TIDMCAML
RNS Number : 8826T
Central Asia Metals PLC
30 March 2021
30 March 2021
CENTRAL ASIA METALS PLC
('CAML' or the 'Company')
2020 Full Year Results
Central Asia Metals plc (AIM: CAML) today announces its full
year results for the 12 months ended 31 December 2020.
Financial highlights
-- 2020 final dividend of 8 pence per share (2019: Nil)
o 2020 full year dividend of 14 pence per share (2019: 6.5 pence
per share)
o Represents 57% of 2020 free cash flow(1) ('FCF')
o Payable on 25 May 2021 to shareholders registered on 30 April
2021
-- Group gross revenue[1] of $170.3 million (2019: $180.8 million)
o Group net revenue of $160.1 million (2019: $171.7 million)
-- Group EBITDA 1 of $95.7 million (2019: $108.6 million)
-- EBITDA margin 1 of 56% (2019: 60%)
-- Group profit before tax of $59.8 million (2019: $67.8 million)
-- Sasa C1 zinc equivalent cash cost of $0.50 per pound (2019: $0.47 per pound)
-- Kounrad C1 copper cash cost of $0.51 per pound (2019: $0.52 per pound)
-- EPS from continuing operations of 24.78 cents (2019: 29.36 cents)
-- Group FCF of $58.9 million (2019: $69.8 million)
-- Group net debt1 as at 31 December 2020 of $36.2 million (2019: $80.2 million)
o Cash in the bank as at 31 December 2020 of $47.9 million(2)
(2019: $32.6 million)
o 2020 gross debt repayments of $38.4 million (2019: $38.4
million)
Operational highlights
-- Zero lost time injuries at either Sasa or Kounrad during 2020 (2019: one)
-- Zinc in concentrate production of 23,815 tonnes (2019: 23,369 tonnes)
-- Lead in concentrate production of 29,742 tonnes (2019: 29,201 tonnes)
-- Copper production of 13,855 tonnes (2019: 13,771 tonnes)
2021 outlook
-- Sasa production guidance
o Zinc in concentrate, between 23,000 and 25,000 tonnes
o Lead in concentrate, between 30,000 and 32,000 tonnes
-- Kounrad copper production guidance, between 12,500 and 13,500 tonnes
1 See Financial Review section for definition of non-IFRS
alternative performance measures
2 The cash balance figure disclosed includes restricted cash
balance
Nigel Robinson, Chief Executive Officer, commented:
"I am pleased to report a strong set of operational and
financial results for the 2020 financial year, despite some
challenges. Group EBITDA of $95.7 million at a margin of 56% was a
commendable result given the weak commodity prices endured in
particular during H1 2020 due to the COVID-19 pandemic.
"Costs at both operations were well controlled and, in
particular, our capital expenditure was almost 30% below our
initial guidance due to savings and deferrals made during the year
with a view to conserving cash. We met all of our contractual debt
repayment obligations and ended the year with a robust balance
sheet and $36.2 million of net debt.
"Following this strong performance, we are delighted to propose
an eight pence per share final dividend, equating to a full year
dividend of 14 pence per share. Once the final dividend is paid,
the Company will have returned $209.6 million to its shareholders
in the last nine years. The full year dividend represents 57% of
our 2020 FCF and is therefore above our stated policy of 30% to 50%
of FCF. This demonstrates a strong end to 2020 for us and a
positive start to 2021, particularly in terms of commodity
prices.
"While the tailings storage facility 4 ('TSF4') leakage at Sasa
was a notable negative for us, we dealt with this incident swiftly,
appropriately and transparently. By the end of 2020, we had removed
from the river an estimated 95% of the tailings that had spilled
and our procedures to remove the remaining 5%, as well as focus on
biodiversity and regeneration, are well advanced. We have also
committed to develop a 'Youth Park' along the banks of the river
during 2021, which will see us build walking trails, plant trees
and flowerbeds, as well as construct fountains, a pagoda and a
children's play area as a fitting community project following this
incident.
"We have continued our focus on other sustainability aspects,
and we are on track to publish our second Sustainability Report in
Q2 2021, our first to the Global Reporting Initiative ('GRI')
standards (Core option).
"We move into 2021 in a strong position with significantly
improved commodity prices, producing the base metals which are
essential for modern living, profitably and in a safe and
sustainable environment for all our stakeholders."
Analyst conference call and webcast
A live conference call and webcast hosted by Nigel Robinson
(Chief Executive Officer) and Gavin Ferrar (Chief Financial
Officer) will take place at 09:30 (BST) on Tuesday 30 March 2021.
The conference call can be accessed by dialling +44 (0) 330 336
9125 and quoting the confirmation code '8750617', and the webcast
can be accessed using the link: https://brrmedia.news/l37jm. The
presentation will be available on the Company's website and there
will be a replay of the call available following the presentation
at https://www.centralasiametals.com.
For further information contact:
Central Asia Metals Tel: +44 (0) 20 7898 9001
Nigel Robinson, CEO
Gavin Ferrar, CFO
Louise Wrathall, Director of Corporate louise.wrathall@centralasiametals.com
Relations
Peel Hunt (Nominated Advisor and Tel: +44 (0) 20 7418 8900
Joint Broker)
Ross Allister
David McKeown
BMO Capital Markets (Joint Broker) Tel: +44 (0) 20 7236 1010
Thomas Rider
Pascal Lussier Duquette
Blytheweigh (PR Advisors) Tel: +44 (0) 20 7138 3204
Tim Blythe
Megan Ray
Rachael Brooks
Note to editors:
Central Asia Metals, an AIM-listed UK company based in London,
owns 100% of the Kounrad SX-EW copper project in central Kazakhstan
and 100% of the Sasa zinc-lead mine in North Macedonia.
For further information, please visit www.centralasiametals.com
and follow CAML on Twitter at @CamlMetals and on LinkedIn at
Central Asia Metals Plc
Chairman's statement
I am pleased that we ended the year in a strong position.
COVID-19 remains a very real risk for us all, but we believe we
navigated these challenges as best as we could during 2020 and
this, coupled with much improved H2 2020 metals prices, meant we
ended the period with commendable financial results and a strong
balance sheet.
2020
Despite the challenges of 2020, not least the weak H1 2020
commodity prices, we reported strong production from our
operations, which led to CAML EBITDA of $95.7 million and free cash
flow of $58.9 million. This has, in turn, meant we continued to
deleverage, and we ended the year with gross debt of $80.4 million,
some $28.4 million lower than 2019.
LOOKING BACK OVER A SUCCESSFUL DECADE AS AN AIM-LISTED
COMPANY
We reached two significant milestones in 2020. In April, we
produced our 100,000(th) tonne of copper cathode from Kounrad. This
achievement was made possible due to the long-term dedication of
General Director, Pavel Semenchenko, and his team, as well as
Technical Director, Howard Nicholson, who took overall
responsibility for the project's construction on time and below
budget and who remains responsible for the technical aspects of
Kounrad. We are proud that this copper has been produced from what
was waste material, and at costs that are amongst the lowest in the
world.
September 2020 marked 10 years as an AIM-listed company for CAML
and we have enjoyed a very successful decade. We have grown our
business from an exploration and development company with a suite
of assets in central Asia at the time of listing, to a focused
mining company, producing base metals which are essential for
modern living, profitably and in a safe and sustainable environment
for all our stakeholders.
We now employ over 1,000 people in Kazakhstan and North
Macedonia and in 2020 produced some 13,855 tonnes of copper, 23,815
tonnes of zinc and 29,742 tonnes of lead with an annual gross
revenue of $170.3 million from our two projects. Our local
suppliers are important to us, and many others in the local
communities also depend on our operations for their livelihoods. We
have a strong health and safety ethos and our operations have
leading safety statistics. We are most proud to have now set up
charitable foundations in both countries with clear mandates to
support sustainable and long-term development around both of our
operations. In the nine years since we commenced copper production
at Kounrad, we will soon have returned to our supportive
shareholders almost $210 million in dividends. We believe that our
alignment with our shareholders as well as other stakeholders in
this regard sets us apart from many of our peers.
SUSTAINABILITY
We have continued to devote much of our time and energy to
advancing our ESG and sustainability efforts during 2020. In Q2
2020, we published our first Sustainability Report, detailing our
efforts and achievements in this key area, and this was very well
received.
We advanced our approach in 2020, as we retained independent
consultants, ERM, to undertake a stakeholder engagement exercise to
revisit our material topics as previously defined by our desk-based
assessment in 2019.
We were reassured to conclude that we had been focusing on the
areas that are most important to our internal and external
stakeholders and, crucially, we believe this additional analysis
has given us the depth of understanding to align our next
Sustainability report, which will be published in Q2 2021, to the
Global Reporting Initiative's ('GRI') Core Standards.
Our September 2020 tailings storage facility 4 ('TSF4') leakage
was a big disappointment for us and we have since made operational,
monitoring and personnel changes at Sasa to try to ensure that this
never happens again. I was, however, impressed with how the team
dealt with this issue. We have been transparent and open with all
of our stakeholders and we appointed the best consultants in their
fields to help us with the tailings dam and the associated river
remediation programme. Our CEO, Nigel Robinson, spent the majority
of Q4 2020 in North Macedonia and held many meetings with local and
national government officials in conjunction with the Sasa team to
ensure our relationships in North Macedonia remain as strong now as
they were before the incident.
GOVERNANCE
Non-Executive Directors Nigel Hurst-Brown and Robert Cathery
have informed me that they plan to leave the CAML Board during
2021. I am delighted that Mike Prentis has agreed to join the CAML
Board as an Independent Non-Executive Director, effective from 31
March 2021. Formerly a fund manager with BlackRock, Mike brings to
the Board over 35 years of investment and capital markets
experience and will be a great addition to the Group. Mike will
join the Audit, Sustainability and Nomination Committees.
Since the escalation of the COVID-19 pandemic in March 2020, we
have held weekly CAML Board gatherings as we felt that it was
important to provide hands-on guidance and support to the Executive
Directors and senior management team in what has arguably been the
most unusual period in recent history. I believe that we have
navigated this virus (and the unfortunate TSF4 incident) as well as
possible and we look forward to a brighter 2021 with various
vaccine programmes now being implemented.
ACKNOWLEDGEMENTS
I would like to thank the Board of Directors, our senior
management team and all of our employees for their dedication to
our business during 2020, in what was a particularly challenging
year globally. Your efforts do not go unnoticed, and we very much
appreciate your hard work.
CEO's statement
We ended 2020 in a strong position, having overcome a number of
difficulties during the year, in particular the impact of the
COVID-19 pandemic. With zero LTIs at both of our operations, we met
our increased production guidance at Kounrad and, at Sasa, we
achieved our zinc guidance and came within 1% of our lead guidance,
despite the TSF4 related shut-downs.
2020 OVERVIEW
Sasa produced 23,815 tonnes of zinc in concentrate and 29,742
tonnes of lead in concentrate at a C1 zinc equivalent cash cost of
production of $0.50 per pound. While these costs are above previous
years, this is largely due to increased treatment charges globally
as on-site costs remained low.
Our Kounrad operations continued to perform well, delivering
copper cathode output within the increased production guidance
range of 13,855 tonnes. Kounrad's 2020 C1 copper cash cost of
production remained extremely low by global standards at $0.51 per
pound.
Despite the challenges of COVID-19 and weak H1 2020 metal
prices, demand for copper, zinc and lead improved materially in H2
2020 and that, combined with our robust production, led to us
reporting gross revenue of $170.3 million. 2020 EBITDA was $95.7
million, with an EBITDA margin of 56%.
We have continued to deleverage during 2020, having repaid a
further $38.4 million of corporate debt, ending the year in a net
debt position of $36.2 million, with cash in the bank of $47.9
million (including restricted cash). We view this as significant
progress given that CAML had debt of almost $200 million on
acquiring Sasa in November 2017.
The Group generated 2020 free cash flow of $58.9 million,
enabling us to recommend an eight pence per share final dividend.
This equates to a full-year dividend of 14 pence per share, which
represents 57% of 2020 free cash flow.
SUSTAINABILITY
This strong operational and financial performance underpins our
business and we place significant emphasis on ensuring that we are
sustainable for all stakeholders. To demonstrate our efforts and
achievements in this area, we will soon be publishing our second
Sustainability Report, our first to GRI standards, which will
provide qualitative and quantitative data to support material
sustainability topic areas for us and our external
stakeholders.
We remain focused on safety and are pleased to report an
excellent year with zero LTIs at either of our operations during
2020. We therefore report a 2020 LTIFR of 0.00, a marked
improvement on the LTIFR of 0.42 that we reported in 2019. By the
end of 2020, there had been 959 days since the last LTI at Kounrad
and 702 days since the last LTI at Sasa. Effective safety training
and supervision for our employees will always be a priority and are
crucial to maintaining this positive trend into 2021.
We were disappointed to report a leakage at our TSF4 in
September 2020. However, under the guidance of global tailings
experts, Knight Piésold, we were able to swiftly repair the
facility and make some engineering, operational and monitoring
improvements for the future stability of the dam. Most importantly,
we managed to maintain our strong government and local community
relationships through our transparent and open approach to this
issue, as well as our efforts in remediating the river.
It is estimated that, by 31 December 2020, in excess of 95% of
the tailings deposited during the leakage had been removed from the
river. Efforts to remove the remaining tailings will continue into
2021, with the necessary sediment traps already in place and
collecting material. Biodiversity efforts can now accelerate in
2021, with revegetation and tree planting activities to be
undertaken along the riverbanks, as well as the long-term
monitoring of algae and macro-invertebrate regeneration.
During 2020, we spent $0.5 million at Sasa and Kounrad,
supporting the local communities and our host countries nationally
as we played our part in helping to mitigate the negative health
impacts of the COVID-19 pandemic. 60% of our community support
budget was spent on COVID-19 related expenditure. In Kazakhstan,
our Kounrad Foundation charity purchased a polymerase chain
reaction ('PCR') machine for Balkhash Central Hospital to ensure
timely virus testing for the local population. In North Macedonia,
Sasa donated $166,000 to provide support for hospitals
(approximately 50% of funds), as well as providing help for the
most vulnerable in the local community and contributing to the
Government's Ministry of Health COVID-19 fund.
Supporting our local communities in general is a vital aspect of
what we do in the areas close to the operations and, as a result,
we enjoy good relations with our neighbours, and we believe we have
brought some real, positive change. We established the Kounrad
Foundation for charitable donations in 2018 and have recently
completed the formation of a similar Sasa Foundation.
SASA
At Sasa, in addition to our efforts in broadly achieving our
production goals despite TSF4 related production stoppages, we also
completed our Life of Mine studies, the findings of which were
announced with our interim results in September 2020. The Board
recommends the transition of Sasa's Svinja Reka orebody from the
current sub-level caving method to cut and fill stoping as this
will not only result in maximum recovery of mineral resources but
will also enable safer operating practices as well as longer-term
improvements to tailings disposal. Implementation of the Cut and
Fill Project has commenced, and a dedicated Capital Projects Team
formed to ensure the delivery of this project.
KOUNRAD
During the year at Kounrad, leaching operations performed well,
as did the SX-EW processing facilities which achieved availability
of over 99%. We continued to develop more of the Western Dumps for
future leaching operations, while focusing on maximising copper
extraction in the Eastern Dumps. Capital expenditure remained very
low at $1.3 million, comprising some replacement anodes, plus
increasing our footprint of leaching infrastructure and collector
trenches around the Western Dumps.
MARKET PERFORMANCE
During 2020, the CAML share price closed on 31 December 2020 at
GBP2.40, which represents a 9% increase on the 31 December 2019
closing price of GBP2.20. However, since the COVID-19 related share
price low of GBP1.14 in March 2020, CAML shares appreciated by over
100% to the end of the year.
OUTLOOK
The outlook for 2021 is positive, and we look forward to the
year ahead producing the base metals essential for modern living,
for all stakeholders, in a safe and sustainable manner.
While we remain in the midst of the COVID-19 pandemic, we have
gained confidence over the last 12 months in the measures we have
put in place to try to manage, as best we can, infection rates on
our sites. We no longer currently fear the forced shutdown or force
majeures that we believed possible last year, and the 2021 roll-out
of vaccine programmes around the world should soon result in a
marked improvement in the health of the global population. Despite
the COVID-19 impact, the Group did not access any financial support
throughout the pandemic from the UK Government.
We start 2021 in a strong base metal price environment, with
improving treatment charges and increased demand for the metals we
produce. Our production guidance for Sasa is 825,000 to 850,000
tonnes of ore, which should lead to between 23,000 and 25,000
tonnes of zinc in concentrate and between 30,000 and 32,000 tonnes
of lead in concentrate. At Kounrad, we expect to produce between
12,500 and 13,500 tonnes of copper.
Our focus at Sasa during 2021 and 2022 will be implementing the
Cut and Fill Project. We now expect 2021 capital expenditure of
$22-23 million, higher than previously guided in the H1 2020
results announcement. This adjustment is due to an additional $2-3
million in sustaining capital expenditure deferred from 2020 as
well as a decision taken to bring forward from 2022 $4-5 million of
project capital expenditure due to the current strong commodity
prices. We are progressing well and look forward to implementing
this project which will see us extract the maximum resources in a
safe, sustainable and efficient manner.
Operations review
Sasa
While 2020 has been dominated with the challenges of COVID-19
and the TSF4 issue, the mine has delivered strong production, good
cost control and has commenced implementation of the Cut and Fill
Project.
ZINC AND LEAD PRODUCTION AND SALES
2020 mined and processed ore was 826,421 tonnes and 820,215
tonnes respectively. The average head grades were 3.37% zinc and
3.85% lead. The average metallurgical recoveries were 86.1% for
zinc and 94.3% for lead.
Sasa produces a zinc concentrate and a separate lead
concentrate. In 2020, Sasa produced 47,583 tonnes of zinc
concentrate at an average grade of 50.0% and 41,289 tonnes of lead
concentrate at an average grade of 72.0%.
Units 2020 2019 2018
Ore mined t 826,421 817,714 803,101
--------- -------- -------- --------
Plant feed t 820,215 820,491 804,749
--------- -------- -------- --------
Zinc grade % 3.37 3.29 3.31
--------- -------- -------- --------
Zinc recovery % 86.1 86.5 84.6
--------- -------- -------- --------
Lead grade % 3.85 3.77 3.90
--------- -------- -------- --------
Lead recovery % 94.3 94.5 93.6
--------- -------- -------- --------
Zinc concentrate t (dry) 47,583 47,104 46,128
--------- -------- -------- --------
* Grade % 50.0 49.6 48.9
--------- -------- -------- --------
* Contained zinc t 23,815 23,369 22,532
--------- -------- -------- --------
Lead concentrate t (dry) 41,289 40,366 40,317
--------- -------- -------- --------
* Grade % 72.0 72.3 72.9
--------- -------- -------- --------
* Contained lead t 29,742 29,201 29,388
--------- -------- -------- --------
Sasa typically receives from smelters approximately 84% of the
value of its zinc in concentrate and approximately 95% of the value
of its lead in concentrate. Accordingly, 2020 payable production
was 20,008 tonnes of zinc and 28,254 tonnes of lead.
Payable base metal in concentrate sales from Sasa were 19,930
tonnes of zinc and 28,218 tonnes of lead. During 2020 Sasa sold
341,633 ounces of payable silver to Osisko Gold Royalties in
accordance with its streaming agreement.
MINING
A total of 826,421 tonnes of ore were mined using the sub-level
caving method during the year from the 990m and 910m working areas,
representing record underground production. The ore from the
underground operations is trucked to surface via the XIVb ramp
(30%) and hoisted via the Golema Reka shaft (70%).
Total ore development during the year totalled 3,047 metres at
an average combined grade of 7.22% zinc and lead. Waste development
for the year totalled 1,869 metres for 56,977 tonnes of waste,
providing internal ramp access and crosscuts to the mining areas
below the 910m level. A total of 198 metres of vertical development
was completed during the year, providing internal passes and
ventilation raises.
Six new underground machines were purchased during the year
(three loaders, two boomer drill rigs and one truck) following a
review of the equipment and optimisation initiatives. During the
year, a total of six boomers were equipped with telescopic drifters
enabling mechanised 'in-cycle' support, eliminating the need for
hand-held jack leg machines.
Remote loading and charging systems were introduced during the
year, utilising a line of site remote control system on two of the
ST7 loaders and the introduction of the Can Blast explosive loading
system for charging production holes.
Underground communications were installed during the year and
included:
-- NewTrax equipment monitoring system, which enables more
efficient analysis of utilisation and availability
-- Battery backup in the event of power loss
-- Bluetooth receivers
-- CCTV cameras with recording capability were installed at key locations
-- The IT team also commenced installation of a fibre network
underground as well as 5GHz 802.11ac Wi-Fi access points
throughout
PROCESSING
Despite periods of reduced personnel due to COVID-19, the Sasa
processing facility processed a total of 820,215 tonnes of ore
during the year with an availability of 96.3% (2019: 94.7%).
