2012 Annual Results

2012 Annual Results 
PERTH, AUSTRALIA -- (Marketwire) -- 03/27/13 --  Centamin plc
("Centamin" or "the Company") (LSE: CEY) (TSX: CEE) 


 
For immediate release 27 March 2013
 
Centamin plc ("Centamin" or "the Company")
 
(LSE:CEY, TSX:CEE)
 
2012 Annual Results
 
Centamin is pleased to announce its audited annual results for the
period ended 31 December 2012.
 
HIGHLIGHTS FOR THE YEAR (1) (2) (3)
 
Centamin delivered strong operational and financial results in 2012,
producing 262,828 ounces of gold (2011: 202,699 ounces) and generating
profit after tax for the year of US$199 million (2011: US$194.0
million). Through the Group's emphasis on rigorous cost control,
Centamin has continued to reap the benefits of the high gold price, and
this was enhanced further by its debt-free and unhedged position. Now
in its third year of production, the Sukari Gold Mine is highly cash
generative, providing EBITDA of US$233.3 million (2011: US$211.4
million), a 10% increase on 2011, and a robust cash and cash
equivalents balance of US$147.1 million (2011: US$164.2 million) as at
31 December 2012.
 
2012 presented some operating environment challenges, however a solid
second quarter and a record fourth quarter of production have shown
that a substantially larger production profile is achievable for
Sukari. This potential for production growth combined with the Group's
reserves, a significant expansion programme, a solid financial
position, and an experienced team means Centamin is well positioned for
2013, as is shown by the following:
 
* Basic earnings per share 18.27 cents, up 2% on prior year.
 
* Record EBITDA US$233.3 million, up 10% on the prior year.
 
* Full year production was 262,828 ounces, a 30% increase on 2011
and above guidance of 250,000 ounces.
 
* Cash costs of production of US$669 per ounce (equivalent to
US$530 per ounce versus US$556 per ounce in 2011 at subsidized fuel
prices).
 
* Stage 4 plant expansion (to 10Mtpa) commissioning activities
began in Q1 2013 with the new power station commissioned in January
2013 and new blowers and compressors to be commissioned in Q2 2013.
The bulk of commissioning will commence, and be complete, in the second
half of 2013. Expenditure to date is US$228.5 million of the total
forecast US$325 million including contingency.
 
* Centamin remains debt-free and unhedged with cash, bullion on
hand, gold sales receivable and available-for-sale financial assets of
US$219.4 million as at 31 December 2012.
 
* Drilling continued at the V-Shear porphyry and commenced at the
Kurdeman prospect.
 
* A gravity survey, aimed at targeting and defining porphyries
beneath the wadi sediments was completed late in 2012 with results due
in Q2 2013.
 
* Results in Ethiopia confirm the existence of low grade
mineralisation, with drilling continuing.
 
During the year Centamin was involved in two separate court cases
directly relevant to the operation of the mine at Sukari. The first of
these was triggered by a decision taken by the Egyptian General
Petroleum Company (EGPC) to charge international prices, not local
(subsidised) prices for the supply of Diesel Fuel Oil ("DFO"). The
second case saw a judgment by an Egyptian Administrative Court in
relation to the validity of the Company's 160km2 exploitation lease;
although on 20 March 2013 the Supreme Administrative Court upheld the
Company's application to suspend this decision until the merits of the
Company's appeal are considered and ruled on, thus providing assurance
that normal operations would be able to continue during this process.
Both of these cases are described in detail elsewhere in this report
(refer to Note 20 of the Financial Statements). Every action is being
taken to contest the decisions, including the making of formal legal
appeals and, although their resolution may take some time, we remain
confident that a satisfactory outcome will ultimately be achieved.
With respect to the DFO case, management however recognises the
practical difficulties associated with re-claiming funds from the
government and, for this reason, have fully provided against the
prepayment of US$41.4 million as an exceptional item (refer to Note 6
of the Financial Statements). In the meantime the Group is continuing
to pay international prices for DFO.
 
In addition the Group during the year received a demand from Chevron
for the repayment of fuel subsidies received in the period from late
2009 through to January 2012, amounting to some US$60 million (EGP403
million). No provision has been made in respect of the historic
subsidies prior to January 2012 as, based on legal advice that it has
received to date, the Company believes that the prospects of a court
finding in its favour in relation to this matter remain strong.
 
(1) Cash cost of production, EBITDA and cash, bullion on hand and
available-for-sale financial assets are non-GAAP measures. For further
information and a detailed reconciliation refer to the "Non-Gaap
Financial Measures" at the end of the Financial Statements.
 
(2) Basic EPS, EBITDA, Cash costs of Production reported includes an
exceptional provision against prepayments recorded in Q4 to reflect the
removal of fuel subsidies which occurred in January 2012 (refer to Note
6 of the Financial Statements for further details). The provision had
no impact on the 2011 results.
 
