team. This is an ongoing focus as we seek to promote national employment in leadership positions throughout the Group.
In 2022, we commissioned the largest global hybrid solar farm to power a gold mine. The 36MWDC solar plant reduces our annual consumption of diesel fuel for power generation by 22% (up to 70,000 litres of diesel displacement per day), significantly reducing costs and Scope 1 GHG emissions by approximately 60,000 tCO2-e per annum. Solar, combined with the productivity gains from implementation of the high productivity truck trays are two tangible achievements in 2022.
Our vision for a low carbon future is a mine with sources of onsite and imported renewable energy, reductions in absolute energy consumption through efficient operational strategy and new technologies, staged electrification of our mobile fleet and partnerships with our suppliers to select low carbon options and increase recycling in our supply chain. In 2022, we studied opportunities to reduce the operational emission of Sukari over the life of mine, including sourcing clean and lower carbon power through connection to the national grid and further expansion of our onsite renewable energy production. We have set an interim climate target of 30%, to reduce our Scope 1 and 2 GHG emissions by 2030, compared to a 2021 base-year. This would put us on a Paris-aligned trajectory to limit global warming to 'well below' 2°C by 2050.
Our commitment to stakeholder returns includes our dividend commitment to our shareholders. Our sustainable dividend policy of returning a minimum of 30% of free cash flow in cash dividends to shareholders has amassed an impressive nine-year track record, distributing a total of US$834 million, including today's proposed final dividend, since 2014.
Given the potential scale of the organic opportunities available to Centamin, Sukari cashflows and our robust balance sheet, we have been seeking to provide our investors with exposure to our growth projects while maintaining our approach to dividend payments.
In 2021, we commenced the reset with which to lay the foundation for long-term success. 2022 was about execution and delivery into not just our stated guidance but on all our projects and promises. 2023 is about extending our track record of delivery and building on that platform for growth.
In 2023, we are forecasting increased production of 450,000 to 480,000 ounces and targeting lower all-in sustaining costs with a guided range of US$1,250-US$1,400 per ounce sold. This year capex will be US$225 million, including the last full year of contracted waste-stripping programme and additional non-sustaining projects such as the gold gravity circuit, expansion of the north dump leach, completion of the paste-fill plant and ongoing development of the tailings storage facility.
We will continue to deliver into our geological exploration programme at the Sukari orebody and across the concession area while we complete the updated life of mine plan incorporating the underground expansion potential and mining areas of bonanza grades.
The most significant decarbonisation and cost savings opportunity identified for 2023 is the ability to connect to the Egyptian national electricity grid which has recently been extended to within 30km of the Sukari mine site. If successful, this would enable the operations to run on a combination of the current solar generated power and grid, and therefore displacing the current site thermal power generation using diesel.
Thank you to the Board, shareholders, and wider stakeholders for their support, engagement and feedback. I would like to thank everyone at Centamin, our colleagues and contractors, for their hard work, dedication, passion and enthusiasm. What we have achieved in a few short years is significant and provides a platform from which we can begin our journey to developing a multi-asset, multi-jurisdictional gold producer.
Chief Executive Officer
ROSS JERRARD COMMENTED: 'Our strong balance sheet, underpinned by a resilient business with increased capacity for growth, gives us the flexibility and strength to deliver stakeholder returns.'
Centamin is a robust business, committed to responsible mining. In 2020 we set out bold capital reinvestment plans required to sustain our business and drive higher production and improve margins for the long term, and for the last two years we have delivered on those plans.
Despite persisting global supply-side issues and global inflation, our focus is on what we can control. We do this with rigorous planning and subsequent disciplined compliance to plan, a thriving culture of continuous improvement, and active risk and opportunity assessment to ensure we don't stop at the minimum but are always looking to improve.
In 2022, Centamin delivered a resilient financial performance that was in line with our expectations and guidance for the year. Notwithstanding, the Group's results are significantly affected by movements in the gold price, input costs, particularly in consumables and fuel, and to a lesser degree foreign exchange rates.