Commissioning of the tertiary crusher was completed in January
2020 and, since then, the crusher has operated well, producing a
finer product size that will enable the grinding circuit to reach a
capacity of 850,000 tonnes per year going forward.
The metallurgy team also reinstated a regrind mill for the lead
circuit and this, coupled with minor changes in control philosophy
has also aided recoveries.
Sasa's metallurgical laboratory has now been operating
successfully for one year and has provided valuable support in
optimising lead and zinc recoveries.
EXPLORATION
During 2020, CAML undertook diamond drilling at both Svinja
Reka, the location of current Sasa mining operations, and Kozja
Reka, which was mined between 1966 and 1989, and from where 3.2
million tonnes of ore at a combined zinc and lead grade of 10.5%
was extracted. A total of 4,268 metres were drilled at Svinja Reka,
with the aim of verifying previous exploration programmes and
converting a portion of the Inferred Mineral Resources into the
Indicated category.
Following the completion of the Svinja Reka infill drilling
programme between the 830 and 750 levels and interpretation of the
results, a Mineral Resource Estimate was completed at the end of
June 2020 and a total of 710,367 tonnes of Inferred Resources were
converted to Indicated Resources.
A total of 2,528 metres were drilled at Kozja Reka to explore
the potential mineralisation below the 830 level. The drilling
programme will continue in 2021, and, while mineralisation has been
intersected, it is not expected that the findings of this initial
programme will as yet form part of a Mineral Resource Estimate as
additional work would be required.
There were no exploration activities at Golema Reka during
2020.
2021 PRODUCTION GUIDANCE
The 2021 production guidance for Sasa is for a mining rate of
between 825,000 and 850,000 tonnes, resulting in metal output of
between 23,000 and 25,000 tonnes of zinc and between 30,000 and
32,000 tonnes of lead in concentrate.
CUT AND FILL PROJECT
Overview
During the year, CAML completed its technical and financial
analysis and the Board agreed to transition the Svinja Reka
operations at Sasa from the current sub-level caving mining method
to cut and fill stoping.
The cut and fill mining method involves filling mined voids with
a backfill paste material containing tailings to provide support,
rather than allowing the roof to cave as is the case with the
current sub-level caving method. In order to achieve this, a
backfill plant will be constructed, along with associated
reticulation pipework to transport this material underground. This
is then distributed underground to fill stopes.
Given that a major component of the backfill material will be
tailings generated from the Sasa processing plant, it is estimated
that in excess of 40% of Svinja Reka's life of mine tailings will
be stored underground. Approximately 30% of tailings will be stored
in the current TSF4, and CAML is advancing studies with a view to
dry-stacking the remainder and therefore eliminating the need to
construct further tailings dams in the future.
In order to ensure efficient underground operations for the long
term, a new decline will be developed from surface. The development
of this decline, which was mentioned at the time of the H1 2020
results, has subsequently been approved by the Board. The decline
will be larger than the current access route and would offer
increased ventilation, easier access for reticulation
infrastructure and the ability to increase ore production to
900,000 tonnes per year in the medium term, while removing the
'double handling' aspect of the tracked, shaft haulage and conveyor
configuration of the current 830 haulage level. This will become
particularly important once mining operations progress to below the
830 level.
A Capital Projects team has been formed at Sasa to ensure
appropriate focus on this key project and ensure delivery.
Production profile
Cut and fill stoping will commence in H2 2022, with
approximately 90% of ore being extracted using this method by 2024,
by which point an underground production rate of 900,000 tonnes
should be achieved. Production guidance should be maintained at
current levels throughout the construction period. In order to
increase plant throughput to 900,000 tonnes, modifications will be
made to the processing facilities. Specific options are still being
considered, with a likely approach being to add another smaller
mill as well as additional flotation capacity.
Operating and capital costs
It is expected that operating costs will increase minimally,
primarily as a result of the paste component of the operation,
involving thickening of tailings, creation of paste and
reticulation of the backfill product into the mined stopes. Once
the ramp-up period commences in 2023, total site-based costs on a
per tonne basis are likely to be in the order of 5% higher than
that achieved in 2019.
In 2021 and 2022, project capital expenditure required to
transition the mine is expected to be $18-19 million.
Kounrad
The Kounrad team was proud to meet safety, cost and increased
production targets despite the impacts that COVID-19 had on
restricting personnel interactions for health measures.
Additionally, the team was congratulated on achieving a significant
milestone on 18 April 2020, when Kounrad's 100,000(th) tonne of
copper was harvested.
2020 CATHODE PRODUCTION
During the year, the SX-EW plant produced 13,855 tonnes of
copper cathode, a slight increase from the previous year of 13,771
tonnes. Total Kounrad copper production since operations commenced
in April 2012 is now 110,100 tonnes, averaging over 1,058 tonnes
per month since start-up.
During 2020, copper was leached from the Eastern and Western
Dumps, with both areas performing in line with forecasts. This
combined approach will continue into 2021, and from the end of that
year onwards, the contribution from the Eastern Dumps will decline
to approximately 20-25% of total output. Winter leaching of the
Eastern Dumps was suspended in early December 2020 and will restart
in April 2021 and, over the 2020/2021 winter period, copper
production will be generated solely from the Western Dumps.
LEACHING OPERATIONS
Both the Eastern and Western Dumps were simultaneously leached
during 2020, with the production split being 39% and 61%
respectively. As well as leaching copper from the few remaining
un-leached cells in the Eastern Dumps, the team also focused on
irrigating previously leached blocks in order to maximise the
recovery of copper. This technique was implemented on various
blocks that had been allowed to rest for periods of, in some cases,
almost two years. During this rest period, bacterial and chemical
activity continued to solubilise copper mineralisation and this
approach worked extremely well, resulting in total 2020 output from
the Eastern Dumps of 5,355 tonnes. This takes the total quantity of
copper recovered from this resource area, since operations
commenced, to 77,731 tonnes or c.96% of that initially forecast at
the time of the IPO. Typically, the daily average area under
irrigation at the Eastern Dumps during the year was 28
hectares.
This approach of leaching and rotating around all the old,
rested blocks will be undertaken going forward with at least a 0.4
grammes per litre copper pick-up being maintained for eight months
each year.
During Q1 2021, an additional heavy-duty bulldozer will be
purchased, which will be utilised in pushing down the Eastern
inter-dump side walls and ripping the surface of the original
access roads, after which irrigation piping will be laid. The
Company estimates that these currently difficult-to-irrigate areas
contain additional quantities of recoverable copper, from which we
anticipate an extra 3,000 to 4,000 tonnes of copper in the years
between 2021 and 2024. At the Western Dumps, the focus of
irrigation remained on parts of Dump 16 and Dump 22 within the
initial leach area ('ILA'). During 2020, 8,729 tonnes of copper
were recovered from these areas, contributing approximately 63% of
the total Kounrad copper production. The average daily area under
irrigation on the Western Dumps was 33 hectares of both fresh and
previously leached material.
With both dump areas simultaneously under active irrigation, the
volume of raffinate pumped around the site averaged 1,334 cubic
metres per hour ('m(3) /hr') versus 1,329 m(3) /hr in 2019. During
the summer period, a proportion of the off-flow solutions from the
Eastern Dumps was recycled across to the Western Dumps with the aim
of maintaining broadly stable pregnant leach solution ('PLS')
grades to the SX plant. This technique operated successfully and
will be continued in 2021, as and when appropriate.
Given the planned switch to almost all leaching from the Western
Dumps by 2024, engineering studies have been finalised to implement
a split irrigation and solution collection system to allow the
operation of an Intermediate Leach System ('ILS'), which should
result in an increase in the copper grade of the PLS. Capital has
been allocated to the first phase of this project in 2021, which
will involve the installation of over 14 kilometres of water
delivery pipeline and associated pumps. During 2022, the second
phase will be completed in readiness for operations from Spring
2023 onwards. This involves the construction of various collection
ponds and the installation of the top of the dump distribution and
irrigation system.
Application rates of solution to the dumps were maintained at
approximately 2.25 litres per square metre per hour ('l/m(2) /hr')
throughout the year. Direct field experience has confirmed that
materials in Dump 1A require a lower application rate of
approximately 1.5l/m(2) /hr to achieve optimum solution
penetration. Additionally, during 2021, a large-scale field test
will be conducted with a low application rate of between 1.0 to
1.5l/m(2) /hr on Dump 2, in order to assess the potential
exploitation of this fine and clay-rich material.
Significant levelling and shaping earthworks were undertaken for
six months on Dump 21 in readiness for leaching starting in the
Spring of 2021.
CAML's external metallurgical consultant, PCMETS, continued with
its valuable technical oversight of the operation. With three and a
half years of direct field data for analysis, it has been possible
to confirm that leaching of the Western Dumps is materially in line
with our original expectations. This data confirms the necessity of
the ILS approach to the leaching cycle, coupled with the use of
'rest' periods as successfully proven at the Eastern Dumps.
SX-EW PLANT
The SX-EW plant continued to operate efficiently during 2020 and
the overall operational availability throughout the year was in
line with expectations at 99.5%.
With the average Western Dumps copper grade of around 0.1%, the
average PLS grade for the year was 2.10gpl, approximately 3% less
than in 2019. To off-set this reduction the volume of PLS treated
through the SX circuit averaged 1,084m(3) /hr, compared to 985m(3)
/hr achieved in 2019.
While the increased levels of iron in the Western Dumps
generally has a positive impact on leaching, as previously
mentioned, the impact of this increased iron typically causes a
reduction in the current efficiency of the plating process. At an
average of 8.75gpl of iron in the rich electrolyte, compared to
7.37gpl in 2019, power consumed per tonne of copper plated
increased by 6% to 4,045 kWh per tonne.
During Q2 2020, 1,567 anodes were renewed in the EW1 building,
with a further 415 pieces arriving in December for scheduled
replacement in Q1 2021. A further 750 pieces will be ordered for
replacement in the EW2 building during Q3 2021.
An extra 75m(3) capacity tank was delivered to site in late
December to enhance on-site storage capability for Escaid, which is
a crucial reagent for the process.
The focus for the operations team has been on continued safe,
efficient plant operations and the tight control of all operating
costs.
COPPER SALES
Throughout the year, the quality of CAML's copper cathode
product has once again been maintained at high levels both
chemically and visually and there have been no negative quality
claims. Regular in-house and independent metallurgical analyses
have consistently reported 2020 copper purity of around 99.998%.
The Company continues to sell the majority of copper production
through its off-take arrangements with Traxys, the terms of which
are fixed until October 2022.
2021 PRODUCTION GUIDANCE
The 2021 guidance for Kounrad's copper cathode production
remains between 12,500 and 13,500 tonnes.
Financial Review
CAML is pleased to report a strong set of financial results,
which demonstrate a strong operational performance and effective
cost control. However, the results reflect weak zinc and lead
prices, particularly during H1 2020, due to the COVID-19 pandemic,
with gross revenue and EBITDA lower than the prior year.
Overview
The Group generated 2020 EBITDA of $95.7 million (2019: $108.6
million), representing a decrease of 12% from the prior year due to
the decline in commodity prices and an increase in Sasa's
concentrate treatment charges. The EBITDA margin however remained
strong at 56% (2019: 60%) which, given the global conditions,
reflects the Group's ability to maintain low costs across the
operations.
Earnings per share ('EPS') from continuing operations was 24.78
cents (2019: 29.36 cents), 16% lower than the previous year.
CAML generated $58.9 million (2019: $69.8 million) of free cash
flow. The Group has continued to deleverage, having repaid debt of
$38.4 million during the year (2019: $38.4 million). As at 31
December 2020, drawn overdraft facilities totalled $9.7 million
(2019: $0.9 million) resulting in net debt of $36.2 million (2019:
$80.2 million).
Sasa's 2020 EBITDA was $42.3 million (2019: $59.6 million), with
a margin of 51% (2019: 60%). Whilst sales volumes for both zinc and
lead were higher during 2020 compared to 2019, zinc and lead prices
declined during 2020 and treatment charges increased. Continued
cost control has ensured that the mine continues to operate at
approximately the 25th percentile of global producers on a C1 zinc
equivalent cash cost basis.
Kounrad's EBITDA was $65.5 million (2019: $61.7 million), with a
margin of 75% (2019: 76%). EBITDA increased year on year due to an
increase in the average copper price received, effective cost
control and a weakening of the local currency during the year. This
enabled the operation to continue producing copper at costs well
within the lowest industry quartile.
Income statement
Group profit before tax from continuing operations decreased by
12% to $59.8 million (2019: $67.8 million). This was primarily as a
result of reduced revenue due to lower zinc and lead commodity
prices and increased treatment charges, as low costs of production
were maintained.
Revenue
CAML generated 2020 gross revenue of $170.3 million (2019:
$180.8 million), which is reported after deduction of treatment
charges, but before deduction of offtake buyer's fees and silver
purchases for the silver stream. Net revenue after these deductions
was $ 160.1 million (2019: $171.7 million).
Sasa
A total of 19,930 tonnes (2019: 19,697 tonnes) of payable zinc
in concentrate and 28,218 tonnes (2019: 27,875 tonnes) of payable
lead in concentrate were sold during 2020.
The zinc price achieved declined by 10% to an average of $2,253
per tonne (2019: $2,497 per tonne) and, for lead, the price
achieved also declined by 10% to an average of $1,791 per tonne
(2019: $2,001 per tonne), leading to a reduction in gross revenue
generated from the mine. Revenue also declined due to higher
treatment charges during the year of $22.2 million (2019: $13.6
million). Sasa generated 2020 gross revenue of $82.7 million (2019:
$99.1 million). During 2020 the offtake buyer's fee for Sasa was
$0.9 million (2019: $1.1 million).
Zinc and lead concentrate sales agreements have been arranged
with Traxys through to 31 December 2022 for 100% of Sasa
production. During 2020, additional smelters were identified in
China and South Korea to diversify CAML's customer base. Through
these concentrate sales to new smelters, Sasa is benefitting from
reduced treatment charges. However, Group selling and distribution
costs increased to $2.6 million (2019: $1.8 million) reflecting the
increased international shipping costs.
Sasa has an existing silver streaming agreement with Osisko Gold
Royalties whereby Sasa receives approximately $6 per ounce from its
silver production for the life of the mine.
Kounrad
A total of 13,763 tonnes (2019: 13,100 tonnes) of copper cathode
from Kounrad were sold as part of the Company's offtake arrangement
with Traxys which has been fixed through to October 2022. The
commitment is for a minimum of 95% of Kounrad's annual production.
A further 97 tonnes (2019: 500 tonnes) were sold locally, a
reduction from the prior year due to lower local demand as a result
of COVID-19. Total Kounrad copper sales were 13,860 tonnes (2019:
13,600 tonnes).
Revenue increased due to both higher sales volumes when compared
to 2019 and a 4% increase in the average copper price received,
which was $6,267 per tonne in 2020 (2019: $6,011 per tonne). This
generated gross revenue for Kounrad of $87.7 million (2019: $81.7
million). During 2020, the offtaker's fee for Kounrad was $2.5
million (2019: $2.4 million).
2021 hedging
Given the increased capital expenditure required to deliver the
Sasa Cut and Fill Project, CAML has subsequent to year end, put in
place hedging arrangements for a portion of its 2021 metal
production. Kounrad's Zero Cost Collar contract for 30% of copper
production includes a put option of $6,900 per tonne and a call
option of $8,380 per tonne. Sasa's zinc and lead arrangements are
swap contracts, with 30% of Sasa's payable zinc production to be
sold at $2,804 per tonne and 30% of its payable lead production to
be sold at $2,022 per tonne.
These arrangements ensure that CAML retains its leverage to
strong copper, zinc and lead prices, while protecting a meaningful
proportion of revenues during the higher capital expenditure period
and continuing to rapidly deleverage.
Cost of sales
Group cost of sales for the year was $72.0 million (2019: $73.1
million). This includes depreciation and amortisation charges of
$28.6 million (2019: $29.5 million).
Sasa
Sasa's cost of sales for the year was lower than the previous
year at $51.0 million (2019: $52.8 million) as spending was reduced
where possible as commodity prices fell. During 2020, six new
pieces of Epiroc underground equipment (three loaders, two boomers
and a truck) arrived at site and this also resulted in lower
expenditure on underground fleet materials such as spare parts and
tyres. Cost of sales also reflects lower concession fees amounting
to $2.4 million (2019: $2.6 million). This tax is calculated at the
rate of 2% (2019: 2%) on the value of metal recovered during the
year and the reduction resulted from the lower average zinc and
lead prices during the year.
Kounrad
Kounrad's 2020 cost of sales was $21.0 million (2019: $20.3
million). This increase year on year was due to higher sales
volumes and an increase in mineral extraction tax ('MET') paid. MET
is charged by the Kazakhstan authorities at the rate of 5.7% (2019:
5.7%) on the value of metal recovered during the year. MET for the
year was $5.1 million (2019: $4.7 million) and an increase resulted
from the higher average copper price and higher sales volumes
during the year.
During the year, the Kazakhstan Tenge depreciated against the US
Dollar. The average exchange rate for the year was 413 KZT/USD
(2019: 383 KZT/USD), with the Kazakhstan Tenge being worth on
average 7% less in US Dollar terms in 2020 compared to 2019. This
resulted in a benefit for the cost base, including lower
depreciation and amortisation charges during the year of $3.9
million (2019: $4.4 million).
C1 cash cost of production
C1 cash cost of production is a standard metric used in the
mining industry to allow comparison across the sector. In line with
the industry standard, CAML calculates C1 cash cost by including
all direct costs of production at Kounrad and Sasa (reagents,
power, production labour and materials, as well as realisation
charges such as freight and treatment charges) in addition to local
administrative expenses. Royalties, depreciation and amortisation
charges are excluded from C1 cash cost.
2020 2019
Sasa zinc equivalent C1 cash cost ($/lb) 0.50 0.47
------- -------
Kounrad copper C1 cash cost ($/lb) 0.51 0.52
------- -------
Cu equivalent production (t) 29,082 31,233
------- -------
Group Cu equivalent C1 cost ($/lb) 1.15 0.94
------- -------
Fully inclusive Cu equivalent cost of production
($/lb) 1.63 1.50
------- -------
Sasa
Sasa's C1 zinc equivalent cash cost of production for 2020 was
$0.50 per pound (2019: $0.47 per pound). The reason for the $0.03
per pound increase was due to higher realisation costs at Sasa,
primarily due to increased treatment charges for 2020. The on-site
costs, over which CAML has more control, were lower than 2019 at
$39.2 per tonne (2019: $40.3 per tonne) demonstrating continued
cost management.
Kounrad
Kounrad's C1 cash cost of production remains firmly in the
lowest quartile of the copper industry cost curve at $0.51 per
pound (2019: $0.52 per pound). The decrease in C1 cash cost is
largely due to tight cost control and as a result of the
devaluation of the Kazakhstan Tenge. Approximately 70% of the C1
cash cost base in Kazakhstan is denominated in Tenge. The average
C1 cash cost since production commenced in 2012 is $0.55 per
pound.
Group
CAML reports its Group C1 cash cost on a copper equivalent basis
incorporating the production costs at Sasa. The Group's 2020 C1
copper equivalent cash cost was $1.15 per pound (2019: $0.94 per
pound). This number is calculated based on Sasa's 2020 zinc and
lead payable production, which equated to 15,227 copper equivalent
tonnes (2019: 17,462 copper equivalent tonnes) added to Kounrad's
2020 copper production of 13,855 tonnes (2019: 13,771 tonnes).
The Group C1 cash cost on a copper equivalent basis has
increased largely as a result of higher realisation costs at Sasa,
primarily due to increased treatment charges, and lower copper
equivalent production units due to lower lead and zinc prices.
CAML also reports a fully inclusive cost that includes capital
expenditure, local taxes including MET and concession fees,
interest on loans and corporate overheads associated with the
Kounrad and Sasa projects. The Group's fully inclusive copper
equivalent unit cost for the year increased to $ 1.63 per pound
(2019: $1.50 per pound). The increase of $ 0.13 per pound reflects
the higher Group C1 cash cost as explained above, however the
impact of this increase was countered by lower finance costs and
capital expenditure.
Administrative expenses
During the year, administrative expenses were higher at $19.0
million (2019: $18.3 million), largely due to employee pay
increases across the Group and an increase in Kazakhstan
withholding taxes paid.
Finance costs
The interest payable on the debt financing with Traxys Europe
S.A. reduced to LIBOR plus 4.00% with effect from 27 March 2020
(previously LIBOR plus 4.75%) and the 2020 average LIBOR rate also
reduced to 0.63% (2019: 2.27%). The Group therefore incurred lower
finance costs of $6.7 million (2019: $11.2 million) given the
reducing debt balance and lower interest rate.
