CEY Centamin Plc

21 March 2024

Centamin plc

("Centamin" or "the Company")

(LSE:CEY, TSX:CEE)

Full year 2023 results

Audited results for the twelve months ended 31 December 2023

MARTIN HORGAN, CEO, commented: "2023 is the third consecutive year that we have safely delivered on our production guidance, reflecting the operational improvements and flexibility from our three-year reinvestment plan. Despite ongoing local inflationary pressures, we reduced our AISC by $194/oz versus 2022, beating the lower end of our guidance range. With the reinvestment programme ending in 2024, Sukari has been repositioned towards consistently delivering 500,000 ounces per annum over the long-term, with further growth and cost saving opportunities identified.

Looking ahead to 2024, the grid connection project will continue our recent success in taking costs out of the business whilst delivering into our near-term decarbonisation targets of reducing our scope 1 and 2 emissions by 30% by 2030. We will continue to advance the organic growth opportunities within our portfolio of assets by aggressively following up on the recent exploration success with our Eastern Desert Exploration drilling programme ("EDX") and proceed towards an investment decision at Doropo in Cote d'Ivoire following the publication of the DFS later this year."

HIGHLIGHTS

GROUP FINANCIAL SUMMARY

1.      The profit after tax attributable to the parent and the Basic EPS for H1 2023 was updated after the reconciliation of the profit attributable to the Non-Controlling Interest (due to EMRA) for both H1 2023 and H2 2023 was completed at year end.

2.      The comparatives in the Consolidated Statement of Cash Flows for the year ended 31 December 2022 have been restated to reflect an increase of cash generated from operating activities of $2.5m, interest paid of $1.9m and a reduction of the effect of foreign exchange rate changes of $0.6m, resulting in the net restatement of the Operating cash flow and the adjusted free cash flow figures by an increase of US$0.6m

2024 OUTLOOK

Guidance unchanged

2024 KEY MILESTONES

WEBCAST PRESENTATION

The Company will host a webcast presentation today, Thursday 21 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 recording will be made available on the Company website.

To join the webcast: https://www.lsegissuerservices.com/spark/Centamin/events/0995e3c5-b8c1-46ed-ac98-de2fa708e250

Please allow a few minutes to register.

PRINT-FRIENDLY VERSION of the results: www.centamin.com/investors/results-reports/

About Centamin

Centamin is an established gold producer, with premium listings on the London Stock Exchange and Toronto Stock Exchange. 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 5.7 million ounces of gold, and today has a projected mine life to 2034.

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 over 3,000km² of highly prospective exploration ground in Egypt's Arabian 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.

FOR MORE INFORMATION please visit the website www.centamin.com or contact:

ENDNOTES

Guidance

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.  

Financials

Full year financial data points included within this report are audited.

Non-GAAP measures

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

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 and financial assets at fair value through profit or loss.

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

Gold produced is gold poured and does not include gold-in-circuit at period end.

Dividend

All dividends are subject to final Board approval and final dividends are subject to shareholder approval at the Company's annual general meeting.

Forward-looking Statements

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.

LEI: 213800PDI9G7OUKLPV84                                                     

Company No: 109180

CEO Statement

I am pleased to report that 2023 was the third consecutive year of delivery into our production guidance while beating our all-in sustaining cost and capex forecasts. Our focus on operation delivery, alongside a strong gold price environment enabled the Company to generate robust cash flows, supporting the continued investment in our operations without the need to draw down on our sustainability-linked loan.

2023 was the last full-year of our operational reset plan as we unlock the full potential of the Company's portfolio, at the Sukari mine we have focused on the optimisation of the operations and we published a new Life of Mine Plan. The plan maximises the production opportunity and returns the mine to a 500,000 ounce annual production run rate in the long-term while simultaneously focussing on cost and operational efficiencies that will position the mine in the lower half of the industry cost curve and, when combined with the increased gold production, deliver a sustainable improvement in cashflows. 

Alongside Sukari, we have made encouraging progress across our EDX portfolio with the identification of potential satellite feed targets in close proximity to the Sukari mine, whilst in Côte d'Ivoire, we have delivered a Pre-Feasibility Study for our Doropo project.