Revenues increased year-on-year by 8% to US$788 million, from annual gold sales of 438,638 ounces, up 8%, at an average realised price of US$1,794 per ounce, with no significant movement year-on-year. A total of 13,485 ounces of unsold gold bullion was held on-site at year end, due to timing of gold shipments across the year end.
As a Group, Adjusted EBITDA was US$319 million, at a 40% EBITDA margin, principally driven by;
- a 6% increase in gold production, as scheduled, at similar average realised gold prices as compared to last year; offset by
- a 24% increase in the combined open pit and underground material mined, some of which has been capitalised to mining properties as a waste stripping asset
- higher fuel, oil and lubricants costs to the value of US$72 million due to increases in the fuel cost per litre coupled with increased production
- US$53 million additional spend on consumables due to increases in reagent prices and increased production in the year
Profit before tax increased by 11% to US$171 million, due to the factors below, with basic earnings per share decreasing by 29% to 6.29 US cents.
- an 8% increase in revenue, in line with increased gold sales as planned
- a 16% increase in other income; offset by
- a 1% increase in other operating costs, mainly due to a 10% increase in royalties
- a 114% increase in greenfield exploration and evaluation expenditure, and
- a 12% increase in cost of sales
As expected, and in line with our three year reinvestment plans, Centamin's cash flows and earnings were positively impacted in 2022 by higher gold production and sales, offset by higher costs and increased capital expenditure. Operational cash flow decreased by 6% to US$292 million. Cash flows from investing activities were impacted mainly by gross capital expenditure of US$276 million, predominantly invested in sustaining the long-term production from Sukari. Adjusted Group free cash flow declined to negative US$18 million, after profit share distribution of US$35 million to our Egyptian partner, EMRA, and US$27 million advancing our organic growth pipeline at our exploration projects Doropo, EDX and ABC.
STRINGENT COST MANAGEMENT
Our judicious approach to forecasting and stringent cost management meant we were able to counter some of the global inflationary cost pressures last year and delivered guidance as stated at the beginning of 2022. Good progress was made and we are confident we will make our US$150 million target of cost savings by the end of 2023. As at 31 December 2022 we had extracted US$116 million of sustainable cost savings and remain motivated to find further opportunities.
Cash costs of production were US$913 per ounce produced, up 5%, reflecting a 24% increase in total open pit mined tonnes, and a 2% increase in tonnes processed, total underground mined tonnes remained flat year on year and a 6% increase in gold ounces produced. AISC was US$1,399 per ounce sold, up 13%, mainly due to a 11% increase in mine production costs, 9% increase in sustaining corporate costs and a 55% increase in sustaining capital costs. This was partially offset by an 8% increase in gold ounces sold (which was as scheduled and in line with guidance).
Capitalisation of open pit waste-stripping
The largest investment in 2022 was on the accelerated waste-stripping (deferred waste-stripping) which added US$141 million to our balance sheet, US$89 million was included in non-sustaining capital expenditure and related specifically to the work done by the waste-mining contractor, with the balance of US$52 million allocated to sustaining capital expenditure, which was waste material mined by the Centamin fleet above the life of mine strip ratio. Some deferred waste-stripping has already been amortised in the year based on ore extracted from the areas mined.
As more fully described in note 2.9 to the financial statements and required by the Group's financial reporting standards, from 2021, capitalised deferred stripping costs are included in 'Mine Development Properties' and amortised using the unit of production method based on total ounces produced for the 'component' of the orebody, which is defined as the respective 'stage' of the open pit mine plan. Capitalisation occurs when the strip ratio exceeds the life of mine strip ratio for that stage. Only the costs related to the excess stripping are capitalised. In line with the accelerated stripping programme (2022-2024) we expect to be above the life of mine strip ratio, resulting in a larger quantum to be capitalised to the balance sheet.
STRONG BALANCE SHEET
Centamin closed 2022 financial year with cash and liquid assets of US$157 million. As announced on 22 December 2022, we secured the first piece of corporate debt and on 13 March 2023, all conditions precedent were met regarding the US$150 million sustainably linked revolving credit facility ('RCF'), significantly increasing the Company's financial flexibility to fund growth projects across the portfolio. Initially, the focus will be Sukari. Under the terms of our Concession Agreement growth capital invested is recovered over three years, making these investments ideally suited for the structure of the RCF.