Taxation
While the Group profit before tax decreased in 2020, the group
corporate income tax remained consistent at $16.0 million (2019:
$15.9 million). This is due to higher tax paid in Kazakhstan in
2020 owing to an increase in profit before tax at Kounrad from
improved copper commodity prices and cost control at a corporate
income tax rate of 20%. The profit before tax at Sasa decreased
significantly due to lower zinc and lead commodity prices and
increased treatment charges in 2020 however North Macedonian
corporate income tax is payable at a lower rate of 10% therefore
this had less impact on total corporate income tax.
Discontinued operations
The Group continues to report the results of the Copper Bay
entities within discontinued operations. These assets were fully
written off in prior years.
In February 2020, the Group reduced its effective interest in
Ken Shuak LLP from 80% to 10%. The Group will not be required to
contribute towards future costs of the project. Shuak BV was
dissolved in April 2020.
Balance sheet
In reaction to the global market conditions, adjustments were
made to the capital expenditure plan and savings and deferrals were
identified. As a result, the initial 2020 capital expenditure
guidance was reduced from $12.0-$14.0 million to $9.0-$11.0
million.
During the year, there were additions to property, plant and
equipment of $ 8.5 million (2019: $12.1 million). The additions
were a combination of $ 1.3 million (2019: $1.8 million) Kounrad
sustaining capital expenditure and $ 7.2 million (2019: $7.5
million) Sasa sustaining capital expenditure. Sasa's TSF4
construction was completed in 2019 and therefore no construction
costs were incurred during 2020 (2019: $1.9 million).
During 2019, a full audit of Sasa's underground mobile fleet was
undertaken and a decision was made to undergo a phased process of
replacing the current underground mobile plant with a new optimised
fleet. During 2020, six new pieces of Epiroc underground equipment
(three loaders, two boomers and a truck) arrived at site.
As at 31 December 2020, current trade and other receivables were
$8.9 million (31 December 2019: $6.3 million), which includes trade
receivables from the offtake sales of $1.9 million (31 December
2019: $1.5 million) and $2.6 million in relation to prepayments and
accrued income (31 December 2019: $2.2 million).
Non-current trade and other receivables were $3.8 million (31
December 2019: $3.4 million). As at 31 December 2020, a total of
$3.3 million (31 December 2019: $3.1 million) of VAT receivable was
still owed to the Group by the Kazakhstan authorities. Recovery is
still expected through the local sales of cathode to offset these
recoverable amounts.
As at 31 December 2020, current trade and other payables were $
12.9 million (31 December 2019: $12.3 million).
As at 31 December 2020, non-current and current borrowings were
$32.3 million (31 December 2019: $69.5 million) and $48.1 million
respectively (31 December 2019: $39.3 million) comprising of $70.7
million in corporate debt through Traxys Europe S.A. and the $9.7
million of North Macedonian overdraft facilities. The reduction in
total borrowings of $28.4 million reflects debt repaid during the
year of $38.4 million, net drawdowns on overdrafts of $8.0 million,
finance charges of $1.2 million unwinding directly attributable
fees and foreign exchange of $0.8 million on Macedonian Denar
denominated overdrafts.
The debt financing agreement with Traxys Europe S.A. has a final
maturity date of 4 November 2022. The monthly repayment schedule is
$3.2 million and interest is payable at LIBOR plus 4.00% with
effect from 27 March 2020 (previously LIBOR plus 4.75%). Security
is provided over the shares in CAML Kazakhstan BV, certain bank
accounts and the offtake agreements between Traxys and each
operation. The financial covenants of the debt which include the
monitoring of gearing and leverage ratios are all continuously
monitored by management and the Group is both currently compliant
and forecast to continue to be compliant with significant
headroom.
The $5.0 million overdraft facility previously agreed with
Komercijalna Banka AD Skopje with a fixed interest rate of 3.8%
denominated in Macedonian Denar has been extended to July 2021 with
the fixed interest rate reduced to a range of 2.4% to 2.5%
dependent on conditions. In June 2020, a new one-year $5.0 million
overdraft facility was agreed with Ohridska Banka A.D. Skopje with
a fixed interest rate of 2.5% denominated in Macedonian Denar. Both
facilities can be extended on an annual basis. These funds provide
the Group with additional financial flexibility.
As of 31 December 2020, the Group had cash in the bank of $ 47.9
million (31 December 2019: $32.6 million).
During 2018, CMK Europe Limited ('CMK Europe'), paid $5.9
million of withholding tax liability to the Public Revenue Office
('PRO') in North Macedonia. The liability related to the activities
of CMK Europe prior to CAML's ownership. In June 2020, CMK Europe
received a judgement from the Higher Administrative Court of North
Macedonia accepting its appeal and overturning the PRO ruling. The
Court judgement instructed the PRO to repeat the withholding tax
inspection for the year 2015 to 2017 taking into consideration the
findings of the Court judgement. Management believes that a
favourable outcome is probable, however, the contingent asset has
not been recognised as a receivable at 31 December 2020 as receipt
of the amount is dependent on the outcome of the reinspection.
TSF4 incident
During 2020, $0.7 million was incurred as an expense in relation
to the Sasa TSF4 incident, comprising dam repairs to the facility,
environmental aspects for riverbed remediation and includes a
EUR65,000 fine for the environmental impact associated with the
leakage. There was also $0.2 million capitalised in respect of
infrastructure work and engineering improvements. A further $0.3
million is expected to be incurred in expenses to complete the
remediation works during 2021.
Cash flows
The operational performance of both Kounrad and Sasa and the
associated low costs of production resulted in strong cash flows
for the Group in the context of the 2020 global health, economic
and metal price challenges.
Net cash flow generated from operations was $67.4 million (2019: $80.9 million).
During the year, corporate debt repayments of $38.4 million were
made (2019: $38.4 million), plus Group interest paid totalling $4.8
million (2019: $9.4 million). Drawdowns on overdrafts during the
year were $8.0 million (2019: $0.9 million).
$ 1.6 million (2019: $3.0 million) of North Macedonia corporate
income tax was paid in cash during the year in addition to a $4.0
million (2019: $3.9 million) non-cash payment offset against VAT
receivable and overpaid corporate income tax from the prior year.
$13.2 million (2019: $13.3 million) of Kazakhstan corporate income
tax was paid during the year.
Taking into account capital expenditure, CAML's free cash flow
for 2020 was $ 58.9 million (2019: $69.8 million).
Dividend
The Company's dividend policy is to return to shareholders a
target range of between 30% and 50% of free cash flow, defined as
net cash generated from operating activities less sustaining
capital expenditure. The dividends will only be paid provided there
is sufficient cash remaining in the Group to meet the ongoing
contractual debt repayments and that banking covenants are not
breached.
In light of COVID-19, the CAML Board took the decision not to
recommend a final 2019 dividend. Total dividends paid to
shareholders during the year of $13.9 million (2019: $32.2 million)
therefore relate to the interim dividend for the year ended 31
December 2020 of 6.0 pence per Ordinary Share, which was delayed to
December 2020 due to the leakage from Sasa's TSF4.
In conjunction with CAML's 2020 annual results, the Board
proposes a final 2020 dividend of eight pence per Ordinary Share,
which represents 57% of free cash flow and is therefore above our
stated policy. This demonstrates a strong end to 2020 for us and a
positive start to 2021, particularly in terms of commodity prices.
This brings total dividends (proposed and declared) for the year to
14 pence (2019: 6.5 pence) payable on 25 May 2021 to shareholders
registered on 30 April 2021. This latest dividend will increase the
amount returned to shareholders in dividends and share buy-backs
since the 2010 IPO listing to $209.6 million.
Going concern
The Group meets its day-to-day working capital through its
profitable and cash generative operations at Kounrad and Sasa. The
Group manages liquidity risk by maintaining adequate committed
borrowing facilities and the Group has substantial cash balances as
at 31 December 2020.
The prices of copper, zinc and lead were impacted in 2020 by
concerns over global demand due to the outbreak of the COVID-19
pandemic. Looking forward, uncertainty remains regarding the global
health and economic ramifications of COVID-19, although metal
prices have improved significantly from their lows of H1 2020 with
various government COVID-19 vaccine programmes now being
implemented and fiscal stimulus expected to drive demand for raw
materials.
During 2020, both the Kounrad facility in Kazakhstan and the
Sasa mine in North Macedonia continued to operate with no
disruptions to production or sales volumes due to COVID-19. The
Company put in place many measures during 2020 to try to ensure the
health of its employees and contractors on both sites.
The CAML Board has considered and debated a substantial range of
possible scenarios on the Group's operations, financial position
and forecasts covering a period of at least the next 12 months.
This analysis has considered potential impacts associated with a)
operational disruption that may be caused by restrictions applied
by governments, illness amongst the workforce and disruption to
supply chain and offtake arrangements; b) market volatility in
respect of commodity prices; c) availability of existing credit
facilities. Management have performed reverse stress testing
sensitivities to determine when profitability, liquidity or
covenants break.
The likelihood of the stress test scenarios occurring is
considered to be remote and therefore no material uncertainty is
considered to exist and the Directors have a reasonable expectation
that the Group has existence for the foreseeable future,
accordingly, the Directors continue to adopt the going concern
basis in preparing the consolidated financial statements.
Non-IFRS financial measures
The Group uses alternative performance measures, which are not
defined by generally accepted accounting principles ('GAAP') such
as IFRS. These measures are used by management, alongside the
comparable GAAP measures, in evaluating the business performance.
The measures are not intended as a substitute for GAAP measures and
may not be comparable to similarly reported measures by other
companies. The following non-IFRS alternative performance financial
measures are used in this report:
EBITDA
EBITDA is a valuable indicator of the Group's ability to
generate liquidity and is frequently used by investors and analysts
for valuation purposes. It is also a non-IFRS financial measure
which is reconciled as follows:
2020 2019
$'000 $'000
------------------------------------------- ------ -------
Profit for the year 43,690 51,937
------------------------------------------- ------ -------
Plus/(less):
Income tax expense 16,035 15,911
Depreciation and amortisation 29,148 30,080
Foreign exchange loss/(gain) 690 (377)
Other income (535) (212)
Other expenses 28 481
Finance income (116) (336)
Finance costs 6,673 11,153
Loss/(profit) from discontinued operations 70 (53)
EBITDA 95,683 108,584
------------------------------------------- ------ -------
Gross revenue
Gross revenue is presented as the total revenue received from
sales of all commodities after deducting the directly attributable
treatment charges associated for the sale of zinc, lead and silver.
This figure is presented as it reflects the total revenue received
in respect of the zinc and lead concentrate and is used to reflect
the movement in commodity prices during the year. The Board
considers gross revenue, together with the reconciliation to net
IFRS revenue to provide valuable information on the drivers of IFRS
revenue.
Net debt
Net debt is a measure used by the Board for the purposes of
capital management and is calculated as the total of the borrowings
held with Traxys Europe S.A. and bank overdrafts less the cash and
cash equivalents held at the end of the year. This balance does not
include the restricted cash balance of $3.6 million (31 December
2019: $4.0 million):
31-Dec-20 31-Dec-19
$'000 $'000
-------------------------- --------- ---------
Borrowings 80,412 108,768
Cash and cash equivalents (44,231) (28,566)
Net debt 36,181 80,202
-------------------------- --------- ---------
Free cash flow
Free cash flow is a non-IFRS financial measure of the cash from
operations less capital expenditure on property, plant and
equipment and intangible assets and is presented as follows:
2020 2019
$'000 $'000
------------------------------------------------ ------- --------
Net cash generated from operating activities 67,439 80,853
Less: Purchase of property, plant and equipment (8,497) (11,042)
Less: Purchase of intangible assets (2) (21)
Free cash flow 58,940 69,790
------------------------------------------------ ------- --------
On behalf of the Board
Gavin Ferrar
Chief Financial Officer
29 March 2021
Consolidated Income Statement
for the year ended 31 December
2020 2019
Note $'000 $'000
---------------------------------------------------- ------- --------- ----------
Continuing operations
Revenue 6 160,130 171,748
---------------------------------------------------- ------- --------- ----------
Presented as:
Gross revenue (1) 6 170,335 180,815
Less:
Silver stream purchases 6 (6,796) (5,556)
Offtake buyers' fees 6 (3,409) (3,511)
---------------------------------------------------- ------- --------- ----------
Revenue 160,130 171,748
---------------------------------------------------- ------- --------- ----------
Cost of sales 7 (72,037) (73,098)
Distribution and selling costs 8 (2,566) (1,823)
---------------------------------------------------- ------- --------- ----------
Gross profit 85,527 96,827
---------------------------------------------------- ------- --------- ----------
Administrative expenses 9 (18,992) (18,323)
Other expenses 10 (28) (481)
Other income 11 535 212
Foreign exchange (loss)/gain (690) 377
---------------------------------------------------- ------- --------- ----------
Operating profit 66,352 78,612
---------------------------------------------------- ------- --------- ----------
Finance income 15 116 336
Finance costs 16 (6,673) (11,153)
Profit before income tax 59,795 67,795
Income tax 17 (16,035) (15,911)
---------------------------------------------------- ------- --------- ----------
Profit for the year from continuing operations 43,760 51,884
---------------------------------------------------- ------- --------- ----------
Discontinued operations
(Loss)/profit for the year from discontinued
operations 22 (70) 53
---------------------------------------------------- ------- --------- ----------
Profit for the year 43,690 51,937
---------------------------------------------------- ------- --------- ----------
Profit attributable to:
* Non-controlling interests 20 60
* Owners of the parent 43,670 51,877
---------------------------------------------------- ------- --------- ----------
43,690 51,937
---------------------------------------------------- ------- --------- ----------
Earnings per share from continuing and discontinued
operations attributable to owners of the parent $ cents $ cents
during the year (expressed in cents per share)
---------------------------------------------------- ------- --------- ----------
Basic earnings per share
From continuing operations 18 24.78 29.36
From discontinued operations (0.04) 0.03
---------------------------------------------------- ------- --------- ----------
From profit for the year 24.74 29.39
---------------------------------------------------- ------- --------- ----------
Diluted earnings per share
From continuing operations 18 24.07 28.54
From discontinued operations (0.04) 0.03
---------------------------------------------------- ------- --------- ----------
From profit for the year 24.03 28.57
---------------------------------------------------- ------- --------- ----------
Group
(1) Gross revenue is a non-IFRS financial measure which is used
by management, alongside the comparable GAAP measures, in
evaluating the business performance. The measures are not intended
as a substitute for GAAP measures and may not be comparable to
similarly reported measures by other companies.
Consolidated Statement of Comprehensive Income
Group
2020 2019
for the year ended 31 December Note $'000 $'000
-------------------------------------------------- ---- --------- ---------
Profit for the year 43,690 51,937
Other comprehensive income/(expense):
Items that may be subsequently reclassified to
profit or loss:
Currency translation differences 27 26,975 (11,019)
Other comprehensive income/(expense) for the
year, net of tax 26,975 (11,019)
-------------------------------------------------- ---- --------- ---------
Total comprehensive income for the year 70,665 40,918
-------------------------------------------------- ---- --------- ---------
Attributable to:
- Non-controlling interests 20 60
- Owners of the parent 70,645 40,858
-------------------------------------------------- ---- --------- ---------
Total comprehensive income for the year 70,665 40,918
-------------------------------------------------- ---- --------- ---------
Total comprehensive income/(expense) attributable
to equity shareholders arises from:
- Continuing operations 70,735 40,865
- Discontinued operations (70) 53
-------------------------------------------------- ---- --------- ---------
70,665 40,918
-------------------------------------------------- ---- --------- ---------
Statements of Financial Position Registered no. 5559627
as at 31 December
Group Company
2020 2019 2020 2019
Note $'000 $'000 $'000 $'000
----------------------------------------- ------ ---------- ----------- ------------- -------------
Assets
Non-current assets
Property, plant and equipment 19 418,045 406,387 638 838
Intangible assets 20 56,640 58,676 - -
Deferred income tax asset 38 236 266 - -
Investments 21 - - 5,491 5,491
Other non-current receivables 23 3,842 3,389 - -
----------------------------------------- ------ ---------- ----------- ------------- -------------
478,763 468,718 6,129 6,329
----------------------------------------- ------ ---------- ----------- ------------- -------------
Current assets
Inventories 24 7,830 7,283 - -
Trade and other receivables 23 8,945 6,276 326,655 342,083
Restricted cash 25 3,641 4,013 3,441 3,824
Cash and cash equivalents 25 44,231 28,566 32,673 17,834
----------------------------------------- ------ ---------- ----------- ------------- -------------
64,647 46,138 362,769 363,741
----------------------------------------- ------ ---------- ----------- ------------- -------------
Assets of disposal group classified
as held for sale 22 58 219 - -
----------------------------------------- ------ ---------- ----------- ------------- -------------
64,705 46,357 362,769 363,741
----------------------------------------- ------ ---------- ----------- ------------- -------------
Total assets 543,468 515,075 368,898 370,070
----------------------------------------- ------ ---------- ----------- ------------- -------------
Equity attributable to owners of
the parent
Ordinary shares 26 1,765 1,765 1,765 1,765
Share premium 26 191,537 191,184 191,537 191,184
Treasury shares 26 (3,840) (6,526) (3,840) (6,526)
Currency translation reserve 27 (73,498) (100,473) - -
Retained earnings 278,103 250,480 102,687 70,086
394,067 336,430 292,149 256,509
----------------------------------------- ------ ---------- ----------- ------------- -------------
Non-controlling interests 21 (1,315) (1,324) - -
----------------------------------------- ------ ---------- ----------- ------------- -------------
Total equity 392,752 335,106 292,149 256,509
----------------------------------------- ------ ---------- ----------- ------------- -------------
Liabilities
Non-current liabilities
Borrowings 31 32,320 69,473 32,320 69,473
Silver streaming commitment 30 19,246 20,755 - -
Deferred income tax liability 38 26,199 26,089 - -
Lease liability 432 496 387 471
Provisions for other liabilities
and charges 32 6,999 9,027 - -
85,196 125,840 32,707 69,944
----------------------------------------- ------ ---------- ----------- ------------- -------------
Current liabilities
Borrowings 31 48,092 39,295 38,400 38,400
Silver streaming commitment 30 1,573 2,140 - -
Trade and other payables 29 12,895 12,305 5,424 4,965
Lease liability 248 252 218 252
Provisions for other liabilities
and charges 32 2,687 46 - -
----------------------------------------- ------ ---------- ----------- ------------- -------------
65,495 54,038 44,042 43,617
----------------------------------------- ------ ---------- ----------- ------------- -------------
Liabilities of disposal group classified
as held for sale 22 25 91 - -
----------------------------------------- ------ ---------- ----------- ------------- -------------
65,520 54,129 44,042 43,617
----------------------------------------- ------ ---------- ----------- ------------- -------------
Total liabilities 150,716 179,969 76,749 113,561
----------------------------------------- ------ ---------- ----------- ------------- -------------
Total equity and liabilities 543,468 515,075 368,898 370,070
----------------------------------------- ------ ---------- ----------- ------------- -------------
The Company has elected to take the exemption under section 408
of the Companies Act 2006 not to present the parent company Income
Statement or Statement of Comprehensive Income. The profit for the
parent company for the year was $48,526,000 (2019:
$38,637,000).