Having delivered on our commitments during 2023, we enter 2024 with confidence and the potential to realise further opportunity across our portfolio, supported by a strong balance sheet. With the investment in resetting our operations now pivoting to investment in growth we believe we are at an inflection point that will soon see us rewarded for the multi-year investment programme, with stronger free cash flow enabling us to deliver that growth while maintaining our track record of dividend payments.

EGYPT

It was a challenging year within the broader North Africa and Middle East region as a result of multiple conflicts across the region alongside the ongoing impact of the global inflationary environment. Despite these challenges, the Company was well positioned to navigate the operating environment with limited impact on our business. We believe that the risk management processes developed through COVID-19 have enabled the Company to continue to better identify and therefore mitigate risks.  For example, to minimise disruption to operations the Sukari mine carries higher levels of inventory which are sourced from a more diversified supply chain, helping to minimise any potential interruption to our business in 2023.  We continue to monitor the state of the broader Egyptian economy as it navigates short term pressures and note that as a "Dollar functional business" Centamin has been largely insulated from many of these pressures.

We recognise the importance of the Sukari Gold Mine and our exploration blocks to our host nation, Egypt. Through Royalties and profit share payments we have returned US$139m to the government in 2023 while indirectly contributing US$686m through employment and local procurement. The Sukari mine is an important employer within Egypt with over 4,400 jobs at the mine site through direct and contractor employment. 

Given mining's current and potential contribution to the broader Egyptian economy, I am pleased to note that the modernisation of the Egyptian mining industry continued during 2023, with an in-principle agreement around the terms of a new Model Mining Exploitation Agreement (MMEA) with EMRA and the Ministry of Petroleum & Natural Resources. The successful completion of two years of negotiation between an industry group and the government lays the foundation for a balanced economic outcome between state and industry that sits within a robust development framework that is in-line with international practices. The new MMEA unlocks untapped potential of the Arabian Nubian Shield in Egypt and we have been able to leverage off our previous success at Sukari to be one of the first movers in Egypt's Eastern Desert and despite only starting drilling in 2023, we have already enjoyed drilling success which we will build on in 2024.

Sukari Gold Mine

We view safety performance as a good proxy for management capability - 2023 saw continued improvement with only a single LTI recorded within the period and an improvement across LTIRF and TRIFR metrics relative to the three year trailing average. Following an ISO audit we are pleased to have been certified for ISO 45001 Occupational Health and Safety management systems, giving external validation to the strength of our safety systems and processes and external validation of the work completed by the team at Sukari over the last few years.

Our work on sustainability continued with a focus on defining and delivering our decarbonisation roadmap, staffing across gender diversification, training and management promotion. We also developed a roadmap for Global Industry Standard on Tailings Management ("GISTM") conformance with the Engineer of Record (Epoch) to manage our tailings facilities - targeting conformance by 2025 for SGM across the TSFs we operate.

This year was the first full year that Sukari benefited from the cost savings and decarbonisation impact of the 30MWAC solar plant commissioned in 2022. The facility achieved design specifications in terms of reduction in diesel consumption and hence carbon abatement and it is pleasing to see that we are already delivering into our carbon reduction targets.  Given the success of this facility we are assessing the solar expansion project which would provide further cost and decarbonisation benefits by generating all our power requirements from full solar power during daylight hours.  In parallel our grid connection project offers further carbon abatement and significant cost benefits following the planned implementation in 2025 with the aim of displacing diesel completely from power generation at Sukari on a combined basis.

2023 saw the publication of the updated Life of Mine Plan ("LoM plan") which confirms Sukari's status as a Tier 1 asset based on the forecast production and cost profile over the next decade of operations. We have demonstrated a fully engineered plan that sees production return to 500,000 ounces per year, costs in the lower half of the industry cost curve and a mine life in excess of ten years. The plan is centred around the lowering of operating risk through the use of improved data and technical understanding, underpinning a more robust planning process that incorporates operational contingency to address unforeseen issues that arise from time to time.

Despite the excellent progress already made, we are continually searching for continuous improvement opportunities. We have already identified areas to refine and improve this plan. During 2024 we will continue to investigate these opportunities and seek further opportunity for growth and optimisation.

In addition to articulating our long term vision for the Sukari mine, we also maintained our focus on delivery into guidance.  Our production was in the lower end of the guidance range which given the unscheduled, preventative maintenance completed in the milling circuit during the third quarter was pleasing and highlighted the contingency in the operating plan.  The focus on cost control and prudent budgeting continued through 2023, enabling us to beat the all-in sustaining cost guidance while we further improved cash flow through capex savings associated with a change in our rebuild strategy alongside some deferrals on project spend.