(3) Historic cash cost of production,EBITDA and Basic EPS now
reflect adoption of IFRIC 20 (refer to Note 3 of the Financial
Statements for further details).
________________________________________________________________________
Centamin will host a conference call on Wednesday, 27 March at 8.00am
(London, UK time) to update investors and analysts on its results.
Participants may join the call by dialling one of the following three
numbers, approximately 10 minutes before the start of the call.
 
From UK:           Canada:            Rest of world:
08082380673        +18664949885       +44 (0) 1452 569335
Participant pass code: 24856273
 
A second call (Q&A only) will be held for North American analysts and
investors at 2.00pm (London, UK time) / 9.00am EST. Participants may
join the call by dialling one of the following three numbers,
approximately 10 minutes before the start of the call.
 
From Canada:            US:             Rest of world:
+18664949885            +18666551591    +44 (0) 1452 569335
Participant pass code: 24859029
_____________________________________________________________________
 
STRATEGIC REVIEW
 
Our growth strategy seeks to optimise exposure through the mining value
chain: exploration, development and operations. Whilst disciplined and
sustainable growth on our existing projects remains a key focus, we
continue to evaluate potential opportunities to grow through the
acquisition of projects which offer the potential for the Company to
realise strong investment returns.
 
2013 will mark the year when the Stage 4 plant expansion is
commissioned, the Sukari project concludes its investment phase and our
annual capital expenditure requirements for the mine begin to reduce
significantly.
 
Based on the Company's calculation there was no 'Net Profit Share' due
to EMRA as at 30 June 2012, nor is any likely to be due as at 30 June
2013. Furthermore, it is expected that there will be profit share due
to EMRA for the SGM financial year ending 30June 2014, based on
production, gold price and operating expense forecasts. Following
discussions with EMRA and with a view to demonstrating goodwill toward
the Egyptian government, an advance payment has been made subsequent to
year endto the value of US$8.2 million.
 
Maintaining our Social License
 
Maintaining good community relations is a core part of our operational
strategy and corporate governance standards. As the first mining
company in Egypt in modern times, we strive to set an example of a
socially responsible industry through adopting a good neighbour policy.
We take every action to ensure Sukari has the minimum impact on the
social environment, as well as to deliver positive benefits to Egypt
and the community as a result of our investment.
 
In 2012 we nurtured dialogue, maintained open channels of communication
and built positive and constructive relations with all our stakeholders
including the community in areas in which we operate. The Board
approved principles and strategies for the pursuit of corporate
sustainable development (CSD) initiatives.
 
Our work force is remunerated well above the average for Egypt and our
career development programmes are highly valued. In general we enjoy a
very positive and constructive relationship with our employees.
Unfortunately, however, we had two strikes at Sukari during the year.
The first was a legal strike and was settled on the basis of a broad
and above-inflation increase in employee allowance payments. The
second strike was illegal, involving only a small element of our work
force, and was settled with no pay increases and with the help of the
Ministry of Labour. These disputes are set against a background of
multiple and prolonged industrial disputes in many quarters of the
Egyptian economy.
 
Targets for 2013
 
For the year 2013, we project production of 320,000 ounces at a cash
operating cost of US$700 per ounce, at international fuel prices, which
will mark the third year of successive growth in output from Sukari,
and another step on the way to our long-term target for the project of
450-500,000 ounces per annum from 2015 onwards at an
industry-competitive cost of production. The key drivers of production
growth this year will be a continued period of elevated head grades
from both the open pit and underground mines and increasing the
underground ore tonnes mined to 500,000t, as well as commissioning of
the Stage 4 plant expansion to double the processing plant's nameplate
capacity to 10 million tonnes per annum.
 
Although construction of Stage 4 was steady during the first half of
2012, the second half saw an impact from strikes at Sukari, in some of
the ports and at some of the local Egyptian suppliers, as well as
temporary disruptions to the operation's fuel supply and gold exports,
hence our in-country working capital position. This translated to
delivery delays for key items, materials and services and thus a delay
to the anticipated commissioning of the expanded plant, the bulk of
which is now expected to commence in the second half of 2013 and with
completion before the end of the year. As part of the implementation
of Stage 4 the Company is in discussions with EMRA and other government
departments in relation to securing the necessary permits to increase
daily ammonium nitrate ("AN") consumption and blasting accessories in
order to increase open pit mining rates to the required level to feed
the expanded plant. This process is expected to be completed during
the year.
 
The capital expenditure programme for 2013 has two key focus areas:
completion of the Stage 4 plant expansion and the on-going development
of the underground mine. The total Stage 4 capital expenditure
estimate is US$325 million including contingency, with US$228.5 million
spent by the end of 2012 and the bulk of the remaining capital
expenditure due in 2013. The budget for the underground expansion is
US$20 million and will take the new decline ("Ptah") to its target
depth below the existing area of operation. Underground drilling will
continue to test the potential for significant resource and reserve
expansion and the development of multiple production sources.
 