Consolidated Statement of Changes in Equity
for the year ended 31 December
Non-controlling
Currency interests
Attributable to Ordinary Share Treasury translation Retained Total $'000 Total
owners shares premium shares reserve earnings $'000 equity
of the parent Note $'000 $'000 $'000 $'000 $'000 $'000
---------------- -------- ----------- --------- --------- ------------ ---------- ------------ ---------------- ------------
Balance as at 1
January
2019 1,765 191,184 (6,526) (89,454) 230,281 327,250 (1,384) 325,866
---------------- -------- ----------- --------- --------- ------------ ---------- ------------ ---------------- ------------
Profit for the
year - - - - 51,877 51,877 60 51,937
Other
comprehensive
expense -
currency
translation
differences 27 - - - (11,019) - (11,019) - (11,019)
Total
comprehensive
income - - - (11,019) 51,877 40,858 60 40,918
---------------- -------- ----------- --------- --------- ------------ ---------- ------------ ---------------- ------------
Transactions
with
owners
Share based
payments 28 - - - - 1,085 1,085 - 1,085
Exercise of
options 28 - - - - (599) (599) - (599)
Dividends 36 - - - - (32,164) (32,164) - (32,164)
---------------- -------- ----------- --------- --------- ------------ ---------- ------------ ---------------- ------------
Total
transactions
with owners,
recognised
directly in
equity - - - - (31,678) (31,678) - (31,678)
---------------- -------- ----------- --------- --------- ------------ ---------- ------------ ---------------- ------------
Balance as at 31
December 2019 1,765 191,184 (6,526) (100,473) 250,480 336,430 (1,324) 335,106
---------------- -------- ----------- --------- --------- ------------ ---------- ------------ ---------------- ------------
Profit for the
year - - - - 43,670 43,670 20 43,690
Other
comprehensive
income -
currency
translation
differences 27 - - - 26,975 - 26,975 - 26,975
---------------- -------- ----------- --------- --------- ------------ ---------- ------------ ---------------- ------------
Total
comprehensive
income - - - 26,975 43,670 70,645 20 70,665
---------------- -------- ----------- --------- --------- ------------ ---------- ------------ ---------------- ------------
Transactions
with
owners
Share based
payments 28 - - - - 964 964 - 964
Exercise of
options 28 - 353 2,686 - (3,039) - - -
Disposal of
subsidiaries 21 - - - - (122) (122) (11) (133)
Dividends 36 - - - - (13,850) (13,850) - (13,850)
---------------- -------- ----------- --------- --------- ------------ ---------- ------------ ---------------- ------------
Total
transactions
with owners,
recognised
directly in
equity - 353 2,686 - (16,047) (13,008) (11) (13,019)
---------------- -------- ----------- --------- --------- ------------ ---------- ------------ ---------------- ------------
Balance as at 31
December 2020 1,765 191,537 (3,840) (73,498) 278,103 394,067 (1,315) 392,752
---------------- -------- ----------- --------- --------- ------------ ---------- ------------ ---------------- ------------
Company Statement of Changes in Equity
for the year ended 31 December
Ordinary Share Treasury Retained Total
Shares premium shares earnings equity
Company Note $'000 $'000 $'000 $'000 $'000
---------------------------------- ------- -------- -------- -------- --------- -----------
Balance as at 1 January 2019 1,765 191,184 (6,526) 63,127 249,550
---------------------------------- ------- -------- -------- -------- --------- -----------
Profit for the year - - - 38,637 38,637
---------------------------------- ------- -------- -------- -------- --------- -----------
Total comprehensive income - - - 38,637 38,637
---------------------------------- ------- -------- -------- -------- --------- -----------
Transactions with owners
Share based payments 28 - - - 1,085 1,085
Exercise of options 28 - - - (599) (599)
Dividends 36 - - - (32,164) (32,164)
---------------------------------- ------- -------- -------- -------- --------- -----------
Total transactions with owners,
recognised directly in equity - - - (31,678) (31,678)
---------------------------------- ------- -------- -------- -------- --------- -----------
Balance as at 31 December 2019 1,765 191,184 (6,526) 70,086 256,509
---------------------------------- ------- -------- -------- -------- --------- -----------
Profit for the year - - - 48,526 48,526
---------------------------------- ------- -------- -------- -------- --------- -----------
Total comprehensive income - - - 48,526 48,526
---------------------------------- ------- -------- -------- -------- --------- -----------
Transactions with owners
Share based payments 28 - - - 964 964
Exercise of options 28 - 353 2,686 (3,039) -
Dividends 36 - - - (13,850) (13,850)
---------------------------------- ------- -------- -------- -------- --------- -----------
Total transactions with owners,
recognised directly in equity - 353 2,686 (15,925) (12,886)
---------------------------------- ------- -------- -------- -------- --------- -----------
Balance as at 31 December 2020 1,765 191,537 (3,840) 102,687 292,149
---------------------------------- ------- -------- -------- -------- --------- -----------
Consolidated Statement of Cash Flows
for the year ended 31 December
2020 2019
Note $'000 $'000
---------------------------------------------- ----- ----- -------- --------- ----------
Cash flows from operating activities
Cash generated from operations 33 87,020 105,143
Interest paid (4,837) (9,445)
Corporate income tax paid (net of refunds) (14,744) (14,845)
Cash flow generated from operating activities 67,439 80,853
------------------------------------------------------------ -------- --------- ----------
Cash flows from investing activities
Purchase of property, plant and equipment (8,497) (11,042)
Proceeds from sale of property, plant
and equipment 350 233
Deferred consideration paid - (6,500)
Purchase of intangible assets (2) (21)
Interest received 15 116 336
Decrease in restricted cash 25 372 363
Net cash used in investing activities (7,661) (16,631)
------------------------------------------------------------ -------- --------- ----------
Cash flows from financing activities
Drawdown of overdraft 31 9,105 895
Repayment of overdraft 31 (1,110) -
Repayment of borrowings 31 (38,400) (38,400)
Dividends paid to owners of the parent 36 (13,850) (32,164)
Receipt/(settlement) on exercise of
share options 28 10 (589)
Net cash used in financing activities (44,245) (70,258)
------------------------------------------------------------ -------- --------- ----------
Effect of foreign exchange gain on cash
and cash equivalents 82 1
Net increase/(decrease) in cash and
cash equivalents 15,615 (6,035)
Cash and cash equivalents at the beginning
of the year 25 28,672 34,707
------------------------------------------------------------ -------- --------- ----------
Cash and cash equivalents at the end
of the year 25 44,287 28,672
------------------------------------------------------------ -------- --------- ----------
Cash and cash equivalents at 31 December 2020 includes cash at
bank and on hand included in assets held for sale of $56,000 (31
December 2019: $106,000) (note 22). The Consolidated Statement of
Cash Flows does not include the restricted cash balance of
$3,641,000 (2019: $4,013,000) (note 25).
The brought forward cash and cash equivalents as at 1 January
2020 has been reclassified to exclude the immaterial overdrafts
drawdown of $895,000. The overdraft arrangements are not repayable
on demand and therefore represents a form of financing and not a
component of cash and cash equivalents.
The notes below are an integral part of the consolidated
financial information.
Notes to the Financial Information
for the year ended 31 December 2020
1. General information
Central Asia Metals plc ('CAML' or the 'Company') and its
subsidiaries (the 'Group') are a mining and exploration
organisation with operations primarily in Kazakhstan and North
Macedonia and a parent holding company based in the United Kingdom
('UK').
The Group's principal business activities are the production of
copper cathode at its Kounrad operations in Kazakhstan and the
production of lead, zinc and silver at its Sasa operations in North
Macedonia. CAML owns 100% of the Kounrad SX-EW copper project in
Kazakhstan and 100% of the Sasa zinc-lead mine in North Macedonia.
The Company also owns a 75% equity interest in Copper Bay Limited
which is currently held for sale. See note 21 for details.
CAML is a public limited company, which is listed on the AIM
market of the London Stock Exchange and incorporated and domiciled
in England, UK. The address of its registered office is Masters
House, 107 Hammersmith Road, London, W14 0QH. The Company's
registered number is 5559627.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these Consolidated Financial Statements are set out below. These
policies have been consistently applied to all the years presented,
unless otherwise stated.
Basis of preparation of the Financial Information
The financial information set out herein does not constitute the
Group's statutory financial statements for the year ended 31
December 2020, but is derived from the Group's audited financial
statements. The auditors have reported on the 2020 financial
statements and their reports were unqualified and did not contain
statements under s498(2) or (3) Companies Act 2006, nor did they
contain a material uncertainty in relation to going concern. The
2020 Annual Report was approved by the Board of Directors on 29
March 2020, and will be mailed to shareholders in April 2020. The
financial information in this statement is audited but does not
have the status of statutory accounts within the meaning of Section
434 of the Companies Act 2006.
The Group's consolidated financial statements, which form part
of the 2020 Annual Report, have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006. The consolidated financial
statements have been prepared under the historical cost convention
with the exception of assets held for sale which have been held at
fair value. The Group financial information is presented in US
Dollars ($) and rounded to the nearest thousand.
The parent company meets the definition of a qualifying entity
under FRS 100 (Financial Reporting Standard 100) issued by the
Financial Reporting Council. The parent company financial
statements have therefore been prepared in accordance with FRS 101
(Financial Reporting Standard 101) 'Reduced Disclosure Framework'
as issued by the Financial Reporting Council. As permitted by FRS
101, the Company has taken advantage of the disclosure exemptions
available under that standard in relation to share-based payments,
financial instruments, fair value measurements, capital management,
presentation of a cash flow statement, new standards not yet
effective, impairment of assets and related party transactions.
Where relevant, equivalent disclosures have been given in the Group
financial statements of Central Asia Metals plc.
The preparation of financial information in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial
information are explained in note 4.
Going concern
The Group sells and distributes its copper cathode product
primarily through an offtake arrangement with Traxys Europe S.A.
('Traxys') with a minimum of 95% of the SX-EW plant's forecasted
output committed as sales for the period up until October 2022. The
Group sells Sasa's zinc and lead concentrate product through an
offtake arrangement with Traxys which has been fixed through to 31
December 2022. The commitment is for 100% of the Sasa concentrate
production.
The Group meets its day to day working capital requirements
through its profitable and cash generative operations at Kounrad
and Sasa. The Group manages liquidity risk by maintaining adequate
committed borrowing facilities and the Group has substantial cash
balances as at 31 December 2020.
The prices of copper, zinc and lead were impacted in 2020 by
concerns over global demand due to the outbreak of the COVID-19
pandemic. Looking forward, uncertainty remains regarding the global
health and economic ramifications of COVID-19, although metal
prices have improved significantly from their lows of H1 2020 with
various government COVID-19 vaccine programmes now being
implemented and fiscal stimulus expected to drive demand for raw
materials.
During 2020, both the Kounrad facility in Kazakhstan and the
Sasa mine in North Macedonia continued to operate with no
disruptions to production or sales volumes due to COVID-19. The
Company put in place many measures during 2020 to try to ensure the
health of its employees and contractors on both sites.
The CAML Board has considered and debated a substantial range of
possible scenarios on the Group's operations, financial position
and forecasts covering a period of at least the next 12 months.
This analysis has considered potential impacts associated with a)
operational disruption that may be caused by restrictions applied
by governments, illness amongst the workforce and disruption to
supply chain and offtake arrangements; b) market volatility in
respect of commodity prices; c) availability of existing credit
facilities. Management have performed reverse stress testing
sensitivities to determine when profitability, liquidity or
covenants break. The financial and other covenants of our debt
which include the monitoring of gearing and leverage ratios are all
continuously monitored by management and the Group is both
currently compliant and forecast to continue to be compliant.
The likelihood of the stress test scenarios occurring is
considered to be remote and therefore no material uncertainty is
considered to exist and the Directors have a reasonable expectation
that the Group has existence for the foreseeable future,
accordingly, the Directors continue to adopt the going concern
basis in preparing the consolidated financial information.
Please refer to notes 6, 25 and 29 for information on the
Group's revenues, cash balances and trade and other payables.
New and amended standards and interpretations adopted by the
Group
The Group has adopted the following standards and amendments for
the first time for their annual reporting period commencing 1
January 2020:
The definition of material has been amended for IAS 1 and IAS 8
to align the definition across standards and is effective 1 January
2020. The new definition clarifies the definition of material
whereby if omitting, misstating or obscuring it could reasonably be
expected to influence decisions of the primary users of financial
statements. The amendments to the definition of material will not
have a significant impact on the financial statements.
The definition of a business per IFRS 3 has also been amended to
determine when an entity acquires a business or a group of assets.
This amendment is effective from 1 January 2020 and will therefore
affect all future business combinations however there is no impact
on the current reporting period.
Interest Rate Benchmark Reform - IBOR 'phase 1' (Amendments to
IFRS 9, IAS 39 and IFRS 7) that is the first part to a two-phase
project which considers relief to hedge accounting in the period
before the IBOR reform. These amendments are mandatorily effective
for periods beginning 1 January 2020 and must be applied
retrospectively however there is no impact on the current reporting
period.
New standards, interpretations, and amendments not yet
effective
Certain new accounting standards and interpretations have been
published that are not mandatory for 31 December 2020 reporting
periods and have not been early adopted by the Group. These
standards include:
Interest Rate Benchmark Reform - IBOR 'phase 2' (Amendments to
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) that addresses issues
that might affect financial reporting after the reform of an
interest rate benchmark including its replacement with an
alternative benchmark rate. These amendments are mandatorily
effective for periods beginning 1 January 2021.
IAS 37 - Onerous Contracts - Cost of Fulfilling a Contract
amending the standard regarding costs a company should include as
the cost of fulfilling a contract when assessing whether a contract
is onerous. These amendments are mandatorily effective for periods
beginning 1 January 2022.
IAS 16 - Property, Plant and Equipment - Proceeds before
Intended Use regarding proceeds from selling items produced while
bringing as asset into the location and condition necessary for it
to be capable of operating in the manner intended by management.
These amendments are mandatorily effective for periods beginning 1
January 2022.
IAS 1 - Presentation of Financial statements - The
classification of liabilities as current or non-current basing the
classification on contractual arrangements at the reporting date.
These amendments are effective for periods beginning 1 January
2023.
These standards are not expected to have a material impact on
the entity in the current or future reporting periods and on
foreseeable future transactions.
Basis of consolidation
The Group Financial Statements consolidate the Financial
Statements of CAML and the entities it controls drawn up to 31
December 2020.
Subsidiaries are all entities (including structured entities)
over which the Group has control. The Group controls an entity when
the Group is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the
Group. They are deconsolidated from the date that control
ceases.
Intercompany transactions, balances and unrealised losses/gains
on transactions between Group companies are eliminated. Unrealised
losses/gains are also eliminated but considered an impairment
indicator of the asset transferred. Accounting policies of
subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Business combinations
The Group applies the acquisition method to account for business
combinations. The consideration transferred for the acquisition of
a subsidiary is the fair value of the assets transferred, the
liabilities incurred to the former owners of the acquiree and the
equity interests issued by the Group. The consideration transferred
includes the fair value of any asset or liability resulting from a
contingent consideration arrangement. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the
acquisition date. The Group recognises any non-controlling interest
in the acquiree on an acquisition-by-acquisition basis, either at
fair value or at the non-controlling interest's proportionate share
of the recognised amounts of the acquiree's identifiable net
assets. Acquisition-related costs are expensed as incurred and
reported within other expenses.
Goodwill
The excess of the consideration transferred of a business
combination, the amount of any non-controlling interest in the
acquired entity, and acquisition-date fair value of any previous
equity interest in the acquired entity over the fair value of the
net identifiable assets acquired is recorded as goodwill. If those
amounts are less than the fair value of the net identifiable assets
of the business acquired, the difference is recognised directly in
profit or loss as a bargain purchase. Goodwill is capitalised as an
intangible asset with any impairment in carrying value being
charged to the consolidated statement of comprehensive income.
Where the fair value of identifiable assets, liabilities and
contingent liabilities exceed the fair value of consideration paid,
the excess is credited in full to the consolidated statement of
comprehensive income on the acquisition date.
After initial recognition, goodwill is stated at cost less any
accumulated impairment losses, with the carrying value being
reviewed for impairment, at least annually and whenever events or
changes in circumstances indicate that the carrying value may be
impaired.
For the purpose of impairment testing, goodwill is allocated to
the cash-generating unit expected to benefit from the business
combination in which the goodwill arose. Where the recoverable
amount is less than the carrying amount, including goodwill, an
impairment loss is recognised in the Income Statement. The carrying
amount of goodwill allocated to an entity is taken into account
when determining the gain or loss on disposal of the unit.
Where settlement of any part of cash consideration is deferred,
the amounts payable in the future are discounted to their present
value as at the date of exchange. The discount rate used is the
entity's incremental borrowing rate, being the rate at which a
similar borrowing could be obtained from an independent financier
under comparable terms and conditions.
Non-controlling interests
Non-controlling interests represent the portion of profit or
loss and net assets in subsidiaries that are not held by the Group
and are presented separately within equity in the Consolidated
Statement of Financial Position distinct from parent shareholder's
equity.
Where losses are incurred by a partially owned subsidiary, they
are consolidated such that the non-controlling interests' share in
the losses is apportioned in the same way as profits.
Where profits are then made in future periods, such profits are
then allocated to the parent company until all unrecognised losses
attributable to the non-controlling interests but absorbed by the
parent are recovered at which point, profits are allocated as
normal.
Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker
which is considered to be the Board. The Group's segmental
reporting reflects the operational focus of the Group. The Group
has been organised into geographical and business units based on
its principal business activities of mining production, having two
reportable segments as follows:
-- Kounrad (production of copper cathode) in Kazakhstan
-- Sasa (production of lead, zinc and silver) in North Macedonia
Included within the unallocated segment are corporate costs for
CAML PLC which includes the Group debt held with Traxys and other
holding companies within the Group which are not separately
reported to the Board
Foreign currency translation
The functional currency for each entity in the Group is
determined as the currency of the primary economic environment in
which it operates. The Consolidated Financial Statements are
presented in US Dollars, which is the Group's and Company's
presentation currency. The functional currency of the Company is US
Dollars.
Transactions in currencies other than the currency of the
primary economic environment in which they operate are initially
recorded at the rate ruling at the date of the transaction. Foreign
currency monetary assets and liabilities denominated in foreign
currencies are retranslated at the functional currency rate of
exchange ruling at the reporting date. Exchange differences arising
on the retranslation of unsettled monetary assets and liabilities
are recognised immediately in profit or loss.
Exchange gains and losses arising on the retranslation of
monetary financial assets are treated as a separate component of
the change in fair value and recognised in profit or loss. Exchange
gains and losses on non-monetary OCI financial assets form part of
the overall gain or loss in OCI recognised in respect of that
financial instrument.
On consolidation, the results of overseas operations are
translated into USD at rates approximating to those ruling when the
transactions took place. All assets and liabilities of overseas
operations, including goodwill arising on the acquisition of those
operations, are translated at the rate ruling at the reporting
date. Exchange differences arising on translating the opening net
assets at opening rate and the results of overseas operations at
actual rates are recognised in other comprehensive income and
accumulated in the foreign exchange reserve.
On disposal of a foreign operation, the cumulative exchange
differences recognised in the foreign exchange reserve relating to
that operation up to the date of disposal are transferred to the
consolidated statement of comprehensive income as part of the
profit or loss on disposal.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses. Cost
comprises the aggregate amount paid and the fair value of any other
consideration given to acquire the asset and includes costs
directly attributable to making the asset capable of operating as
intended.
The cost of the item also includes the cost of decommissioning
any buildings or plant and equipment and making good the site,
where a present obligation exists to undertake the restoration
work.
Development costs relating to specific mining properties are
capitalised once management determines a property will be
developed. A development decision is made based upon consideration
of project economics, including future metal prices, reserves and
resources, and estimated operating and capital costs.
Capitalisation of costs incurred and proceeds received during the
development phase ceases when the property is capable of operating
at levels intended by management and is considered commercially
viable. Costs incurred during the production phase to increase
future output by providing access to additional reserves, are
deferred and depreciated on a units-of-production basis over the
component of the reserves to which they relate. Ore reserves may be
declared for an undeveloped mining project before its commercial
viability has been fully determined. Development costs incurred
after the commencement of production are capitalised to the extent
they are expected to give rise to a future economic benefit.
Development costs are not depreciated until such time as the areas
under development enter production.
Depreciation is provided on all property, plant and equipment on
a straight-line basis over its total expected useful life. As at 31
December 2020 the remaining useful lives were as follows:
-- Construction in progress - not depreciated
-- Land - not depreciated
-- Plant and equipment - over 5 to 21 years
-- Mining assets - over 2 to 21 years
-- Motor vehicles - over 2 to 10 years
-- Office equipment - over 2 to 10 years
-- Right of use assets - term of lease agreement
Mineral rights are depreciated on a Unit of Production basis
('UoP'), in proportion to the volume of ore mined in the year
compared with total proven and probable reserves as well as
measured, indicated and certain inferred resources which are
considered to have a sufficiently high certainty of commercial
extraction at the beginning of the year. Assets within operations
for which production is not expected to fluctuate significantly
from one year to another or which have a physical life shorter than
the related mine are depreciated on a straight-line basis.
Construction in progress is not depreciated until transferred to
other classes of property, plant and equipment.
The carrying values of property, plant and equipment are
reviewed for impairment if events or changes in circumstances
indicate the carrying value may not be recoverable and are written
down immediately to their recoverable amount. Useful lives and
residual values are reviewed annually and where adjustments are
required, these are made prospectively.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Any gain or loss arising on
de-recognition of the asset is included in the Income
Statement.
Leases
Leases are recognised as a right-of-use asset and a
corresponding liability at the date at which the leased asset is
available for use by the Group.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
-- fixed payments (including in-substance fixed payments), less
any lease incentives receivable and variable payments based on
index or rate
-- amounts expected to be payable by the Group under residual value guarantees
-- payments of penalties for terminating the lease, if the lease
term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be readily determined,
which is generally the case for leases in the Group, the lessee's
incremental borrowing rate is used, being the rate that the
individual lessee would have to pay to borrow the funds necessary
to obtain an asset of similar value to the right-of-use asset in a
similar economic environment with similar terms, security and
conditions.
The Group leases offices and equipment. Rental contracts are
typically made for fixed periods of six months to five years and
have extension options.
Lease terms are negotiated on an individual basis and contain a
wide range of different terms and conditions. The lease agreements
do not impose any covenants other than the security interests in
the leased assets that are held by the lessor. Leased assets may
not be used as security for borrowing purposes.