Since 2020 we have placed a significant focus on our geological understanding of our assets and 2023 saw continued progress delivering Resource and Reserve growth at the operation, driven by underground exploration success and a redesign of the open pit and underground mining areas in the new LoM Plan. 

Operationally, the open pit performed well with the planned waste movement being achieved while the team mined 44% more ore compared to 2022 due to mining in the northerly stage 7 area of the pit which saw significant waste to ore conversion resulting from a lack of drill coverage due to steep terrain - it is not anticipated that this will continue into 2024 or beyond.  The underground achieved the targeted volume growth with one million tonnes of ore hauled to surface by our mining fleet, up from 625,000 tonnes in 2020 when underground mining was carried out by a contractor.  We remain on track to achieve 1.4Mt per annum by 2026 as per the new LoM plan. Despite the unscheduled mill maintenance issue, the processing facility achieved 12Mt milled with metallurgical recoveries at the top end of the targeted performance range which was an excellent outcome.

In respect of our tailings facilities, further progress was made with our work to bring Centamin in line with the requirements of the GISTM and we have developed a roadmap of work streams that will see the company conforming by end-2025 - our facilities are in a good position at this time and the work being completed at Sukari will ensure we continue to work in line with international standards around tailings facilities.

On the workforce front, we continued to make good progress around our gender diversity targets and as 2023 saw a further increase in female employment at the Sukari mine - this initiative is a key priority for the Company and performance in this area is embedded in both our corporate lending facility and management performance metrics relating to remuneration.  While gender diversification lends itself to new employees, it has not come at the cost of our existing workforce - our Employee Development Pathway training programme continued to make good progress since commencement in 2021 and last year we introduced the Leadership Development Pathway focussing on the identification and development of talented individuals and providing a framework for them to reach their full potential. 

Looking forward to 2024, we expect to see continued Resource and Reserve development resulting from our focused geological exploration efforts, maintain our upward trajectory in regards to production growth and retain a focus on cost control to drive improved cash flow through delivering such outcomes as the grid connection and potential solar expansion.

Eastern Desert Exploration ("EDX")

It was a landmark year for our Egyptian exploration activities outside of the Sukari Mining Concession.  In 2020, with the launch of Egypt's EDX bid round and vision for a new modern mining industry, Centamin applied for a number of exploration licences across the Eastern Desert - both adjacent to the Sukari mine and more remote from the operations.  Since being successfully awarded approximately 3,000km² of ground, Centamin has embarked on both field work to generate drill targets while simultaneously working with the government of Egypt and an industry group to finalise the terms of the new model mining exploitation agreement (MMEA).

In mid-2023, negotiations between government and industry were concluded to set out the final terms of a comprehensive legal and fiscal framework applicable to any future discovery in the EDX blocks that compliments the agreed exploration terms finalised in 2021. Following agreement of the terms, the MMEA will be submitted to Parliament for approval as a special law. The MMEA terms represent a balanced and equitable outcome for stakeholders (government / industry / local communities) while providing a robust legal framework in line with the internationally accepted standards required by the industry for the long-term investment horizons associated with mining projects.  It also places Egypt in a competitive position compared to other mining jurisdictions as it seeks to unlock its untapped geological potential.

In parallel with the negotiation process, Centamin continued exploration field work across our portfolio with an initial focus on the areas immediately adjacent to the Sukari mine.

During 2022 and the first half of 2023, a series of drill targets in the Nugrus Block were identified by our team with some eight zones of interest all within 30km of Sukari. H2 2023 saw the mobilisation of an RC rig to undertake an initial 16,216 meter scout drilling campaign across these targets. The results were released in early 2024 showing promise at two of the eight targets - Little Sukari and Um Majal - where potentially commercial zones of mineralisation were identified.

In parallel, soil sampling was completed across the Um Rus block some 50km north of Sukari with the aim of testing geological structures for potential gold mineralisation that could be developed into drill targets.  Late in the year field work commenced at the Nadj block, some 100km north of Sukari with the timing aimed at seeking to work in the cooler winter and spring months ahead of the summer. 