APPROACH TO CAPITAL ALLOCATION
Capital allocation continues to be disciplined and closely qualified against value creation. The Company continues to exercise a balanced approach to responsibly maximising operating cash flow generation, reinvesting for future growth and prioritising sustainable shareholder returns. The Company's liquidity and strength of the balance sheet is fundamental to the longevity of the business and is seriously considered when assessing capital allocation. Centamin has an active growth pipeline through results-driven exploration and continually assesses inorganic growth opportunities. Our organic projects are self-funded but before capital is allocated they are routinely ranked based on results against our development criteria and prospective returns.
In 2022, a key focus was on improving operational efficiencies to achieve consistent operational performance with US$165 million spent on sustaining capital expenditure and US$119 million on non-sustaining, or 'growth' capital expenditure. Growth projects include the construction of the hybrid solar plant, reducing the reliance on fossil fuels and improving operating costs, and ongoing construction of the underground paste-fill plant.
Impressive progress was made on project delivery as we achieved several further important milestones, including initiating business improvements such as completion of the preparatory work on centralising our accounting and internal control systems across the Group in 2022, which will enable faster and more efficient access to our numbers, ahead of planned implementation in 2023.
Stakeholder, and specifically shareholder returns, are central to our Company strategy. Centamin were one of the first gold producers to pay dividends under a structured policy. We have built a nine-year track record of returning cash to shareholders, based on our policy linked to free cash flow generation before growth investment. Our dividend policy makes firm commitments on capital allocation, meaning shareholder interests are always at the centre of what we do.
Consistent with the Company's commitment to returning cash to shareholders, and recognising 2022 as the peak reset year, the Board proposes a 2022 final dividend, for the year ended 31 December 2022 of 2.5 US cents per share (c.US$29 million), bringing the proposed total dividend for 2022 to 5 US cents per share (c.US$58 million):
- Interim 2022 dividend paid: 2.5 US cents per share
- Final 2022 dividend proposed: 2.5 US cents per share
The final 2022 dividend is subject to shareholder approval at the 2023 AGM on 23 May 2023 and following approval would be paid on 23 June 2023.
We are fully focused on managing the bottom line of the business so that we can maximise the value at Sukari and deliver growth and diversification combined with sustainable stakeholder returns. We have budgeted for similar costs in 2023 as 2022, accounting for rising input costs, driven by higher consumer price inflation within our operating countries, supply chain pressures on fuel, consumables and shipping costs and tighter labour markets. We have prudently decided not to budget any offsetting impacts of our ongoing cost-savings and improving operating efficiencies and productivity gains until we have a better sense of the longer-term inflationary environment.
The previous two years have been largely focused on business transformation and building our geological understanding. Today, we are excited by the additional value that is organically within our grasp and we are pursuing to capture of this upside to achieve our goals across growth and returns.
Chief Financial Officer
PRIMARY STATEMENTS HIGHLIGHTS
Revenue from gold and silver sales for the year increased by 8% year-on-year to US$788 million (2021: US$733 million) with the year-on-year average realised gold price remaining flat at US$1,794 per ounce sold (2021: US$1,797 per ounce sold) complimented by an 8% increase in gold ounces sold to 438,638 ounces (2021: 407,252 ounces).
Cost of sales represents the cost of mining, processing, refining, transport, site administration, depreciation, amortisation and movement in production inventories. Cost of sales is up 12% year-on-year to US$544 million, mainly as a result of:
- 11% increase (US$40 million) in total mine production costs from US$368 million to US$409 million (+ve), primarily due to the following drivers:
- a 30% increase in processing costs (US$47 million) (+ve). The increase was driven by price increases on fuel. Diesel fuel is mainly consumed at Sukari for the process plants power generation; offset by
- a 3% decrease in open pit mining costs (US$4 million) (-ve); and
- a 6% decrease in administration costs (US$3 million) (-ve)
- There was no significant change in the underground mining costs.