Intangible assets
a) Exploration and evaluation expenditure
Capitalised costs include costs directly related to any Group
exploration and evaluation activities in areas of interest for
which there is a high degree of confidence in the feasibility of
the project. Exploration and evaluation expenditure capitalised
includes acquisition of rights to explore, topographical,
geological, geochemical and geophysical studies, exploration
drilling, trenching, sampling and activities in relation to the
evaluation of the technical feasibility and commercial viability of
extracting a mineral resource.
Exploration and evaluation assets are measured at cost less
provision for impairment, where required.
b) Mining licences, permits and computer software
The historical cost model is applied, with intangible assets
being carried at cost less accumulated amortisation and accumulated
impairment losses. Intangible assets with a finite life have no
residual value and are amortised on a straight-line basis over
their expected useful lives with charges included in either cost of
sales or administrative expenses:
Computer software - over two to five years
Mining licences and permits - over the duration of the legal agreement
The carrying value of intangible assets is reviewed for
impairment whenever events or changes in circumstances indicate the
carrying value may not be recoverable.
Impairment of non-financial assets
The Group carries out impairment testing on all assets when
there exists an indication of an impairment. If any such indication
exists, the Group makes an estimate of the asset's recoverable
amount. An asset's recoverable amount is the higher of an asset's
or cash-generating unit's fair value less costs to sell or its
value in use.
Where the carrying amount of an asset exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount. Impairment losses are recognised in the Income
Statement.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and risks specific to the asset.
The best evidence of an asset's fair value is the value obtained
from an active market or binding sale agreement. Where neither
exists, fair value less costs to sell is based on the best
available information to reflect the amount the Group could receive
for the cash-generating unit in an arm's length sale. In some
cases, this is estimated using a discounted cash flow analysis on a
post-tax basis.
A previously recognised impairment loss is reversed if the
recoverable amount increases as a result of a reversal of the
conditions that originally resulted in the impairment. This
reversal is recognised in the Income Statement and is limited to
the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised in prior
years.
Goodwill is also reviewed annually, as well as whenever events
or changes in circumstances indicate that the carrying amount may
not be recoverable. Non-financial assets other than goodwill which
have suffered an impairment are reviewed for possible reversal of
the impairment at each reporting date.
Revenue
IFRS 15 establishes a comprehensive framework for determining
whether, how much and when revenue is recognised. These steps are
as follows: identification of the customer contract; identification
of the contract performance obligations; determination of the
contract price; allocation of the contract price to the contract
performance obligations; and revenue recognition as performance
obligations are satisfied.
Under IFRS 15, revenue is recognised when the performance
obligations are satisfied and the customer obtains control of the
goods or services, usually when title has passed to the buyer and
the goods have been delivered in accordance with the contractual
delivery terms.
Those sales of zinc and lead made abroad to China and Korea are
sold under CIF where legal title transfers when the goods are
loaded onto the ship and leave the port. However, part of the
transaction price is allocated to a distinct 'shipping and
insurance' as we are responsible for arranging the freight and
insurance on behalf of customer. This amount is not material to the
Group so no adjustment has been made to the financial
statements.
Revenue is measured at the fair value of consideration received
or receivable from sales of metal to an end user, net of any
buyers' discount, treatment charges and value added tax. The Group
recognises revenue when the amount of revenue can be reliably
measured and when it is probable that future economic benefits will
flow to the entity.
The value of consideration is fair value which equates to the
contractually agreed price. The offtake agreements provide for
provisional pricing i.e. the selling price is subject to final
adjustment at the end of the quotation period based on the average
price for the month following delivery to the buyer. Such a
provisional sale contains an embedded derivative which is not
required to be separated from the underlying host contract, being
the sale of the commodity. At each reporting date, if any sales are
provisionally priced, the provisionally priced copper cathode, zinc
and lead sales are marked-to-market using forward prices, with any
significant adjustments (both gains and losses) being recorded in
revenue in the Income Statement and in trade receivables in the
Statement of Financial Position.
The Company may mitigate commodity price risk by fixing the
price in advance for its copper cathode with the offtake partner
and also its zinc and lead sales with the banks where a facility
has been set up and agreed. The price fixing arrangements are
outside the scope of IFRS 9 Financial Instruments: Recognition and
Measurement and do not meet the criteria for hedge accounting.
The Group reports both a gross revenue and revenue line. Gross
revenue is reported after deductions of treatment charges but
before deductions of offtakers fees and silver purchases under the
Silver Stream (note 6).
Inventory
Inventories are stated at the lower of cost and net realisable
value. Cost is determined using the weighted average method.
The cost of finished goods and work in progress comprises raw
materials, direct labour and all other direct costs associated with
mining the ore and processing it to a saleable product.
Net realisable value is the estimated selling price in the
ordinary course of business, less any further costs expected to be
incurred to completion. Provision is made, if necessary, for
slow-moving, obsolete and defective inventory.
Non-current assets (or disposal groups) held for sale and
discontinued operations
Non-current assets (or disposal groups) are classified as held
for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use and a
sale is considered highly probable. They are measured at the lower
of their carrying amount and fair value less costs to sell, except
for assets such as deferred tax assets, assets arising from
employee benefits, financial assets and investment property that
are carried at fair value and contractual rights under insurance
contracts, which are specifically exempt from this requirement.
An impairment loss is recognised for any initial or subsequent
write-down of the asset (or disposal group) to fair value less
costs to sell. A gain is recognised for any subsequent increases in
fair value less costs to sell an asset (or disposal group), but not
in excess of any cumulative impairment loss previously recognised.
A gain or loss not previously recognised by the date of the sale of
the non-current asset (or disposal group) is recognised at the date
of derecognition.
Non-current assets (including those that are part of a disposal
group) are not depreciated or amortised while they are classified
as held for sale. Interest and other expenses attributable to the
liabilities of a disposal group classified as held for sale
continue to be recognised.
Non-current assets classified as held for sale and the assets of
a disposal group classified as held for sale are presented
separately from the other assets in the balance sheet. The
liabilities of a disposal group classified as held for sale are
presented separately from other liabilities in the balance
sheet.
A discontinued operation is a component of the entity that has
been disposed of or is classified as held for sale and that
represents a separate major line of business or geographical area
of operations, is part of a single co-ordinated plan to dispose of
such a line of business or area of operations, or is a subsidiary
acquired exclusively with a view to resale. The results of
discontinued operations are presented separately in the Statement
of Comprehensive Income.
Current and deferred income tax
The current income tax charge is calculated based on the tax
laws enacted or substantively enacted at the reporting date in the
countries where the Group's subsidiaries operate and generate
taxable income.
Deferred income tax assets and liabilities are recognised where
the carrying amount of an asset or liability in the consolidated
statement of financial position differs from its tax base, except
for differences arising on:
-- The initial recognition of goodwill,
-- The initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of
the transaction affects neither accounting or taxable profit,
and
-- Investments in subsidiaries and joint arrangements where the
Group is able to control the timing of the reversal of the
difference and it is probable that the difference will not reverse
in the foreseeable future.
Recognition of deferred tax assets is restricted to those
instances where it is probable that taxable profit will be
available against which the difference can be utilised. The amount
of the asset or liability is determined using tax rates that have
been enacted or substantively enacted by the reporting date and are
expected to apply when the deferred tax liabilities/(assets) are
settled/(recovered). When there is uncertainty concerning the
Group's filing position regarding the tax bases of assets or
liabilities, the taxability of certain transactions or other
tax-related assumptions, then the Group:
-- Considers whether uncertain tax treatments should be
considered separately, or together as a group, based on which
approach provides better predictions of the resolution;
-- Determines if it is probable that the tax authorities will
accept the uncertain tax treatment; and
-- If it is not probable that the uncertain tax treatment will
be accepted, measure the tax uncertainty based on the most likely
amount or expected value, depending on whichever method better
predicts the resolution of the uncertainty. This measurement is
required to be based on the assumption that each of the tax
authorities will examine amounts they have a right to examine and
have full knowledge of all related information when making those
examinations.
Deferred income tax assets and liabilities are offset when the
Group has a legally enforceable right to offset current tax assets
and liabilities and the deferred tax assets and liabilities relate
to taxes levied by the same tax authority on either:
-- The same taxable group company, or
-- Different group entities which intend either to settle
current tax assets and liabilities on a net basis, or to realise
the assets and settle the liabilities simultaneously, in each
future period in which significant amounts of deferred tax assets
or liabilities are expected to be settled or recovered.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held
at call with banks and other short-term highly liquid investments
with original maturities of three months or less.
Restricted cash
Restricted cash is cash with banks that is not available for
immediate use by the Group. Restricted cash is shown separately
from cash and cash equivalents on the Statement of Financial
Position.
Investments
Investments in subsidiaries are recorded at cost less provision
for impairment.
Share capital
Ordinary Shares are classified as equity. Incremental costs
directly attributable to the issue of new shares are shown in
equity as a deduction, net of tax, from the proceeds.
Treasury shares
Where any Group company purchases the Company's equity share
capital (treasury shares), the consideration paid, including any
directly attributable incremental costs (net of income taxes) is
deducted from equity attributable to the Company's equity holders
until the shares are cancelled or reissued. Where such Ordinary
Shares are subsequently reissued, any consideration received, net
of any directly attributable incremental transaction costs and the
related income tax effects, is included in equity attributable to
the Company's equity holders.
Share based compensation
Where equity settled share options are awarded to employees, the
fair value of the options at the date of grant is charged to the
consolidated statement of comprehensive income over the vesting
period. Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each
reporting date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of
options that eventually vest. Non-vesting conditions and market
vesting conditions are factored into the fair value of the options
granted. As long as all other vesting conditions are satisfied, a
charge is made irrespective of whether the market vesting
conditions are satisfied. The cumulative expense is not adjusted
for failure to achieve a market vesting condition or where a
non-vesting condition is not satisfied. An option pricing model is
used to measure the fair value of the options.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the consolidated statement of comprehensive income over the
remaining vesting period.
Trade and other receivables
Trade and other receivables are accounted for under IFRS 9 using
the expected credit loss model and are initially recognised at fair
value and subsequently measured at amortised cost less any
allowance for expected credit losses.
Impairment of financial assets
Impairment provisions for current and non-current trade
receivables are recognised based on the ' simplified approach '
within IFRS 9 using a provision matrix in the determination of the
lifetime expected credit losses. During this process the
probability of the non-payment of the trade receivables is
assessed. This probability is then multiplied by the amount of the
expected loss arising from default to determine the lifetime
expected credit loss for the trade receivables. For trade
receivables, which are reported net, such provisions are recorded
in a separate provision account with the loss being recognised in
profit or loss. On confirmation that the trade receivable will not
be collectable, the gross carrying value of the asset is written
off against the associated provision.
Impairment provisions for receivables from subsidiaries and
loans to subsidiaries are recognised based on the 'general
approach' within IFRS 9. The methodology used to determine the
amount of the provision is based on whether there has been a
significant increase in credit risk since initial recognition of
the financial asset with the assessment also taking into account
the ability of the subsidiary to repay the receivable or loan in
the event that it was called due. For those where the credit risk
has not increased significantly since initial recognition of the
financial asset, twelve month expected credit losses along with
gross interest income are recognised. For those for which credit
risk has increased significantly, lifetime expected credit losses
along with the gross interest income are recognised. For those that
are determined to be credit impaired, lifetime expected credit
losses along with interest income on a net basis are recognised.
Lifetime expected credit losses are the expected credit losses that
result from all possible default events over the expected life of
the loan whereas twelve month expected credit losses are a portion
of lifetime expected credit losses that represent the expected
credit losses that result from default events that are possible
within twelve months of the reporting date.
From time to time, the Group elects to renegotiate the terms of
trade receivables due from customers with which it has previously
had a good trading history. Such renegotiations will lead to
changes in the timing of payments rather than changes to the
amounts owed and, in consequence, the new expected cash flows are
discounted at the original effective interest rate and any
resulting difference to the carrying value is recognised in the
consolidated statement of comprehensive income (operating
profit).
Trade and other payables
Trade and other payables are not interest bearing and are
initially recognised at fair value and subsequently measured at
amortised cost using the effective interest method.
Silver stream commitment
The silver stream arrangement has been accounted for as a
commitment as the Group has obligations to deliver silver to a
third party at a price below market value. On acquisition,
following completion of the business combination, the silver stream
commitment was identified as an unfavourable contract and recorded
at fair value. Payments received under the arrangement prior to the
acquisition by the Group were not considered to be a transaction
with a customer. Management has determined that the agreement is
not a derivative as it will be satisfied through the delivery of
non-financial items (i.e. silver commodity from the Company's
production), rather than cash or financial assets. Subsequent to
initial recognition the silver stream commitment is not revalued
and is amortised on a units of production basis to cost of
sales.
The fair value of consideration received for delivered silver
under the agreement is recorded as revenue. In addition, silver
produced in conjunction with the Group's lead and zinc production
and sold under the offtake agreement is recorded in gross revenue
with a corresponding deduction for silver purchased to deliver
under the silver stream recorded in arriving at net revenue.
Borrowings
Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption amount is recognised in
profit or loss over the period of the borrowings using the
effective interest method. Fees paid on the establishment of loan
facilities are recognised as transaction costs of the loan to the
extent that it is probable that some or all of the facility will be
drawn down. In this case, the fee is deferred until the draw down
occurs. To the extent there is no evidence that it is probable that
some or all of the facility will be drawn down, the fee is
capitalised as a prepayment for liquidity services and amortised
over the period of the facility to which it relates.
Borrowings are removed from the balance sheet when the
obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial
liability that has been extinguished or transferred to another
party and the consideration paid, including any non-cash assets
transferred or liabilities assumed, is recognised in profit or loss
as other income or finance costs.
Borrowings are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting period.
Provisions
a) Asset retirement obligation
Provisions for environmental restoration of mining operations
are recognised when the Group has a present legal or constructive
obligation as a result of past events; it is probable that an
outflow of resources will be required to settle the obligation; and
the amount can be reliably estimated. Provisions are not recognised
for future operating losses.
Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation using a pre-tax
rate that reflects current market assessments of the time value of
money and the cash flows incorporate assessments of risk. The
increase in the provision due to passage of time is recognised as
interest expense.
b) Employee benefits - pension
The Group, in the normal course of business, makes payments on
behalf of its employees for pensions, health-care, employment and
personnel tax, which are calculated based on gross salaries and
wages according to legislation. The cost of these payments is
charged to the Consolidated Statement of Comprehensive Income in
the same period as the related salary cost.
c) Employee benefits - retirement benefits and jubilee awards
Pursuant to the labour law prevailing in the North Macedonian
subsidiaries, the Group is obliged to pay retirement benefits for
an amount equal to two average monthly salaries, at their
retirement date. According to the collective labour agreement, the
Group is also obliged to pay jubilee anniversary awards for each 10
years of continuous service of the employee. Due to the long-term
nature of these plans, such estimates are subject to significant
uncertainty. In addition, the Group is not obligated to provide
further benefits to current and former employees.
Retirement benefit obligations arising on severance pay are
stated at the present value of expected future cash payments
towards the qualifying employees. These benefits have been
calculated by an independent actuary in accordance with the
prevailing rules of actuarial mathematics and recognised as a
liability with no pension plan assets. Actuarial gains and losses
arising from experience adjustments and changes in actuarial
assumptions are charged or credited to profit and loss over the
employees' expected average remaining working lives.
3. Financial instruments - risk management
The Group's activities expose it to a variety of financial
risks; market price risk (including foreign currency exchange risk,
commodity price risk and interest rate risk), liquidity risk,
capital risk and credit risk. These risks are mitigated wherever
possible by the Group's financial management policies and practices
described below. The Group's risk management is carried out by a
central treasury department (Group treasury) under policies
approved by the Board. Group treasury identifies, evaluates and
hedges financial risks in close co-operation with the Group's
operating units.
Foreign currency exchange risk
The Group operates internationally and is exposed to foreign
exchange risk arising from various currency exposures. The primary
Group currency requirements are US Dollar, British Pound,
Kazakhstan Tenge, Euro and North Macedonian Denar.
The following table highlights the major currencies the Group
operates in and the movements against the US Dollar during the
course of the year:
Average rate Reporting date
spot rate
2020 2019 Movement 2020 2019 Movement
Kazakhstan Tenge 412.95 382.75 8% 420.71 381.18 10%
Macedonian Denar 54.02 54.96 (2%) 50.24 54.95 (9%)
Euro 1.13 1.12 1% 1.23 1.12 10%
British Pound 0.78 0.79 (1%) 0.74 0.76 (3%)
----------------- --------- --------- -------- -------- -------- --------
Foreign exchange risk does not arise from financial instruments
that are non-monetary items or financial instruments denominated in
the functional currency. Kazakhstan Tenge and North Macedonian
Denar denominated monetary items are therefore not reported in the
tables below, as the functional currency of the Group's
Kazakhstan-based and North Macedonian-based subsidiaries is the
Tenge and Denar respectively.
The Group's exposure to foreign currency risk based on US Dollar
equivalent carrying amounts at the reported date:
Group
---------------------------- ---------------------------------------- --------------------------------------------------------
2020
--------------------------------------------------------------------------------------------------
In $'000 equivalent USD EUR GBP
---------------------------- ---------------------------------------- --------------- ---------------------------------------
Cash and cash equivalents 2,637 208 2,397
Trade and other receivables 285 - -
Trade and other payables (15) (398) (2,542)
---------------------------- ---------------------------------------- --------------- ---------------------------------------
Net exposure 2,907 (190) (145)
---------------------------- ---------------------------------------- --------------- ---------------------------------------
Group
---------------------------- -------------------------------------- -------------------------------------------------------
2019
-----------------------------------------------------------------------------------------------
In $'000 equivalent USD EUR GBP
---------------------------- -------------------------------------- -------------- ---------------------------------------
Cash and cash equivalents 2,419 94 2,220
Trade and other receivables 1 - -
Trade and other payables - (609) (429)
---------------------------- -------------------------------------- -------------- ---------------------------------------
Net exposure 2,420 (515) 1,791
---------------------------- -------------------------------------- -------------- ---------------------------------------
Trade and other receivables excludes prepayments and VAT
receivable and trade and other payables excludes corporation tax,
social security and other taxes as they are not considered
financial instruments.
At 31 December 2020, if the foreign currencies had
weakened/strengthened by 10% against the US Dollar, post-tax Group
profit for the year would have been $205,000 lower/higher (2019:
$194,000 lower/higher).
Commodity price risk
The Group has a hedging policy in place to allow us to manage
commodity price risk however the Directors elected not to hedge
during 2020. Post year end, the Group has put in place hedging
arrangements with ING, a relationship bank for a portion of its
2021 metal production. Kounrad's Zero Cost Collar contract for 30%
of copper production includes a put option of $6,900 per tonne and
a call option of $8,380 per tonne. Sasa's zinc and lead
arrangements are Swap contracts, with 30% of Sasa's zinc production
to be sold at $2,804 per tonne and 30% of its lead to be sold at
$2,022 per tonne.
The following table details the Group's sensitivity to a 10%
increase and decrease in the copper, zinc and lead price against
the invoiced price. 10% is the sensitivity used when reporting
commodity price internally to management and represents
management's assessment of the possible change in price. A positive
number below indicates an increase in profit for the year and other
equity where the price increases.
Estimated effect on earnings and equity
2020 2019
$'000 $'000
-------------------------------------------- -------- --------
10% increase in copper, zinc and lead price 18,230 18,853
-------------------------------------------- -------- --------
10% decrease in copper, zinc and lead price (18,230) (18,853)
-------------------------------------------- -------- --------
Liquidity risk
Liquidity risk relates to the ability of the Group to meet
future obligations and financial liabilities as and when they fall
due. The Group currently has sufficient cash resources to
facilitate the debt and a material income stream from the Kounrad
and Sasa projects. The Group has no undrawn borrowings as at 31
December 2020 (2019: nil).
Future expected payments: Group
31 Dec 31 Dec
20 $'000 19 $'000
-------------------------------------------- --------- ---------
Trade and other payables within one year 9,221 8,981
Borrowings payable within one year (note
31) 50,443 44,684
Borrowings payable later than one year but
not later than five years (note 31) 34,514 76,304
Lease liability payable within one year 432 252
Lease liability payable later than one year
but not later than five years 248 496
94,858 130,717
-------------------------------------------- --------- ---------
Capital risk
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal structure to reduce the
cost of capital.
The Group manages its capital in order to provide sufficient
funds for the Group's activities. Future capital requirements are
regularly assessed and Board decisions taken as to the most
appropriate source for obtaining the required funds, be it through
internal revenue streams, external fund raising, issuing new shares
or selling assets. In order to maintain or adjust the capital
structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or
sell assets to reduce debt.