2024 will see an aggressive follow up to the success seen in Nugrus at Little Sukari and Um Majal. Further mapping, IP surveys and an extended drilling campaign are planned to further define the potential of both targets. Work will continue at Um Rus and Nadj blocks with the potential to generate drill targets that can be tested in late 2024 and into 2025, subject to successful outcomes.

CÔTE D'IVOIRE

Doropo

Good progress was achieved across our Côte d'Ivoire portfolio with a specific focus on the advancement of the Doropo project in northern Côte d'Ivoire.  The Pre-Feasibility Study ("PFS") demonstrated a viable project with an attractive scale of gold production at a competitive cost profile in line with capital cost intensity as seen across the region. Based on the PFS outcomes the project currently meets Centamin's hurdles for scale, quality and financial metrics which supported the decision to commence a full Feasibility Study and associated ESIA for Doropo which will be completed in mid-2024.

The development plan is technically simple in terms of robust geology, supporting relatively shallow open pit mining across multiple sites which feed into an industry standard process facility - the main challenge with the project relates to its interaction with and impacts on local communities during the construction and operation phases.

As such, a significant effort has been completed in respect of mapping and understanding the baseline social and environmental setting of the project area and importantly ensuring that this data is utilised in the project design phase to minimise impacts on local communities by following a hierarchy of: Avoid / Minimise / Mitigate / Compensate. This has led to changes in project design to accommodate this strategy and ultimately deliver a more robust outcome for all stakeholders.

The delivery of the Doropo PFS has enabled Centamin to publish our first non-Sukari reserve and has been one of the key drivers of the Company exceeding its stated aim of growing the Group Reserves by more than 3Moz over the three years from 2021 to 2023, having now delivered 3.5Moz of Reserve growth.

Building on the success of the PFS, the Company launched the Definitive Feasibility Study ("DFS") and associated ESIA in mid-2023 with aim of submitting a mining licence application in mid-2024. In parallel, we have started to assess the funding options for the construction phase of Doropo with the aim of reaching a final investment decision point in late 2024 with a fully funded construction package in place alongside the requisite in-country permits required to enable the Board to make an informed decision on the construction phase.

2024 OUTLOOK

In 2024 we look to continue our track record of delivery and building on the platform for growth that has been established by the reinvestment programme at Sukari. We are forecasting increased production of 470,000 to 500,000 ounces and are targeting all-in sustaining costs of US$1,200-1,350 per ounce sold.

This year capex at Sukari will be US$215m, plus US$91m of sustaining deferred stripping reclassified from operating costs. This includes the final phase of contracted waste-stripping programme which is expected to be completed during the middle of the year. Other investments include the grid power connection project, fleet expansion and underground expansion which will combine to support long-term production rates of around 500,000 ounces per year and improved margins.

We will follow up on our initial success at EDX to assess the potential for satellite feed to be trucked to the Sukari mine and complete the Doropo Definitive Feasibility Study. In respect of Government interaction we will look to finalise the MMEA signature and have this ratified by Parliament and progress the work on our 15 year Tax Exemption Renewal for Sukari  to take effect from March 2025.

After a successful year of excellent progress across our portfolio, I would like to thank all our stakeholders who have made this progress possible. From the dedication and hard work of our workforce across our portfolio, through to our host governments and local stakeholders, it is their support and engagement that has enabled us to continue the journey at Centamin across 2023 and set us up for further success into 2024 and beyond. 

Martin Horgan

Chief Executive Officer

FINANCIAL REVIEW

The last three years have been about delivering the bold capital reinvestment plans required to sustain our business and drive both higher production and improved margins for the next decade and beyond.  We exit this reinvestment period with a much improved business which is well set for the future.

The significance of having a tier one asset is evident when faced with economic challenges. Inflation was the one common threat that had an impact across the whole industry in 2023. Despite these pricing pressures and persisting global supply-side issues, our focus was firmly on what we could control. We did this through rigorous planning and disciplined execution on plans, and supported by a robust risk and opportunity assessment to ensure we were always striving to improve.

FINANCIAL PERFORMANCE

Centamin delivered a resilient financial performance that was in line with our expectations and guidance for the year. The Company's strong operational performance throughout the year was supported by the healthy gold price environment, which remained robust in 2023.

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. All of which are external factors of which we need to minimise the impact. We have protected our exposure to the gold price through the gold price protection programme from July 2023 through to June 2024 (240,000 ounces at a $1,900 gold price per ounce) to match the remaining significant capital investment period which ends in H1 2024.