- 5% increase in depreciation and amortisation charges year-on-year from US$139 million to US$146 million (+ve). This increase was mainly due to:
- a US$284 million in net additions to property, plant and equipment (excl. capital work in progress) which increased the associated depreciation and amortisation charges; in addition to higher gold production in the year
The profit share payments during the year are reconciled against SGM's audited financial statements. Any variation between payments made during the year (which are based on the Company's estimates) and the audited financial statements, may result in a balance due and payable to EMRA or advances to be offset against future distributions. SGM's 30 June 2022 financial statements have been audited and signed off.
Refer to note 184.108.40.206 in the notes for details of the treatment and disclosure of the EMRA profit share.
The following table provides a breakdown of the total capital expenditure of the Group:
(1) Non-sustaining capital expenditure included further spend on the solar plant, underground paste-fill plant and the Capital Waste Stripping. Non-sustaining costs are primarily those costs incurred at 'new operations' and costs related to 'major projects at existing operations' that will materially benefit the operation.
(2) Reclassified from operating expenditure.
The following table provides a breakdown of the total exploration expenditure of the Group:
Exploration and evaluation expenditure comprises expenditure incurred for exploration activities primarily in Côte d'Ivoire and in the new Egypt greenfield permit areas. Greenfield exploration and evaluation costs (excluding Burkina Faso) increased by US$15 million or 133% as more exploration and evaluation work specifically drilling and assaying at the two Côte d'Ivoire sites was done in 2022 as compared to 2021 as well as the commencement of exploration work in the new Egypt permit areas. The brownfield capitalised exploration costs on the Sukari concession area decreased by US$4 million or 24% year on year.
The spend in Burkina Faso is mainly on key services and other regulatory obligations required as the process to formally exit the project is currently underway.
As referred to in note 5.2, subsequent to the year end, the Board proposed a final dividend for 2022 of 2.5 US cents per share. Subject to shareholder approval at the annual general meeting on 23 May 2023, the final dividend will be paid on 23 June 2023 to shareholders on record date of 2 June 2023.
Also refer to note 5.1 in the financial statements for more information on the Law 32 judgement that was handed down in January 2023.
The Company's compliance requirements and obligations in respect of the US$150 million Revolving Credit Facility had not yet commenced as at 31 December 2022 as there were certain conditions precedent that were still to be satisfied to make the agreement effective. The conditions precedent were met on 13 March 2023 subsequent to year end and before the annual financial statements were signed and the facility is available for draw down from this date the conditions precedent were met.
Other than as noted above, there were no other significant events occurring after the reporting date requiring disclosure in the financial statements.
NON‑GAAP FINANCIAL MEASURES
1) EBITDA and adjusted EBITDA
EBITDA is a non‑GAAP financial measure, which excludes the following from profit before tax:
- Finance costs
- Finance income
- Depreciation and amortisation
Management considers EBITDA a valuable indicator of the Group's ability to generate liquidity by producing operating cash flow to fund working capital needs and capital expenditures. EBITDA is also frequently used by investors and analysts for valuation purposes whereby EBITDA is multiplied by a factor or 'EBITDA multiple' that is based on an observed or inferred relationship between EBITDA and market values to determine a company's approximate total enterprise value. EBITDA is intended to provide additional information to investors and analysts and does not have any standardised definition under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
EBITDA excludes the impact of cash cost of production and income of financing activities and taxes, and therefore is not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may also calculate EBITDA differently. The following table provides a reconciliation of EBITDA to profit for the year before tax.
Adjusted EBITDA removes the effect of transactions that are not core to the Group's main operations, like adjustments made to normalise earnings, for example profit on financial assets at fair value through profit or loss, impairments of property, plant and equipment, non-current mining stockpiles and exploration and evaluation assets.
Reconciliation of profit before tax to EBITDA and adjusted EBITDA:
(1) In the 2021 Consolidated Statement of Comprehensive Income, Finance costs were included and disclosed in 'Other operating costs', in the current year they are now separately disclosed in their own line hence the change on the Finance Costs number in 2021.
(2) Adjustments made to normalise earnings for example profit on financial assets at fair value through profit or loss, impairments of property, plant and equipment, non-current mining stockpiles and exploration and evaluation assets.