The financial covenants of the debt which include the monitoring
of gearing and leverage ratios are all continuously monitored by
management and the Group is both currently compliant and forecast
to continue to be compliant with significant headroom.
Consistent with others in the industry, the Group monitors
capital on the basis of the following gearing ratio:
Net debt
2020 2019
Note $'000 $'000
------------------------------------ --- --- ----- ---------- ----------
Cash and cash equivalents excluding
restricted cash 25 44,231 28,566
Bank overdraft 31 (9,692) (895)
Borrowings, variable interest rates
- repayable within one year 31 (38,400) (38,400)
Borrowings, variable interest rates
- repayable after one year 31 (32,320) (69,473)
Net debt (36,181) (80,202)
---------------------------------------------- ----- ---------- ----------
Total equity 392,752 335,106
---------------------------------------------- ----- ---------- ----------
Net debt to equity ratio 9% 24%
---------------------------------------------- ----- ---------- ----------
Changes in liabilities arising from financing activities
The total borrowings as at 1 January 2020 were $108,768,000 (1
January 2019: $144,949,000). During the year, total repayments were
$38,400,000 (2019: $38,400,000). During the year, there were
drawdowns on our unsecured overdrafts of $9,105,000 (2019:
$895,000) and repayments of $1,110,000 (2019: $nil). Other changes
amounted to $2,049,000 (2019: $1,324,000) leading to a closing debt
balance of $80,412,000 (2019: $108,768,000). See note 31 for more
details.
The cash and cash equivalents including cash at bank and on hand
in assets held for sale brought forward were $28,672,000 (2019:
$34,707,000) with a net $15,615,000 inflow (2019: $6,035,000
outflow) during the year and therefore a closing balance of
$44,287,000 (2019: $28,672,000).
Credit risk
Credit risk refers to the risk that the Group's financial assets
will be impaired by the default of a third party. The Group is
exposed to credit risk primarily on its cash and cash equivalents
as set out in note 25 and on its trade and other receivables as set
out in note 23. The Group sells a minimum of 95% of Kounrad's
copper cathode production to the offtake partner which pays on the
day of dispatch and during the year 100% of Sasa's zinc and lead
concentrate was sold to Traxys which assumes the credit risk.
For banks and financial institutions, only parties with a
minimum rating of BBB- are accepted. 98% of the Group's cash and
cash equivalents including restricted cash at the year-end were
held by banks with a minimum credit rating of A- (2019: 98%). The
rest of the Group's cash was held with a mix of institutions with
credit ratings between A to BB- (2019: A to BB).The Directors have
considered the credit exposures and do not consider that they pose
a material risk at the present time. The credit risk for cash and
cash equivalents is managed by ensuring that all surplus funds are
deposited only with financial institutions with high quality credit
ratings.
The expected credit loss for intercompany loans receivable is
considered immaterial (note 23).
Interest rate risk
The Group's main interest rate risk arises from long-term
borrowings with variable rates, which expose the Group to cash flow
interest rate risk. During 2020, the Group's borrowings at variable
rates were denominated in US Dollars. The Group's borrowings are
carried at amortised cost. The Group has borrowings at variable
interest rates and a 1% point rise in market interest rate would
have caused the interest paid to increase by $843,000 (2019:
$1,343,000) while a similar decrease would have caused the same
decrease in interest paid. The Group does not hedge its exposure to
interest rate risk.
The Group had $28,896,000 of cash balances on short-term deposit
as at 31 December 2020 (2019: $14,494,000). The average fixed
interest rate on short-term deposits during the year was 0.3%
(2019: 0.6%).
Categories of financial instruments
Financial assets
Group
----------------------------------------------- --------------------
31 Dec 31 Dec
Cash and receivables: 20 $'000 19 $'000
----------------------------------------------- --------- ---------
Cash and cash equivalents including restricted
cash (note 25) 47,872 32,579
Trade and other receivables 5,058 2,980
------------------------------------------------- --------- ---------
52,930 35,559
----------------------------------------------- --------- ---------
Trade and other receivables excludes prepayments and VAT
receivable as they are not considered financial instruments. All
trade and other receivables are receivable within one year for both
reporting years.
Financial liabilities
Group
-------------------------------------------- --------------------
31 Dec 31 Dec
Measured at amortised cost: 20 $'000 19 $'000
-------------------------------------------- --------- ---------
Trade and other payables within one year 9,221 8,981
Borrowings payable within one year (note
31) 48,092 39,295
Borrowings payable later than one year but
not later than five years (note 31) 32,320 69,473
Lease liability within one year 432 252
Lease liability payable later than one year
but not later than five years 248 496
90,313 118,497
-------------------------------------------- --------- ---------
Trade and other payables excludes the silver streaming
commitment, corporation tax, social security and other taxes as
they are not considered financial instruments.
4. Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The following are key areas where
critical accounting estimates and judgements are required that
could have a material impact on the Financial Statements:
Impairment of non-current assets
Significant accounting judgements
The carrying value of the goodwill generated by accounting for
the business combination of the Group acquiring an additional 40%
in the Kounrad project in May 2014 (the "Kounrad Transaction") and
the CMK Resources Limited acquisition in November 2017 requires an
annual impairment review. This review determines whether the value
of the goodwill can be justified by reference to the carrying value
of the business assets and the future discounted cash flows of the
respective CGUs. The key assumptions used in the Group's impairment
assessments are disclosed in note 20.
Key sources of estimation uncertainty
Estimates are required periodically to assess assets for
impairment. The critical accounting estimates are future commodity
prices, treatment charges, future ore production, discount rates
and projected future costs of development and production. Ore
reserves and resources included in the forecasts include certain
resources considered to be sufficiently certain and economically
viable. The Group's resources statements include additional
resources which are not included in the life of mine plan or
impairment test.
Decommissioning and site rehabilitation estimates
Significant accounting judgements
Provision is made for the costs of decommissioning and site
rehabilitation costs when the related environmental disturbance
takes place. Judgement and experience is used in determining the
expected timing, closure and decommissioning methods, which can
vary in response to changes in the relevant legal requirements or
decommissioning technologies.
Key sources of estimation uncertainty
The discounted provision recognised represents management's best
estimate of the costs that will be incurred, and many of these
costs will not crystallise until the end of the life of the mine.
Estimates are reviewed annually and are based on current
contractual and regulatory requirements and the estimated useful
life of mines. Engineering and feasibility studies are undertaken
periodically and in the interim management make assessments for
appropriate changes based on the environmental management strategy;
however significant changes in the estimates of contamination,
restoration standards, timing of expenditure and techniques will
result in changes to provisions from period to period.
A 1% change in the discount rate on the Group's rehabilitation
estimates would result in an impact of $948,000 (2019: $781,000) on
the provision for environmental rehabilitation, and an impact of
$948,000 (2019: $781,000) on the statement of comprehensive income.
A 5% change in cost on the Group's rehabilitation estimates would
result in an impact of $460,000 (2019: $420,000) on the provision
for environmental rehabilitation.
Mineral reserves and resources
Key sources of estimation uncertainty
The major value associated with the Group is the value of its
mineral reserves and resources. The value of the reserves and
resources have an impact on the Group's accounting estimates in
relation to depreciation and amortisation, impairment of assets and
the assessment of going concern. These resources are the Group's
best estimate of product that can be economically and legally
extracted from the relevant mining property. The Group's estimates
are supported by geological studies and drilling samples to
determine the quantity and grade of each deposit.
Ore resource estimates may vary from period to period. This
judgement has a significant impact on impairment consideration and
the period over which capitalised assets are depreciated within the
Financial Statements.
The Kounrad resources were classified as JORC Compliant in 2013
and mineral resources were estimated in June 2017 and the Sasa JORC
ore reserves and mineral resources were estimated in June 2020.
Tax
Significant accounting judgements
Management make judgements in relation to the recognition of
various taxes payable and receivable by the Group and VAT
recoverability for which the recoverability and timing of recovery
is assessed. This includes judgement on the contingent asset
disclosed of $5.9m withholding tax receivable following a judgement
from the Higher Administrative Court of North Macedonia accepting
its appeal. Management believes that a favourable outcome is
probable, however, the contingent asset has not been recognised as
a receivable at 31 December 2020 as receipt of the amount is
dependent on the outcome of the re-inspection. The Group operates
in jurisdictions which necessarily require judgment to be applied
when assessing the applicable tax treatment for transactions and
the Group obtains professional advice where appropriate to ensure
compliance with applicable legislation.
TSF4 leakage
Significant accounting judgements
In September 2020 there was a short-term leakage of tailings
from TSF4 which required structural dam repairs, engineering
improvements to the facility as well as environmental work for
riverbed remediation. Management made judgements for the accounting
treatment for the repair and remediation work. IAS 16 indicates
that repairs and maintenance expenses after construction are
generally not capitalised when used to restore an asset to a
previous operating condition or to keep an asset in its current
operating condition. Repair work should be capitalised when it
increases the usefulness and efficiency of the equipment or
enhances its useful life or some economic benefit to the Company.
It has been determined by management that most of the repair and
remediation work of $0.7m will not bring any additional economic
benefits to the Group and has therefore been expensed during the
year. However, there were some costs identified during the work
that led to engineering improvements and therefore $0.2m has been
capitalised according to IAS 16. As at 31 December 2020 no material
future costs are anticipated to be incurred attributable to the
leakage.
5. Segmental information
The segmental results for the year ended 31 December 2020 are as
follows:
Kounrad Sasa Unallocated Total
$'000 $'000 $'000 $'000
---------------------------------------------- ------------- ----------- ----------------- -----------
Gross revenue 87,667 82,668 - 170,335
Silver stream purchases - (6,796) - (6,796)
Offtake buyers' fees (2,546) (863) - (3,409)
---------------------------------------------- ------------- ----------- ----------------- -----------
Revenue 85,121 75,009 - 160,130
---------------------------------------------- ------------- ----------- ----------------- -----------
EBITDA 65,473 42,347 (12,137) 95,683
Depreciation and amortisation (4,007) (24,890) (251) (29,148)
Foreign exchange gain/(loss) 221 (889) (22) (690)
Other income (note 11) 166 359 10 535
Other expenses (note 10) (3) (5) (20) (28)
Finance income (note 15) 9 - 107 116
Finance costs (note 16) (162) (586) (5,925) (6,673)
---------------------------------------------- ------------- ----------- ----------------- -----------
Profit/(loss) before income tax 61,697 16,336 (18,238) 59,795
---------------------------------------------- ------------- ----------- ----------------- -----------
Income tax (16,035)
---------------------------------------------- ------------- ----------- ----------------- -----------
Profit for the year after tax from continuing
operations 43,760
---------------------------------------------- ------------- ----------- ----------------- -----------
Loss from discontinued operations (70)
---------------------------------------------- ------------- ----------- ----------------- -----------
Profit for the year 43,690
---------------------------------------------- ------------- ----------- ----------------- -----------
Depreciation and amortisation includes amortisation on the fair
value uplift on acquisition of Sasa and Kounrad of $17.7m.
The segmental results for the year ended 31 December 2019 are as
follows:
Kounrad Sasa Unallocated Total
$'000 $'000 $'000 $'000
---------------------------------------------- ------------- ----------- ----------------- -----------
Gross revenue 81,708 99,107 - 180,815
Silver stream purchases - (5,556) - (5,556)
Offtake buyers' fees (2,424) (1,087) - (3,511)
---------------------------------------------- ------------- ----------- ----------------- -----------
Revenue 79,284 92,464 - 171,748
---------------------------------------------- ------------- ----------- ----------------- -----------
EBITDA 61,720 59,564 (12,700) 108,584
Depreciation and amortisation (4,533) (25,308) (239) (30,080)
Foreign exchange (loss)/gain (169) 698 (152) 377
Other income (note 11) 182 30 - 212
Other expenses (note 10) (40) (441) - (481)
Finance income (note 15) 9 1 326 336
Finance costs (note 16) (106) (263) (10,784) (11,153)
---------------------------------------------- ------------- ----------- ----------------- -----------
Profit/(loss) before income tax 57,063 34,281 (23,549) 67,795
---------------------------------------------- ------------- ----------- ----------------- -----------
Income tax (15,911)
---------------------------------------------- ------------- ----------- ----------------- -----------
Profit for the year after tax from continuing
operations 51,884
---------------------------------------------- ------------- ----------- ----------------- -----------
Profit from discontinued operations 53
---------------------------------------------- ------------- ----------- ----------------- -----------
Profit for the year 51,937
---------------------------------------------- ------------- ----------- ----------------- -----------
Depreciation and amortisation includes amortisation on the fair
value uplift on acquisition of Sasa and Kounrad of $19.4m.
A reconciliation between profit for the year and EBITDA is
presented in the Financial Review section.
Group segmental assets and liabilities for the year ended 31
December 2020 are as follows:
Segmental assets Additions to non-current Segmental liabilities
assets
---------------------- -------------------- -------------------------- --------------------------
31 Dec 20 31 Dec 19 31 Dec 20 31 Dec 19 31 Dec 20 31 Dec 19
$'000 $'000 $'000 $'000 $'000 $'000
---------------------- --------- --------- ------------ ------------ ------------ ------------
Kounrad 66,562 76,118 1,255 1,850 (11,142) (11,017)
Sasa 435,141 411,899 7,265 9,432 (62,792) (55,269)
Assets held for
sale (note 22) 58 219 - - (25) (91)
Unallocated including
corporate 41,707 26,839 4 870 (76,757) (113,592)
---------------------- --------- --------- ------------ ------------ ------------ ------------
543,468 515,075 8,524 12,152 (150,716) (179,969)
---------------------- --------- --------- ------------ ------------ ------------ ------------
6. Revenue
2020 2019
Group $'000 $'000
International customers (Europe) - copper
cathode 87,110 78,848
International customers (Europe) - zinc
and lead concentrate 80,652 97,199
Domestic customers (Kazakhstan) - copper
cathode 557 2,860
International customers (Europe) - silver 2,016 1,908
---------------------------------------------------- ---------- ----------
Total gross revenue 170,335 180,815
---------------------------------------------------- ---------- ----------
Less:
Silver stream purchases (6,796) (5,556)
Offtake buyers' fees (3,409) (3,511)
Revenue 160,130 171,748
---------------------------------------------------- ---------- ----------
Kounrad
The Group sells and distributes its copper cathode product
primarily through an offtake arrangement with Traxys, which has
been retained as CAML's offtake partner through to September 2022.
The offtake arrangements are for a minimum of 95% of the SX-EW
plant's output. Revenue is recognised at the Kounrad mine gate when
the goods have been delivered in accordance with the contractual
delivery terms.
The offtake agreement provides for the option of provisional
pricing i.e. the selling price is subject to final adjustment at
the end of the quotation period based on the average price for the
month following delivery to the buyer. The Company may mitigate
commodity price risk by fixing the price in advance for its copper
cathode sales with the offtake partner (see note 3).
The costs of delivery to the end customers have been effectively
borne by the Group through means of an annually agreed buyer's fee
which is deducted from the selling price.
During 2020, the Group sold 13,763 tonnes (2019: 13,100 tonnes)
of copper through the offtake arrangements. Some of the copper
cathodes are also sold locally and during 2020, 97 tonnes (2019:
500 tonnes) were sold to local customers.
Sasa
The Group sells Sasa's zinc and lead concentrate product to
smelters through an offtake arrangement with Traxys which has been
fixed through to 31 December 2022. The commitment is for 100% of
the Sasa concentrate production. The agreements with the smelters
provide for provisional pricing i.e. the selling price is subject
to final adjustment at the end of the quotation period based on the
average price for the month, two months or three months following
delivery to the buyer and subject to final adjustment for assaying
results.
The Group sold 19,930 tonnes (2019: 19,697 tonnes) of payable
zinc in concentrate and 28,218 tonnes (2019: 27,875 tonnes) of
payable lead in concentrate.
The revenue arising from silver relates to a contract with
Osisko Gold Royalties where the Group has agreed to sell all of its
silver at a fixed price of $5.69/oz, significantly below market
value and arising from the silver stream commitment inherited on
acquisition (note 30).
7. Cost of sales
2020 2019
Group $'000 $'000
------------------------------------ -------- ---------
Reagents, electricity and materials 18,321 19,931
Depreciation and amortisation 28,587 29,499
Silver stream commitment (note 30) (2,017) (2,285)
Royalties 7,488 7,271
Employee benefit expense 14,931 12,862
Consulting and other services 4,352 5,398
Taxes and duties 375 422
72,037 73,098
------------------------------------ -------- ---------
8. Distribution and selling costs
2020 2019
Group $'000 $'000
------------------------------ --------- ---------
Freight costs 2,224 1,550
Transportation costs 30 108
Employee benefit expense 3 61
Depreciation and amortisation 13 20
Materials and other expenses 296 84
------------------------------ --------- ---------
2,566 1,823
------------------------------ --------- ---------
The above distribution and selling costs are those incurred at
Kounrad and Sasa in addition to the costs associated with the
offtake arrangements.
9. Administrative expenses
2020 2019
Group $'000 $'000
--------------------------------------------- ------- --------
Employee benefit expense 9,352 8,867
Share based payments 964 1,085
Consulting and other services 6,166 6,084
Auditors remuneration (note 12) 381 378
Office-related costs 923 1,271
Taxes and duties 658 77
Depreciation and amortisation 548 561
--------------------------------------------- ------- --------
Total from continuing operations 18,992 18,323
--------------------------------------------- ------- --------
Total from discontinued operations (note 22) 83 170
--------------------------------------------- ------- --------
19,075 18,493
--------------------------------------------- ------- --------
10. Other expenses
2020 2019
Group $'000 $'000
-------------------------------------------------- ------- --------
Other expenses 28 -
Loss on disposal of property, plant and equipment - 481
28 481
-------------------------------------------------- ------- --------
11. Other income
2020 2019
Group $'000 $'000
-------------------------------------------------- ------- --------
Gain on disposal of property, plant and equipment 306 -
Other income 229 212
535 212
-------------------------------------------------- ------- --------
12. Auditors' remuneration
During the year, the Group obtained the following services from
the Company's auditors and its associates:
2020 2019
$'000 $'000
--------------------------------------------------------- -------- ---------
Fees payable to BDO LLP the Company's auditors for the
audit of the parent company and Consolidated Financial
Statements 190 160
Fees payable to BDO LLP the Company's auditors and its
associates for other services:
- The audit of Company's subsidiaries 139 144
Fees payable to BDO LLP the Company's auditors and its
associates for other services: 52 -
- Other assurance services
Fees payable to PWC LLP the previous Company's auditors
for the audit of the parent company and Consolidated
Financial Statements - 36
Fees payable to PWC LLP the previous Company's auditors
and its associates for other services:
- Other assurance services - 38
--------------------------------------------------------- -------- ---------
381 378
--------------------------------------------------------- -------- ---------
13. Employee benefit expense
The aggregate remuneration of staff, including Directors, was as
follows:
Group 2020 2019
$'000 $'000
--------------------------------------------- --------- ---------
Wages and salaries 18,019 16,242
Social security costs and similar taxes 2,569 2,426
Staff healthcare and other benefits 2,168 2,123
Other pension costs 2,990 2,315
Share based payment expense (note 28) 964 1,085
--------------------------------------------- --------- ---------
Total for continuing operations 26,710 24,191
--------------------------------------------- --------- ---------
Total for discontinuing operations (note 22) 74 75
--------------------------------------------- --------- ---------
26,784 24,266
--------------------------------------------- --------- ---------
The total employee benefit expense includes an amount of
$1,346,000 (2019: $1,316,000) which has been capitalised within
property, plant and equipment.
Company 2020 2019
$'000 $'000
Wages and salaries 5,464 5,391
Social security costs 1,137 934
Staff healthcare and other benefits 413 533
Other pension costs 161 165
Share based payments (note 28) 964 1,085
------------------------------------ --------- ---------
8,139 8,108
------------------------------------ --------- ---------
Key management remuneration is disclosed in the Remuneration
Committee report.
14. Monthly average number of people employed
Group 2020 2019
Number Number
Operational 905 901
Construction 5 8
Management and administrative 133 130
------------------------------ --------- ----------
1,043 1,039
------------------------------ --------- ----------
The monthly average number of staff employed by the Company
during the year was 16 (2019: 15).
15. Finance income
Group 2020 2019
$'000 $'000
----------------------- ------------ ---------
Bank interest received 116 336
----------------------- ------------ ---------
116 336
----------------------- ------------ ---------
16. Finance costs
Group 2020 2019
$'000 $'000
Provisions: unwinding of discount (note 32) 528 329
Interest on borrowings (note 31) 6,060 10,779
Lease interest expense and bank charges 85 45
Total for continuing operations 6,673 11,153
--------------------------------------------- ------------ ------------
Total for discontinuing operations (note 22) - 57
--------------------------------------------- ------------ ------------
6,673 11,210
--------------------------------------------- ------------ ------------
17. Income tax
2020 2019
Group $'000 $'000
------------------------------------ ---- ----
Current tax on profits for the year 16,998 17,234
Deferred tax credit (note 38) (963) (1,323)
Income tax expense 16,035 15,911
Taxation for each jurisdiction is calculated at the rates
prevailing in the respective jurisdictions.