CHAIRMAN'S STATEMENT
 
Dear Shareholders
 
2012 represented the third full year of production at Sukari, a period
in which your company further extended its track record of successive
annual production growth. The operation delivered a record 262,828
ounces of gold at a cash cost of production of US$669 per ounce, which
was ahead of guidance of 250,000 ounces at US$700 per ounce (with fuel
at international prices) set out at the beginning of the year. The
operating team in Egypt deserve immense credit for this performance in
a year where challenges were again presented and overcome. The ability
to perform well in all circumstances is key to a successful operation,
particularly one that is growing as rapidly as Sukari, and shareholders
should take comfort from the team's demonstrated ability to deliver
growth, whilst maintaining a strong emphasis on rigorous cost control.
 
Sukari's safety performance was also a significant improvement on the
previous year with a lost time injury frequency rate of 0.69 per
200,000 man-hours achieved during the period. It was again pleasing to
note that no significant environmental incidents have taken place.
 
The Stage 4 expansion to double the processing plant's nameplate
capacity to 10 million tonnes per annum is the key to the next stage of
output growth and delivery of our stated long-term production target
for Sukari of 450-500,000 ounces per annum from 2015 onwards. The
construction team made great inroads through 2012 on what is a major
construction effort, which continued to be funded out of the proceeds
of production at Sukari. Although construction was steady during the
first half of the year, the second half saw an impact from strikes,
both at Sukari and within the local supply chain, and also disruptions
to gold exports and hence our in-country working capital position.
This translated to delivery delays for key items, materials and
services, with the effect that the bulk of commissioning will commence
in the second half of 2013 and be complete before year end. The
capital cost estimate of the Stage 4 expansion which is funded by PGM
out of cost recoveries, is US$325 million including contingency, with
expenditure at the end of 2012 of US$228.5 million.
 
Production growth was complemented by continued drilling of Sukari Hill
from both surface and underground, with the aim of replenishing and
increasing the resource and reserve base, and an update resource and
reserve statement will be delivered in the second half of 2013. The
expanding underground development in particular provides increasing
drilling access to the northern and depth extents of the deposit.
 
Exploration activities continued on the seven other prospects in the
160km2 Sukari exploitation lease within trucking distance of the Sukari
plant. The first significant signs of low grade porphyry away from
Sukari Hill were identified at the V-Shear prospect and work continues
to determine the extents and controls on this mineralisation.
Elsewhere, on-going drilling at the Kurdeman prospect offers the
potential to fast-track high grade ore to supplement the existing
underground production. Further regional drilling of the Sukari licence
is planned for 2013.
 
Drilling in Ethiopia continued on our four exploration licences in the
north of the country. Centamin intends to continue to grow and
diversify its project pipeline through targeted acquisitions of
exploration and development prospects in the region and beyond.
 
Despite the negative effect of having to pay higher costs for fuel for
much of 2012, costs that were incurred as direct consequence of a
decision taken by EGPC, which we are robustly contesting in Court,
financially, our position remains strong with approximately US$220
million held in cash, bullion, gold sales receivables and
available-for-sale financial assets, no debt and no hedging. With
revenues of US$426 million and a profit for the year of US$199 million,
Sukari continued to demonstrate in 2012 that it remains highly cash
generative and well placed to fund its growth from cost recoveries. We
have exited the year as we had planned with a strong cash position and
having made a significant investment and progress toward completing
Stage 4. Completion of Stage 4 will mark the end of a major expansion
and investment programme at Sukari.
 
Our appeal against the 30 October 2012 ruling by the Egyptian
Administrative Court, which we believe is based on an incorrect
assertion that there was a lack of evidence with respect to our
exploitation lease at Sukari, remains on-going. Very importantly on 20
March 2013 the Supreme Administrative Court approved our application to
suspend enforcement of the 30 October ruling until the conclusion of
the appeal process and this will allow operations at Sukari to continue
whilst the court process runs its course. We have full confidence in
our legal title and our appeal case and also highlight the separate
supporting appeals lodged by the Ministry of Petroleum and the Egyptian
Mineral Resource Authority (EMRA). It is our belief that this
re-enforces the government's publicly-stated view that the terms of our
Concession Agreement are fair and that Centamin's continued investment
and operation at Sukari are both necessary and welcome. I would like
to thank the Minister of Petroleum and EMRA for standing by us
throughout the year and I look forward to the continued co-operation as
we deliver on our stated goals.
 
I would like to close by thanking all those at Sukari, in Alexandria,
London, Jersey and Perth for their efforts in 2012 as Centamin
continued on its journey to becoming an established gold producer. In
a year where there were many events that required your Board's
attention it was a year that the depth, professionalism and dedication
of your Non-Executive Directors came to the fore. I would like to
thank deeply the Board for their counsel.
 
Despite and because of the challenges that we have faced in 2012, your
company remains well positioned to deliver outstanding growth and
shareholder returns in the coming years. I look forward to updating
you further over the course of 2013 either at our AGM, which this year
will be held in Jersey on 23 May, or at our presentation to
shareholders that will be held in London on 16 May.
 
Josef El-Raghy
Chairman
 
Please click here for the full 2012 Annual Results
http://www.rns-pdf.londonstockexchange.com/rns/9770A_-2013-3-27.pdf
 
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