Revenues increased year-on-year by 13% to US$891 million, generated from annual gold sales of 456,625 ounces, up 4%, at an average realised price of US$1,948 per ounce, up 9% year-on-year. A total of 6,915 ounces of unsold gold bullion was held onsite at year end, due to the timing of gold shipments across the year end.

Adjusted EBITDA increased by 25% to US$398 million, at a 45% EBITDA margin, principally driven by;

Profit before tax increased by 14% to US$195 million, due to;

As expected, and in line with our three-year reinvestment plans, Centamin's cash flows and earnings were positively impacted in 2023 by higher gold production and sales, offset by higher costs.

Cashflows

Operational cash flow increased by 21% to US$354 million. Cash flows from investing activities were impacted mainly by gross capital expenditure of US$204 million, predominantly invested in sustaining the long-term production from Sukari.

During 2023 each partner received profit share distributions of US$112 million (2022: US$36 million (EMRA) and US$46 million (Centamin).

In addition to the profit share distributions, Centamin also received cost recovery payments totalling US$45 million from SGM.

Centamin financed growth projects of US$36 million into Sukari, spent US$31 million in greenfield exploration related costs, advancing of our organic growth pipeline at our exploration projects Doropo, EDX and ABC, plus paid for our corporate activities.

COST MANAGEMENT

Our approach to forecasting and stringent cost management meant we were able to counter some of the global inflationary cost pressures last year and delivered costs either below or as stated in our guidance (albeit that the ounce profile was at the lower end of the range).

Continued good progress was made during the year on the cost savings programme. At 31 December 2023 we had extracted US$185 million of sustainable cost savings from the business over the period of the programme. We remain motivated to find further opportunities, initiatives included the solar plant, light weight truck trays, re-ripping of dump leach material and appointment of a new underground drilling contractor.

The most significant future opportunity remains the national grid power tie in. The tender for connection to the national grid was successfully completed, and the Sukari leadership is busy drafting a definitive agreement with the winning bidder, with an estimated energisation date at the beginning of 2025.

Cash costs of production were US$875 per ounce produced, down 4%, reflecting a 5% decrease in total open pit material mined tonnes, and a 2% decrease in tonnes processed, offset by a 36% year on year increase in total underground mined tonnes and a 2% increase in gold ounces produced.

AISC was US$1,205 per ounce sold, down 14%, mainly due to a 63% decrease in other sustaining capital expenditure, partially offset by a 12% increase in royalties on gold sales paid to the Egyptian government, a 36% increase in corporate administration costs which was driven by a number of one off projects. This was also complemented by a 4% increase in gold ounces sold (which was as scheduled and in line with guidance).

FUEL PRICES

Major macroeconomic and geopolitical events influenced the oil price throughout 2023 with rising interest rates and the risks of recessions weighing on oil price demand outlooks.

Oil price is the most significant commodity assumption materially affecting the cost base of our business. The average price realised for the 2023 year was US$0.80 per litre which was below actual spend and what we had budgeted for and resulted in savings of US$15m despite using 2.3 million litres more than budgeted (actual fuel used in 2023 was 165m litres) with majority being used in the underground operations due to increased activity.

Total diesel consumption across the Sukari operation in 2024 is expected to be 160m litres equating to US$145 million at US$0.90/litre. The solar plant performance has resulted in a significant reduction in diesel consumption compared to historical averages, while the mining contractor's diesel consumption is reduced by 50% as the waste mining contract comes to an end by June 2024.

Further fuel savings are expected beyond 2024 with the Grid Connection Project and solar expansion opportunities. Refer to our Decarbonisation Roadmap for more information on the initiatives underway to fully displace the use of diesel oil for power generation at Sukari.

IMPACT OF FOREX

Some of Egypt's more long-standing challenges have intersected with multiple global shocks causing a foreign exchange crisis, historic inflation, and pressures to worsen the already-stretched fiscal and external accounts.

While triggered by the global polycrisis, the rising macroeconomic imbalances in Egypt reflect pre-existing domestic challenges, including the sluggish non-oil exports and FDI, constrained private sector activity and job-creation, as well as the elevated and rising government debt. Egypt's overall macroeconomic environment during FY2023/24 is expected to be undermined by the concurrent global shocks and domestic macroeconomic imbalances and regional instability, before starting to improve over the medium-term as the country continues to push ahead with stabilisation and structural reforms.