The tax on the Group's profit before tax differs from the
theoretical amount that would arise using the weighted average tax
rate applicable to profits of the consolidated entities as
follows:
2020 2019
Group $'000 $'000
Profit before income tax 59,795 67,795
Tax calculated at domestic tax rates applicable to
profits in the respective countries 9,473 21,964
Tax effects of:
Expenses not deductible for tax purposes 26,180 19,854
Non-taxable income (22,469) (27,194)
Movement on unrecognised deferred tax - tax losses 2,851 1,287
Income tax expense 16,035 15,911
Corporate income tax is calculated at 19% (2019: 19%) of the
assessable profit for the year for the UK parent company, 20% for
the operating subsidiaries in Kazakhstan (2019: 20%) and 10% (2019:
10%) for the operating subsidiaries in North Macedonia.
Expenses not deductible for tax purposes includes share-based
payment charges, transfer pricing adjustments in accordance with
local tax legislation and depreciation and amortisation charges.
Non-taxable income includes intercompany dividend income.
Deferred tax assets have not been recognised on tax losses
primarily at the parent company as it remains uncertain whether
this entity will have sufficient taxable profits in the future to
utilise these losses.
18. Earnings/(loss) per share
(a) Basic
Basic earnings/(loss) per share is calculated by dividing the
profit/(loss) attributable to owners of the Company by the weighted
average number of Ordinary Shares in issue during the year
excluding Ordinary Shares purchased by the Company and held as
treasury shares (note 26).
2020 2019
$'000 $'000
Profit from continuing operations attributable to owners
of the parent 43,740 51,824
(Loss)/profit from discontinued operations attributable
to owners of the parent (70) 53
Profitable attributable to owners of the parent 43,670 51,877
2020 2019
No. No.
Weighted average number of Ordinary Shares in issue 176,498,266 176,498,266
2020 2019
$ cents $ cents
Earnings/(loss) per share from continuing and discontinued
operations attributable to owners of the parent during
the year (expressed in $ cents per share)
From continuing operations 24.78 29.36
From discontinued operations (0.04) 0.03
From profit for the year 24.74 29.39
(b) Diluted
The diluted earnings/(loss) per share is calculated by adjusting
the weighted average number of Ordinary Shares outstanding after
assuming the conversion of all outstanding granted share
options.
2020 2019
$'000 $'000
Profit from continuing operations attributable to owners
of the parent 43,740 51,824
Profit/(loss) from discontinued operations attributable
to owners of the parent (70) 53
Profitable attributable to owners of the parent 43,670 51,877
2020 2019
No. No.
Weighted average number of Ordinary Shares in issue 176,498,266 176,498,266
Adjusted for:
* Share options 5,215,770 5,076,397
Weighted average number of Ordinary Shares for diluted
earnings per share 181,714,036 181,574,663
2020 2019
Diluted earnings/(loss) per share $ cents $ cents
From continuing operations 24.07 28.54
From discontinued operations (0.04) 0.03
From profit for the year 24.03 28.57
19. Property, plant and equipment
Motor
Construction Plant Mining vehicles Mineral
in and assets and ROU Land rights
progress equipment $'000 assets $'000 $'000 Total
Group $'000 $'000 $'000 $'000
Cost
At 1 January 2019 17,317 113,232 1,415 1,947 634 350,333 484,878
Additions 10,566 481 - 1,084 - - 12,131
Disposals (214) (732) - (32) - - (978)
Change in estimate - asset
retirement obligation
(note 32) - 3,664 - - - - 3,664
Transfers (12,951) 12,951 - - - - -
Exchange differences (345) (941) 11 (14) (15) (8,532) (9,836)
At 31 December 2019 14,373 128,655 1,426 2,985 619 341,801 489,859
Additions 8,399 49 - 74 - - 8,522
Disposals (41) (1,623) - (39) (1,703)
Change in estimate - asset
retirement obligation
(note 32) - 448 - - - - 448
Transfers (18,441) 18,441 - - - - -
Exchange differences 447 829 (134) (146) 58 27,228 28,282
At 31 December 2020 4,737 146,799 1,292 2,874 677 369,029 525,408
Accumulated depreciation
At 1 January 2019 - 32,996 225 852 - 21,204 55,277
Provided during the year - 9,964 89 471 - 17,801 28,325
Disposals - (237) - (27) - - (264)
Exchange differences - 127 2 5 - - 134
At 31 December 2019 - 42,850 316 1,301 - 39,005 83,472
Provided during the year - 10,702 115 343 - 16,159 27,319
Disposals - (1,620) - (39) - - (1,659)
Exchange differences - (1,666) (30) (73) - - (1,769)
At 31 December 2020 - 50,266 401 1,532 - 55,164 107,363
Net book value at 31
December
2019 14,373 85,805 1,110 1,684 619 302,796 406,387
Net book value at 31
December
2020 4,737 96,533 891 1,342 677 313,865 418,045
The Company had $638,000 of office equipment at net book value
as at 31 December 2020 (2019: $838 ,000 ).
The decrease in estimate in relation to the Kounrad asset
retirement obligation of $160,000 (2019: increase of $783,000) is
due to a adjusting the provision recognised at the net present
value of future expected costs using latest assumptions on
inflation rates and discount rates (note 32).
The increase in estimate in relation to the Sasa asset
retirement obligation of $608,000 (2019: increase of $2,881,000) is
due to a combination of adjusting the provision recognised at the
net present value of future expected costs using latest assumptions
on inflation rates and discount rates as well as updating the
provision for management's best estimate of the costs that will be
incurred based on current contractual and regulatory requirements
(note 32).
During the year there were total disposals of plant, property
and equipment at cost of $1,703,000 (2019: $978,000) with
accumulated depreciation of $1,659,000 (2019: $264,000). The Group
received $350,000 (2019: $233,000) consideration for these assets
and therefore a gain of $306,000 was recognised in other income
(note 11) (2019: loss of $481,000 recognised in other
expenses).
Amounts recognised in the income statement
The income statement shows the following amounts relating to
leases:
2020 2019
$'000 $'000
Depreciation charge of right-of-use assets
Office 171 323
Other 24 19
195 342
Interest expense included in finance
costs 45 45
As at 31 December 2020 there are no indications of impairment
with the fair value of the assets exceeding the net book value.
20. Intangible assets
Mining Computer
licences software
Goodwill and permits and website Total
Group $'000 $'000 $'000 $'000
Cost
At 1 January 2019 31,179 37,634 519 69,332
Additions - - 21 21
Disposals - - (12) (12)
Exchange differences (507) (140) 1 (646)
At 31 December 2019 30,672 37,494 529 68,695
Additions - - 2 2
Disposals - - (253) (253)
Exchange differences 881 (1,334) (7) (460)
At 31 December 2020 31,553 36,160 271 67,984
Accumulated amortisation
At 1 January 2019 - 7,537 484 8,021
Provided during the year - 1,940 55 1,995
Disposals - - (12) (12)
Exchange differences - 15 - 15
At 31 December 2019 - 9,492 527 10,019
Provided during the year - 1,864 10 1,874
Disposals - - (253) (253)
Exchange differences (274) (22) (296)
At 31 December 2020 - 11,082 262 11,344
Net book value at 31 December 2019 30,672 28,002 2 58,676
Net book value at 31 December 2020 31,553 25,078 9 56,640
The Company had nil computer software and website costs at net
book value as at 31 December 2020 (2019: nil).
Impairment assessment
Kounrad project
The Kounrad project located in Kazakhstan has an associated
goodwill balance of $8,154,000 (2019: $8,999,000). In accordance
with IAS 36 "Impairment of assets" and IAS 38 "Intangible Assets",
a review for impairment of goodwill is undertaken annually or at
any time an indicator of impairment is considered to exist and in
accordance with IAS 16 "Property, plant and equipment", a review
for impairment of long-lived assets is undertaken at any time an
indicator of impairment is considered to exist. The discount rate
applied to calculate the present value is based upon the nominal
weighted average cost of capital applicable to the cash generating
unit ('CGU'). A CGU is the smallest identifiable group of assets
that generates cash inflows that are largely independent of the
cash inflows from other assets or groups of assets. The recoverable
amount of the CGU is assessed by reference to the higher of value
in use ('VIU'), being the net present value ('NPV') of future cash
flows expected to be generated by the asset, and fair value less
costs to dispose ('FVLCD'). The FVLCD is considered to be higher
than VIU and has been derived using discounted cash flow techniques
(NPV of expected future cash flows of a CGU), which incorporate
market participant assumptions.
The discount rate reflects equity risk premiums over the
risk-free rate, the impact of the remaining economic life of the
CGU and the risks associated with the relevant cash flows based on
the country in which the CGU is located. These risk adjustments are
based on observed equity risk premiums, historical country risk
premiums and average credit default swap spreads for the
period.
The key economic assumptions used in the review were a five-year
forecast average nominal copper price of $6,851 per tonne (2019:
$6,372 per tonne) and a long-term price of $6,724 per tonne (2019:
$6,595 per tonne) and a discount rate of 8% (2019: 8%). Assumptions
in relation to operational and capital expenditure are based on the
latest budget approved by the Board. The carrying value of the net
assets is not currently sensitive to any reasonable changes in key
assumptions. Management concluded and the net present value of the
asset is significantly in excess of the net book value of assets,
and therefore no impairment has been identified.
Sasa project
The Sasa project located in North Macedonia has an associated
goodwill balance of $23,399,000 (2019: $21,673,000). The business
combination in 2017 was accounted for at fair value under IFRS 3
and therefore recoverable value is sensitive to changes in
commodity prices, operational performance, treatment charges,
future cash costs of production and capital expenditures. In
accordance with IAS 36 'Impairment of assets' and IAS 38
'Intangible Assets', a review for impairment of goodwill is
undertaken annually or at any time an indicator of impairment is
considered to exist and in accordance with IAS 16 'Property, plant
and equipment', a review for impairment of long-lived assets is
undertaken at any time an indicator of impairment is considered to
exist.
The assessment compared the recoverable amount of the Sasa Cash
CGU with its carrying value for the year ended 31 December 2020.
The recoverable amount of the CGU is assessed by reference to the
higher of VIU, being the NPV of future cash flows expected to be
generated by the asset, and FVLCD. The FVLCD is considered to be
higher than VIU and has been derived using discounted cash flow
techniques (NPV of expected future cash flows of a CGU), which
incorporate market participant assumptions. Cost to dispose is
based on management's best estimates of future selling costs at the
time of calculating FVLCD. Costs attributable to the disposal of
the CGU are not considered significant. The methodology used for
the fair value is a level 3 valuation.
The expected future cash flows utilised in the FVLCD model are
derived from estimates of projected future revenues based on broker
consensus commodity prices, treatment charges, future cash costs of
production and capital expenditures contained in the life of mine
('LOM') plan, and as a result FVLCD is considered to be higher than
VIU. The Group's discounted cash flow analysis reflects probable
reserves as well as indicated resources and certain inferred
resources which are considered sufficiently certain and
economically viable, and is based on detailed research, analysis
and modelling. The forecast operational and capital expenditure
reflects the transition of mining method from sub-level caving to
cut and fill stoping.
At 31 December 2020, the Group has reviewed the indicators for
impairment, including forecasted commodity prices, treatment
charges, discount rates, operating and capital expenditure, and the
mineral reserves and resources' estimates and an impairment is not
necessary. For the purposes of the impairment review a discount
rate of 9.13% (2019: 8.07%) was applied to calculate the present
value of the CGU. The discount rate was supported by a detailed
WACC calculation considering both the country and company risk
premiums. The key economic assumptions used in the review were a
five-year forecast average nominal zinc and lead price of $2,391
(2019: $2,220) and $2,093 (2019: $1,986) per tonne respectively and
a long-term price of $2,291 (2019: $2,358) and $2,095 (2019:
$1,900) per tonne respectively. Management forecasts factor in a
decrease in Zinc and lead treatment charges which are currently
high but are forecast to return to historic averages by 2022.
Management then performed sensitivity analyses whereby certain
parameters were flexed downwards by reasonable amounts for the CGU
to assess whether the recoverable value for the CGU would result in
an impairment charge. The following sensitivities when applied in
isolation would result in a breakeven position:
Long-term zinc price reduced by 12%
Long-term lead price reduced by 7%
Discount rate increased to 11%
Production decreased by 5%
Treatment charges increased by 30%
Operational expenditure increased by 9%
Capital expenditure increased by 45%
In isolation, none of the changes set out above would result in
an impairment. This sensitivity analysis also does not take into
account any of management's mitigation factors should these changes
occur or the planned production optimisation in future years. The
Board considers the base case forecasts to be appropriate and
balanced best estimates.
21. Investments
Shares in Group undertakings:
Company
31 Dec 31 Dec
20 $'000 19 $'000
At 1 January 5,491 5,491
Investment in Shuak BV 23 2,800
Impairment of investment in Shuak BV (23) (2,800)
At 31 December 5,491 5,491
Investments in Group undertakings are recorded at cost which is
the fair value of the consideration paid, less impairment.
Details of the Company holdings are included in the table
below:
Non-controlling
interest
%
2020 Date
of incorporation
CAML % CAML
% 2019
Registered office 2020
Subsidiary address Activity
Herikerbergweg
238,
1101 CM
CAML Kazakhstan Amsterdam, Holding 23 Jun
BV The Netherlands Company 100 - 100 08
Business Centre
No.
2, 4 Mira Street, Kounrad
Balkhash, project 6 Feb
Sary Kazna LLP Kazakhstan (SUC operations) 100 - 100 06
Business Centre
No.
2, 4 Mira Street, Kounrad
Kounrad Copper Balkhash, project 29 Apr
Company LLP Kazakhstan (SX-EW plant) 100 - 100 08
Masters House, 107
Hammersmith Road,
London, W14 0QH,
Copper Bay United Holding 29 Oct
Limited Kingdom Company 75* 25 75* 10
Masters House, 107
Hammersmith Road,
London, W14 0QH,
Copper Bay (UK) United Holding 9 Nov
Ltd Kingdom Company 75* 25 75* 11
Ebro 2740, Oficina
603, Las Condes,
Copper Bay Chile Santiago, Holding 12 Oct
Limitada Chile Company 75* 25 75* 11
Ebro 2740, Oficina
603, Las Condes,
Minera Playa Santiago, Exploration 20 Oct
Verde Limitada Chile - Copper 75* 25 75* 11
Masters House, 107
Hammersmith Road,
London, W14 0QH, Seller of
United zinc and 5 Sep
CAML MK Limited Kingdom lead concentrate 100 - 100 17
Cannon's Court, 22
Victoria St,
CMK Resources Hamilton Holding 19 June
Limited HM12, Bermuda Company 100 - 100 2015
Prins
Bernhardplein
200
1097 JB
Amsterham, Holding 30 June
CMK Mining B.V. The Netherlands Company 100 - 100 2015
Ivo Lola Ribar no.
57-1/6, 1000
CMK Europe SPLLC Skopje, Holding 10 July
Skopje North Macedonia Company 100 - 100 2015
28 Rudarska Str,
Makedonska
Rudnik SASA DOOEL Kamenica, 2304,
Makedonska North 22 June
Kamenica Macedonia Sasa project 100 - 100 2005
Business Centre
No.
2, 4 Mira Street,
Balkhash, Shuak project 5 Oct
Ken Shuak LLP Kazakhstan (exploration) 10 90 80 16
Shuak BV Herikerbergweg Holding - - 80 20 Sep
238, Company 16
1101 CM
Amsterdam,
The Netherlands
*Fully diluted basis
CAML MK
For the year ended 31 December 2020, CAML MK Limited (registered
number: 10946728) has opted to take advantage of a statutory
exemption from audit under section 479A of the Companies Act 2006
relating to subsidiary companies. The members of CAML MK Limited
have not required it to obtain an audit of their Financial
Statements for the year ended 31 December 2020. In order to
facilitate the adoption of this exemption, Central Asia Metals plc,
the parent company of the subsidiaries concerned, undertakes to
provide a guarantee under Section 479C of the Companies Act 2006 in
respect of CAML MK Limited.
Shuak
In February 2020, the Group reduced its effective interest in
Ken Shuak LLP from 80% to 10% and in April 2020 liquidated Shuak
BV. The Group will not be required to contribute towards future
costs of the project.
CMK Resources Limited
During 2019, CMK Mining B.V. (formally CMK Mining Limited
(Bermuda) was reincorporated from Bermuda into the Netherlands.
Prior to this reincorporation, CMK Resources Limited transferred
its shareholding in CMK Mining B.V. to CAML MK Limited . CMK
Resources Limited was liquidated in February 2020.
Non-controlling interest
31 Dec 20 31 Dec
19
$'000 $'000
Balance at 1 January 1,324 1,384
Profit attributable to non-controlling
interests (20) (60)
Disposal of subsidiaries 11 -
Balance at 31 December 1,315 1,324
Non-controlling interests were held at year end by third parties
in relation to Copper Bay Limited, Copper Bay (UK) Limited, Copper
Bay Chile Limitada and Minera Playa Verde Limitada. During the year
the Group reduced its effective interest in Ken Shuak LLP from 80%
to 10% and in April 2020 liquidated Shuak BV and therefore these
are treated as a disposal of non-controlling interest.
22. Assets held for sale
The assets and liabilities of the Copper Bay entities continue
to be presented as held for sale in the Statement of Financial
Position as the Company progresses it's sale process with a party
currently holding exclusive due diligence rights. The exploration
assets and property, plant and equipment held in Copper Bay were
fully written off in prior periods. The results of the Copper Bay
entities for the year ended 31 December 2020 and the comparative
year ended 31 December 2019 are shown within discontinued
operations in the Consolidated Income Statement.
Assets of disposal group classified as held for sale: 31 Dec 31 Dec
20 $'000 19 $'000
Cash and cash equivalents 56 106
Trade and other receivables 2 113
58 219
Liabilities of disposal group classified 31 Dec 31 Dec
as held for sale: 20 $'000 19 $'000
Trade and other payables 25 73
Provisions - 18
25 91
During the year the following have been recognised in
discontinued operations:
2020 2019
(Loss)/profit from discontinued operations: $'000 $'000
General and administrative expenses (97) (170)
Foreign exchange gain 27 280
Finance costs - (57)
(Loss)/profit from discontinued operations (70) 53
2020 2019
Cash flows of disposal group classified
as held for sale: $'000 $'000
Operating cash flows (50) 48
Total cash flows (50) 48
23. Trade and other receivables
Group Company
------------------
31 Dec 31 Dec 31 Dec 31 Dec
20 $'000 19 20 $'000 19 $'000
Current receivables $'000
--------- -------
Receivable from subsidiary - - 444 381
Loans due from subsidiaries - - 325,496 341,005
Trade receivables 1,928 1,493 - -
Prepayments and accrued income 2,627 2,195 353 387
VAT receivable 1,260 1,101 92 90
Other receivables 3,130 1,487 270 220
8,945 6,276 326,655 342,083
Non-current receivables
Prepayments 760 441 - -
VAT receivable 3,082 2,948 - -
3,842 3,389 - -
The carrying value of all the above receivables is a reasonable
approximation of fair value. There are no amounts past due at the
end of the reporting period that have not been impaired apart from
the VAT receivable balance as explained below. Trade and other
receivables and loans due from subsidiaries are accounted for under
IFRS 9 using the expected credit loss model and are initially
recognised at fair value and subsequently measured at amortised
cost less any allowance for expected credit losses.
The loan due from subsidiaries is owed by CAML MK Limited, a
directly owned subsidiary for $325,496,000 (2019: $301,179,000),
which accrues interest at a rate of 5% per annum and is repayable
on demand. There was another loan as at 31 December 2019 of
$39,826,000 which was owed by CMK Mining B.V, a subsidiary, however
this was repaid in full during the year. The loan has been assessed
for expected credit loss under IFRS 9, however as the Group's
strategies are aligned there is no realistic expectation that
repayment would be demanded early ahead of the current repayment
plans. The expected future cash flows arising from the asset exceed
the intercompany loan value under various scenarios considered
which are outlined in the intangible assets impairment assessment
so it is believed this loan can be repaid and the expected credit
loss is immaterial.
As at 31 December 2020, the total Group VAT receivable was
$4,342,000 (2019: $4,049,000) which includes an amount of
$3,396,000 (2019: $3,086,000) of VAT owed to the Group by the
Kazakhstan authorities. In 2020, the Kazakhstan authorities
refunded $235,000 and a further $247,000 was received in February
2021 and this has been classified as current trade and other
receivables as at 31 December 2020. The Group is working closely
with its advisers to recover the remaining portion. The planned
means of recovery will be through a combination of the local sales
of cathode copper to offset VAT recoverable and by a continued
dialogue with the authorities for cash recovery and further
offsets.