2) Cash cost of production per ounce produced and sold and all-in sustaining costs ('AISC') per ounce sold calculation
Cash cost of production and AISC are non-GAAP financial measures. Cash cost of production per ounce is a measure of the average cost of producing an ounce of gold, calculated by dividing the operating costs in a period by the total gold production over the same period. Operating costs represent total operating costs less sustaining administrative expenses, royalties, depreciation and amortisation. Management uses this measure internally to better assess performance trends for the Company as a whole. Management considers that, in addition to conventional measures prepared in accordance with GAAP, certain investors use such non-GAAP information to evaluate the Company's performance and ability to generate cash flow. Management considers that these measures provide an alternative reflection of the Group's performance for the current year and are an alternative indication of its expected performance in future periods. Cash cost of production is intended to provide additional information, does not have any standardised meaning prescribed by GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. This measure is not necessarily indicative of operating profit or cash flow from operations as determined under GAAP. Other companies may calculate these measures differently.
During June 2013 the World Gold Council ('WGC'), an industry body, published a Guidance Note on the 'all in sustaining costs' metric, which gold mining companies can use to supplement their overall non-GAAP disclosure. AISC is an extension of the existing 'cash cost' metric and incorporates all costs related to sustaining production and in particular recognising the sustaining capital expenditure associated with developing and maintaining gold mines. In addition, this metric includes the cost associated with developing and maintaining gold mines. This metric also includes the cost associated with corporate office structures that support these operations, the community and rehabilitation costs attendant with responsible mining and any exploration and evaluation costs associated with sustaining current operations. AISC US$/oz is arrived at by dividing the dollar value of the sum of these cost metrics, by the ounces of gold sold (as compared to using ounces produced which is used in the cash cost of production calculation).
On 14 November 2018 the World Gold Council published an updated Guidance Note on 'all-in sustaining costs' and 'all-in costs' metrics. Per their press release it was expected that companies have chosen to use the updated guidance from 1 January 2019 or on commencement of their financial year if later. The Group has applied the updated guidance from 1 January 2019 with no impact on our results or comparatives.
Reconciliation of cash cost of production per ounce produced:
1) The movement in inventory on ounces produced is only the net movement in mining stockpiles and ore in circuit while the movement in ounces sold is the net movement in mining stockpiles, ore in circuit and gold in safe inventory.
A reconciliation has been included below to show the cash cost of production metric should gold sold ounces be used as a denominator.
Reconciliation of cash cost of production per ounce sold:
(1) The movement in inventory on ounces produced is only net the movement in mining stockpiles and ore in circuit while the movement in ounces sold is the net movement in mining stockpiles, ore in circuit and gold in safe inventory.
Reconciliation of AISC per ounce sold:
(1) Includes refinery and transport.
3) Cash and cash equivalents, bullion on hand and gold and silver sales debtor
Cash and cash equivalents, bullion on hand, gold and silver sales debtor is a non-GAAP financial measure of the available cash and liquid assets at a point in time. Management uses this measure internally to better assess performance trends for the Company as a whole. Management considers that, in addition to conventional measures prepared in accordance with GAAP, certain investors use such non-GAAP information to evaluate the Company's performance and ability to generate cash flow and the measure is intended to provide additional information.
This non-GAAP measure does not have any standardised meaning prescribed by GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. This measure is not necessarily indicative of cash and cash equivalents as determined under GAAP and other companies may calculate it differently.
Reconciliation to cash and cash equivalents, bullion on hand, gold and silver sales debtor:
The majority of funds have been invested in international rolling short-term interest money market deposits.
4) Free cash flow and adjusted free cash flow
Free cash flow is a non-GAAP financial measure. Free cash flow is a measure of the available cash after distributions to the Non-Controlling Interest ('NCI') in SGM, being EMRA, that the Group has at its disposal to use for capital reinvestment and to distribute to shareholders of the parent. Free cash flow is intended to provide additional information, does not have any standardised meaning prescribed by GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. This measure is not necessarily indicative of operating profit or cash flow from operations as determined under GAAP and other companies may calculate this measure differently.
(1) Adjustments made to free cash flow, for example acquisitions and disposals of financial assets at fair value through profit or loss, which are completed through specific allocated available cash reserves.
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SOURCE: Centamin PLC
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