The three pillars of Egypt's path forward focus on foreign exchange management, inflation targeting at the central bank, and private sector development / State Owned Enterprises ("SOE") reform. There remain notable opportunities for Egypt to attract foreign capital and investment which will drive much-needed sustainable inflows for a medium-term solution to the current economic imbalances. A significant step forward was made on the reform programme when the Egyptian Pound ("EGP") was free floated on 6 March 2024.

Our business is primarily USD denominated so largely protected against the EGP devaluation, but local supply chain costs and availability of goods becomes challenging. The workforce in Egypt were awarded two sets of increases during 2023 with a 15% increase in January 2023 and a further 30% increase in October 2023. We continue to focus on and manage these challenges as a business to ensure that our EGP component cost base remains well managed (circa 15% of the Group spend) and anticipate that while inflation remains a challenge in the short term, expect it to settle over the longer term.

CAPITALISATION OF OPEN PIT WASTE-STRIPPING

The largest investment in 2023 was on the accelerated waste-stripping (deferred waste-stripping) which added US$90 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$1 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.

Refer to note 2.10 to the financial statements for further information.

STRONG BALANCE SHEET

Centamin closed the 2023 financial year with cash and liquid assets of US$153 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 and funded by Centamin, is recovered over three years, making these investments ideally suited for the structure of the RCF. Due to the strong operational performance supported by the gold price we were able to manage our investments without drawing on the RCF facility during 2023.

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 a key consideration 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 2023, a key focus was on improving operational efficiencies to achieve consistent operational performance with US$88 million spent on sustaining capital expenditure and US$116 million on non-sustaining, or 'growth' capital expenditure.

Impressive progress was made on project delivery as we achieved several further important milestones, most notable the successful implementation of the SAP (S4 HANA) ERP system which will greatly assist in centralising our accounting and internal control systems across the Group and will enable faster and more efficient reporting.

ACCELERATING BUSINESS TRANSFORMATION:

2023 has been pivotal in our ongoing digital transformation journey, marking a significant step in enhancing operational efficiency and financial oversight across our Group. 

The successful implementation of SAP across our key operational areas -finance, procurement, human resources, and maintenance, marks a transformative step in our commitment to operational efficiencies, financial excellence and strategic growth.

Enhanced Financial Oversight

Integrating SAP's financial management solutions has started and will continue to evolve and transform our approach to fiscal operations, centralising financial activities across all our entities, enabling real-time, integrated financial reporting and providing greater transparency and control. This streamlined financial consolidation will facilitate strategic decision-making, particularly in cost management, and is a good foundation for robust financial governance.

Revitalising Procurement and Supply Chain Management

SAP's advanced procurement solutions are expected to significantly enhance our procurement and supply chain management processes. This will lead to increased time and cost efficiencies and strengthened supplier relationships, further bolstering our supply chain resilience and strategic purchasing capabilities.

Human Resources 

The SAP suite has brought a new dimension to our human resources management. By automating and streamlining HR processes, we will enhance employee engagement and efficiency, whilst aligning our workforce strategy with our broader business objectives.

Transforming Maintenance Operations

A notable addition to our SAP integration is through our maintenance teams. The SAP Maintenance module will                improve how we manage and optimise our maintenance activities. This integration ensures more efficient scheduling, tracking, and execution of maintenance tasks, and is expected to significantly reduce downtime and increase operational reliability. The enhanced visibility and control over maintenance operations will improve asset longevity and contribute to overall operational cost savings.

Future Proofing our Business

The strategic implementation of SAP solutions across our diverse operational areas signifies our commitment to leveraging technology for sustainable and scalable growth. This comprehensive digital transformation enhances our day-to-day operations, long-term strategic planning and execution capabilities.

As we move forward, the SAP implementation will continue to support the redefinition of our business processes and will be instrumental in driving our success whilst maintaining our commitment to excellence within our sector.

2023 DIVIDEND

Stakeholder, and specifically shareholder returns, are central to our Company strategy. We have built a ten-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 2023 as the final full year of reset of Sukari, the Board proposes a 2023 final dividend, for the year ended 31 December 2023 of 2.0 US cents per share (circa.US$23 million), bringing the proposed total dividend for 2023 to 4 US cents per share (circa.US$46 million):

The final 2023 dividend is subject to shareholder approval at the AGM on 21 May 2024 and following approval would be paid on 19 June 2024.

MANAGING OUR RISKS AND OPPORTUNITIES

In an unpredictable world, due to increasing macroeconomic and geopolitical pressures, you can see below in the Principal Risks and Uncertainties some of the main areas we consider to enable more effective decision making that supports the delivery of our objectives and improves our performance as a responsible mining company.

OUTLOOK

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 2024 as 2023, 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.

Ross Jerrard

Chief Financial Officer

PRIMARY STATEMENTS HIGHLIGHTS

Revenue from gold and silver sales for the year increased by 13% year-on-year to US$891 million (2022: US$788 million) with the year-on-year average realised gold price also increasing by 9% to US$1,948 per ounce sold (2022: US$1,794 per ounce sold) complimented by a 4% increase in gold ounces sold of 456,625 ounces (2022: 438,638 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 10% year-on-year to US$597 million, mainly as a result of:

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 2023 financial statements have been audited and signed off.

Refer to note 1.2.1.2 in the notes for details of the treatment and disclosure of the EMRA profit share.

CAPITAL EXPENDITURE

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.

EXPLORATION 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$2 million or 6% as more exploration and evaluation work specifically drilling and assaying at the two Côte d'Ivoire sites was done in 2023 as compared to 2022 as well as the expansion of exploration work in the Eastern Desert Exploration area under the new Egypt permit areas. The brownfield capitalised exploration costs on the Sukari Mining Concession area remained flat year on year.

The spend in Burkina Faso was on key services, wind down procedures and other regulatory obligations to formally exit the country. The process to formally exit and wind-up the in country incorporated entities is at an advanced stage. 

SUBSEQUENT EVENTS

As referred to in note 5.3 of the Group Consolidated Financial Statements, subsequent to the year end, the Board proposed a final dividend for 2023 of 2.0 US cents per share. Subject to shareholder approval at the Annual General Meeting on 21 May 2024, the final dividend will be paid on 19 June 2024 to shareholders on record date of 31 May 2024.

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:

Management considers EBITDA a valuable indicator of the Group's ability to generate liquidity by producing operating cash flows 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 under IFRS.

EBITDA excludes the impact of depreciation and amortisation, income from 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 fair value movements on derivative financial instruments, 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:

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 would choose 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, gold and silver sales debtor and financial assets at fair value through profit or loss

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 and financial assets

at fair value through profit or loss:

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)    The comparatives in the Consolidated Statement of Cash Flows for the year ended 31 December 2022 have been restated to reflect an increase of cash generated from operating activities of $2.5m, interest paid of $1.9m and a reduction of the effect of foreign exchange rate changes of $0.6m.

(2)    Adjustments made to free cash flow, for example the cost of the put options under the gold price protection programme, acquisitions and disposals of financial assets at fair value through profit or loss, which are completed through specific allocated available cash reserves.

CORPORATE GOVERNACE UPDATE

The Board understands the benefits of refreshing its composition, committee structures as well as planning for future succession. The changes to the committee structures illustrate the Company's commitment to continue to evolve and strengthen our governance model. 

BOARD APPOINTMENTS, RETIREMENT AND COMMITTEE RESTRUCTURING

The following disclosures are made in accordance with LR 9.6.11:

Committee membership following the AGM:

At the recommendation of the Nomination Committee, the Centamin Board has approved the following planned Committee membership to take effect following the AGM on 21 May 2024:

Following the AGM on 21 May 2024, the Board will be made up of the Chair, Senior Independent Director plus six Non-Executive Directors and two Executive Directors.

PRINCIPAL RISKS AND UNCERTAINTIES

PRINCIPAL RISKS

For the current reporting period we have identified 16 principal risks and 3 emerging risks, which means there is no change from the 2022 Annual Report. Further detail on the Principal Risks which could affect Centamin are shown below with a description of the nature of the risk, mitigation measures and ongoing strategy to manage the risk.

EMERGING RISKS

Emerging risks are defined as circumstances or trends that could significantly impact the Company's financial strength, competitive position or reputation within the next three years or over a longer term. Emerging risks may prove difficult to quantify as they are often influenced by external factors and difficult to predict. Emerging risks are considered as part of the Company's strategic discussions through all levels of the Group.