24. Inventories
31 Dec 31 Dec
20 19
Group $'000 $'000
Raw materials 6,986 6,431
Finished goods 844 852
7,830 7,283
The Group did not have any slow-moving, obsolete or defective
inventory as at 31 December 2020 and therefore there were no
write-offs to the Income Statement during the year (2019: nil). The
total inventory recognised through the Income Statement was
$4,808,000 (2019: $4,955,000).
25. Cash and cash equivalents and restricted cash
Group Company
31 Dec 31 Dec 31 Dec 31 Dec
20 19 20 19
$'000 $'000 $'000 $'000
Cash at bank and on hand 15,335 14,072 3,777 3,340
Short-term deposits 28,896 14,494 28,896 14,494
Cash and cash equivalents 44,231 28,566 32,673 17,834
Restricted cash 3,641 4,013 3,441 3,824
Total cash and cash equivalent including
restricted cash 47,872 32,579 36,114 21,658
The restricted cash amount of $3,641,000 (2019: $4,013,000) is
held at bank to cover corporate debt service compliance and Kounrad
subsoil user licence requirements. Short-term deposits are held at
call with banks.
The Group holds an overdraft facility in Sasa and these amounts
are disclosed in note 31 Borrowings.
Reconciliation to cash flow statements
The above figures reconcile to the amount of cash shown in the
statement of cash flows at the end of the financial year as
follows:
Group
31 Dec 31 Dec
20 $'000 19 $'000
Cash and cash equivalents as above (excluding
restricted cash) 44,231 28,566
Cash at bank and on hand in assets held
for sale (note 22) 56 106
Balance per statement of cash flows 44,287 28,672
26. Share capital and premium
Ordinary Share Treasury
Number of Shares premium shares
shares $'000 $'000 $'000
At 1 January 2019 and 31
December 2019 176,498,266 1,765 191,184 (6,526)
Exercise of options - - 353 2,686
At 31 December 2020 176,498,266 1,765 191,537 (3,840)
The par value of Ordinary Shares is $0.01 per share and all
shares are fully paid. During the year there was an exercise of
share options by employees and directors which were settled by
selling both trust and treasury shares. The proceeds of disposal of
trust and treasury shares exceeded the purchase price by $353,000
and has been recognised in share premium.
Treasury Trust Employee
Shares Shares benefit
No. No. trust shares
No.
At 1 January 2019 and 31 December 2019 511,647 1,621,783 2,436,317
Disposal of treasury shares (40,000) (1,005,467) -
At 31 December 2020 471,647 616,316 2,436,317
27. Currency translation reserve
Currency translation differences arose primarily on the
translation on consolidation of the Group's Kazakhstan-based and
North Macedonian-based subsidiaries whose functional currency is
the Tenge and North Macedonian Denar respectively. In addition,
currency translation differences arose on the goodwill and fair
value uplift adjustments to the carrying amounts of assets and
liabilities arising on the Kounrad Transaction and CMK Resources
acquisition which are denominated in Tenge and Denar respectively.
During 2020, a non-cash currency translation gain of $26,975,000
(2019: loss of $11,019,000) was recognised within equity.
28. Share based payments
The Company provides rewards to staff in addition to their
salaries and annual discretionary bonuses, through the granting of
share options in the Company. The Company share option scheme has
an exercise price of effectively nil for the participants.
The share options granted during 2012 until 2018 were based on
the achievement by the Group and the participant of the performance
targets as determined by the CAML Remuneration Committee that are
required to be met in year one and then options could be exercised
one third annually from the end of year one. Options granted during
2012 to 2018 had straight forward conditions attached and were
valued using a Black-Scholes model.
Share options granted in 2019 vest after three years depending
on achievement of the Group of performance target relating to the
level of absolute total shareholder return compound annual growth
rate of the value of the Company's shares over the performance
period of three financial years ending 31 December 2021.
Share options granted in 2020 vest after three years depending
on a combination of the achievement of the Group of performance
target relating to the level of absolute total shareholder return
compound annual growth rate of the value of the Company's shares
over the performance period of three financial years ending 31
December 2022 relative to the constituents of a selected
groupmining index of companies as well as sustainability
performance targets.
The fair value at grant date of the 2019 and 2020 grants are
independently determined using a Monte Carlo simulation model that
takes into account the exercise price, the term of the option, the
impact of dilution (where material), the share price at grant date
and expected price volatility of the underlying share, the expected
dividend yield, the risk-free interest rate for the term of the
option, and the correlations and volatilities of the share
price.
The assessed fair value at grant date of options granted during
the year ended 31 December 2020 was $2,136,000 in total which is
recognised over the vesting period commencing 16 December 2020
until 31 March 2023. As the share options were granted on, and
vesting commenced on the 16 December 2020, the charge for the
current year is immaterial. For the 2019 share options $483,000
(2019: $362,000) was expensed for the year ended 31 December 2020.
An additional dividend related share option charge of $308,000
(2019: $723,000) was recognised and also additional costs
associated when share options were exercised of $173,000 (2019:
$nil). The number of shares covered by such awards is increased by
up to the value of dividends declared as if these were reinvested
in Company shares at the dates of payment. The outstanding share
options included in the calculation of diluted earnings/(loss) per
share (note 18) includes these additional awards but they are
excluded from the disclosures in this note. In total, an amount of
$964,000 (2019: $1,085,000) has been expensed within employee
benefits expense from continuing operations for share based payment
charges for the year ended 31 December 2020.
The model inputs for options granted during the year
included:
31 Dec 2020 31 Dec 2019
Vesting period 2 years 3 months 3 years
Exercise price $0.01 $0.01
Grant date: 16 December 2020 30 May 2019
Expiry date: 15 December 2030 29 May 2029
Share price at grant date $3.02 $2.71
Expected price volatility of the
Company's shares 16% 15%
Risk-free interest rate 0.55% 1.84%
As at 31 December 2020, 4,420,348 (2019: 4,182,729) options were
outstanding. Share options are granted to Directors and selected
employees. The exercise price of the granted options is presented
in the table below for every grant. The Company has the option but
not the legal or constructive obligation to repurchase or settle
the options in cash.
Movements in the number of share options outstanding and their
related weighted average price are as following:
2020 2019
Average Average
exercise exercise
price price
in $ per in $ per
share Options share Options
option (number) option (number)
At 1 January 0.01 4,182,729 0.01 3,311,600
Granted 0.01 1,039,126 0.01 1,124,877
Exercised 0.01 (801,507) 0.08 (156,627)
Non-vesting - - 0.01 (97,121)
At 31 December 0.01 4,420,348 0.01 4,182,729
Non-vesting shares relates to options granted for which the
performance targets were not met. Out of the outstanding options
of
4,420,348 (2019: 4,182,729), 1,932,717 options (2019: 2,149,192)
were exercisable as at 31 December 2020 excluding the value of
additional share options for dividends declared on those
outstanding. The related weighted average share price at the time
of exercise was $3.26 (2019: $2.73) per share.
Share options exercised by the Directors during the year are
disclosed in the Remuneration Committee Report.
Share options outstanding at the end of the year have the
following expiry date and exercise prices:
Option
Expiry exercise 2020 2019
Grant - vest date price Share options (number)
of option $
7 May
8 May 12 22 0.01 76,032 100,000
23 Jul
24 Jul 13 23 0.01 36,801 60,155
2 Jun
3 Jun 14 24 0.01 143,064 196,355
7 Oct
8 Oct 14 24 0.01 160,000 214,354
21 Apr
22 Apr 15 25 0.01 212,121 358,948
18 Apr
18 Apr 16 26 0.01 338,940 533,157
21 Apr
21 Apr 17 27 0.01 482,872 642,376
2 May
2 May 18 28 0.01 806,515 952,507
2 May
30 May 19 29 0.01 1,124,877 1,124,877
16 Dec
16 Dec 20 30 0.01 1,039,126 -
4,420,348 4,182,729
Employee Benefit Trust
The Company set up an Employee Benefit Trust ('EBT') during 2009
as a means of incentivising certain Directors and senior management
of CAML prior to the Initial Public Offering ('IPO'). All of the
shares awarded as part of the EBT scheme vested on the successful
completion of the IPO on 30 September 2010.
2,534,688 Ordinary Shares were initially issued as part of the
arrangements in December 2009 followed by a further issue of
853,258 in September 2010. The shares were issued at the exercise
price of $0.68, which was the best estimate of the Company's
valuation at the time. Details of the awards to Directors of the
Company are contained in the Remuneration Committee Report.
29. Trade and other payables
Group Company
31 Dec 31 Dec 31 Dec 31 Dec
20 19 20 19 $'000
$'000 $'000 $'000
Trade and other payables 4,652 3,917 131 179
Accruals 4,569 5,064 4,142 4,581
Corporation tax, social security and
other taxes 3,674 3,324 1,151 205
12,895 12,305 5,424 4,965
The carrying value of all the above payables is equivalent to
fair value.
All Group and Company trade and other payables are payable
within less than one year for both reporting periods.
30. Silver streaming commitment
The carrying amounts of the silver streaming commitment for
silver delivery are as follows:
Group Company
31 Dec 31 Dec 31 Dec 31 Dec
20 19 $'000 20 $'000 19
$'000 $'000
Current 1,573 2,140 - -
Non-current 19,246 20,755 - -
20,819 22,895 - -
On 1 September 2016, the CMK Group entered into a Silver
Purchase Agreement. The Group acquired this agreement as part of
the acquisition of the CMK Group and inherited a silver streaming
commitment related to the production of silver during the life of
the mine. The reduction in the silver streaming commitment is
recognised in the Income Statement within cost of sales as the
silver is delivered based on the units of production.
31. Borrowings
Group Company
31 Dec 31 Dec 31 Dec 31 Dec
20 19 $'000 20 19
$'000 $'000 $'000
Secured: Non-current
Bank loans 32,320 69,473 32,320 69,473
Secured: Current
Bank loans 38,400 38,400 38,400 38,400
Unsecured: Current
Bank overdraft 9,692 895 - -
Total Current 48,092 39,295 38,400 38,400
Total borrowings 80,412 108,768 70,720 107,873
The carrying value of loans approximates fair value:
Carrying amount Fair value
31 Dec 31 Dec 31 Dec 31 Dec
20 $'000 19 $'000 20 $'000 19 $'000
Traxys Europe S.A. 70,720 107,873 70,720 107,873
Bank overdrafts 9,692 895 9,692 895
80,412 108,768 80,412 108,768
The movement on borrowings can be summarised as follows:
Group Company
31 Dec 31 Dec 31 Dec 31 Dec
20 19 20 19
$'000 $'000 $'000 $'000
Balance at 1 January 108,768 144,949 107,873 144,949
Repayment of borrowings (38,400) (38,400) (38,400) (38,400)
Finance charge interest 4,813 9,455 4,627 9,455
Finance charge unwinding of directly
attributable fees 1,247 1,324 1,247 1,324
Interest paid (4,794) (9,455) (4,627) (9,455)
Drawdown of overdraft 9,105 895 - -
Repayments of overdraft (1,110) - - -
Foreign exchange 783 - -
Balance at 31 December 80,412 108,768 70,720 107,873
During the year, $38,400,000 (2019: $38,400,000) of the
principal amount of Group debt was repaid as well as a further
$4,794,000 (2019: $9,455,000) interest.
The Group holds one corporate debt package with Traxys repayable
on 4 November 2022. Interest was payable at LIBOR plus 4.75% and
reduced to LIBOR plus 4.00% with effect from 27 March 2020.
Security is provided over the shares in CAML Kazakhstan BV, certain
bank accounts and the Kounrad offtake agreement as well as over the
Sasa offtake agreement.
The financial covenants of the debt which include the monitoring
of gearing and leverage ratios are all continuously monitored by
management and the Group is both currently compliant and forecast
to continue to be compliant with significant headroom.
The $5,000,000 overdraft facility previously agreed with
Komercijalna Banka AD Skopje with a fixed interest rate of 3.8%
denominated in Macedonian Denar previously repayable in July 2020
was extended for a further year to 30 July 2021 with the fixed
interest rate reduced from 3.8% down to a range of 2.4% to 2.5%
dependent on conditions. This overdraft as at 31 December 2020 was
$4,809,000 (31 December 2019: $895,000).
In June 2020 a new one year $5,000,000 overdraft facility was
agreed with Ohridska Banka A.D. Skopje with a fixed interest rate
of 2.5% denominated in Macedonian Denar repayable on 26 June 2021.
This overdraft as at 31 December 2020 was $4,883,000 (31 December
2019: nil).
As at 31 December 2020, the Group measured the fair value using
techniques for which all inputs which have a significant effect on
the recorded fair value are observable, either directly or
indirectly (Level 2).
The different levels have been defined as follows:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (Level
2).
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level
3).
32. Provisions for other liabilities and charges
Group
Asset Employee Other
retirement retirement employee
obligation benefits benefits Legal claims Total
$'000 $'000 $'000 $'000 $'000
At 1 January 2019 4,428 196 165 327 5,116
Change in estimate 3,664 39 36 - 3,739
Settlements of provision - (32) (11) (30) (73)
Unwinding of discount (note
16) 329 - - - 329
Exchange rate difference (23) (4) (4) (7) (38)
At 31 December 2019 8,398 199 186 290 9,073
Change in estimate 448 43 47 351 889
Settlements of provision - (23) (19) (631) (673)
Unwinding of discount (note
16) 528 - - - 528
Exchange rate difference (178) 20 21 6 (131)
At 31 December 2020 9,196 239 235 16 9,686
Non-current 6,572 203 224 - 6,999
Current 2,624 36 11 16 2,687
At 31 December 2020 9,196 239 235 16 9,686
a) Asset retirement obligation
The Group provides for the asset retirement obligation
associated with the mining activities at Kounrad, estimated
internally to be required in 2034. The provision is recognised at
the net present value of future expected costs using a discount
rate of 8.07% (2019: 8.07%). The decrease in estimate in relation
to the asset retirement obligation of $160,000 (2019: increase of
$783,000) is due to adjusting the provision recognised at the net
present value of future expected costs using an inflation rate of
3.86% (2019: 4.13%).
Under current legislation entities operating mining and related
activities in North Macedonia are required to take remedial action
for the land where such activities have occurred based on a plan
approved by the Ministry of the Environment as well as in
accordance with international best practices. In 2017, the Group
engaged an independent expert to conduct an independent assessment
on the environment of the mining activities of the Group and to
prepare an assessment of the restoration and the relevant costs
connected with the mine, and the mining properties and in 2019, the
Group engaged the University of Shtip to assess future costs in
relation to TSF3.2 and TSF4. The final asset retirement obligation
used these external assessment as well as the Group's own internal
calculations to estimate the future potential obligations. The
expected current cash flows were projected over the useful life of
the mining sites and discounted to 2020 terms using a discount rate
of 4.94% (2019: 7.25%). The cost of the related assets are
depreciated over the useful life of the assets and are included in
property, plant and equipment. The increase in estimate in relation
to the asset retirement obligation of $608,000 (2019: increase of
$2,914,000) is due to a combination of adjusting the provision
recognised at the net present value of future expected costs using
latest assumptions on inflation rates and discount rates as well as
updating the provision for management's best estimate of the costs
that will be incurred based on current contractual and regulatory
requirements. See note 39 for subsequent events related to the
asset retirement obligation.
b) Employee retirement benefit
All employers in North Macedonia are obliged to pay employees
minimum severance pay on retirement equal to two months of the
average monthly salary applicable in the country at the time of
retirement. The retirement benefit obligation is stated at the
present value of expected future payments to employees with respect
to employment retirement pay. The present value of expected future
payments to employees is determined by an independent authorised
actuary in accordance with the prevailing rules of actuarial
mathematics.
c) Other employee benefit
The Group is also obliged to pay jubilee anniversary awards in
North Macedonia for each ten years of continuous service of the
employee. Provisions for termination and retirement obligations are
recognised in accordance with actuary calculations. Basic 2020
actuary assumptions are used as follows:
Discount rate: 3.0%
Expected rate of salary increase: 2.4%
d) Legal claims
The Group is party to certain legal claims and the recognised
provision reflects management's best estimate of the most likely
outcome. The Group reviews outstanding legal cases following
developments in the legal proceedings and at each reporting date,
in order to assess the need for provisions and disclosures in its
financial statements. Among the factors considered in making
decisions on provisions are the nature of litigation, claim or
assessment, the legal process and potential level of damages in the
jurisdiction in which the litigation, claim or assessment has been
brought, the progress of the case (including the progress after the
date of the financial statements but before those statements are
issued), the opinions or views of legal advisers, experience on
similar cases and any decision of the Group's management as to how
it will respond to the litigation, claim or assessment.
33. Cash generated from operations
(Group) 2020 2019
Note $'000 $'000
Profit before income tax including discontinued
operations 59,725 67,847
Adjustments for:
Depreciation and amortisation 29,148 30,080
Silver stream commitment (2,017) (2,285)
(Gain)/loss on disposal of property, plant
and equipment 11 (306) 481
Foreign exchange gain/(loss) 690 (377)
Share based payments 28 964 1,085
Finance income 15 (116) (336)
Finance costs 16 6,673 11,153
Changes in working capital:
Inventories 24 (546) 246
Trade and other receivables 23 (7,009) (1,738)
Trade and other payables 29 46 (940)
Provisions for other liabilities and charges 32 (232) (73)
Cash generated from operations 87,020 105,143
The increase in trade and other receivables of $7,009,000
includes movement in Sasa VAT receivable balance which during the
year is offset against the corporate income tax payments during the
year.
34. Commitments
Significant expenditure contracted for at the end of the
reporting period but not recognised as liabilities is as
follows:
Group 31 Dec 31 Dec
20 $'000 19 $'000
Property, plant and equipment 3,046 851
Other 194 340
3,240 1,191
35. Contingent asset
During 2018, CMK Europe SPLLC Skopje ('CMK Europe'), paid $5.9
million of withholding tax liability to the Public Revenue Office
('PRO') in North Macedonia. The liability related to the activities
of CMK Europe prior to CAML's ownership. In June 2020, CMK Europe,
received a judgement from the Higher Administrative Court of North
Macedonia accepting its appeal. The Court judgement instructed the
PRO to repeat the withholding tax inspection for the period 2015 to
2017 taking into consideration the findings of the Court judgement.
Management believes that a favourable outcome is probable, however,
the contingent asset has not been recognised as a receivable at 31
December 2020 as receipt of the amount is dependent on the outcome
of the re-inspection.
36. Dividend per share
In line with the Company dividend policy, the Company paid
$13,850,000 in 2020 (2019: $32,164,000) which consisted of a 2020
interim dividend of 6.0 pence per share (2019: interim dividend of
6.5 pence per share and a final dividend for 2018 of 8.0 pence per
share).
37. Related party transactions
Key management remuneration
Key management remuneration comprises the Directors'
remuneration, including Non-Executive Directors and is as
follows:
2020 2020 2020 2020 2020 2020 2019
Basic Annual Benefits Employers
salary bonus Pension in Kind NI Total Total
/ fees $'000 $'000 $'000 $'000 $'000 $'000
$'000
Executive Directors:
Nigel Robinson 468 378 29 12 258 1,145 1,009
Gavin Ferrar 385 312 23 - 214 934 811
Non-Executive Directors:
Nick Clarke 227 - - 13 30 270 735
Nigel Hurst-Brown 129 - - - 16 145 143
Robert Cathery 104 - - - 13 117 115
Nurlan Zhakupov 72 - - - - 72 95
David Swan 104 - - - 13 117 115
Roger Davey 97 - - - 12 109 113
Dr Gillian Davidson 104 - - - 14 118 9
1,690 690 52 25 570 3,027 3,145
During the year Nigel Robinson exercised 350,000 shares for a
total share option gain of $1,032,000, Gavin Ferrar exercised
300,000 shares for a total gain of $870,000 and Nurlan Zhakupov
exercised 40,000 shares for a gain of $117,000.
Kounrad foundation
The Kounrad foundation, a vehicle through which Kounrad donates
to the community, was advanced $198,000 (2019: $195,000). This is a
related party by virtue of common Directors.
38. Deferred income tax asset and liability
Group
The movements in the Group's deferred tax assets and liabilities
are as follows:
Currency (Debit)/credit
translation to income
At 1 differences statement At 31 December
January $'000
2020 $'000 2020 $'000
$'000
Other temporary differences (190) 27 (390) (553)
Deferred tax liability on fair value adjustment
on Kounrad Transaction (6,428) 599 328 (5,501)
Deferred tax liability on fair value adjustment
on CMK acquisition (19,205) (1,729) 1,025 (19,909)
Deferred tax liability, net (25,823) (1,103) 963 (25,963)
Reflected in the statement of financial 31 Dec 31 Dec
position as: 20 19
$'000 $'000
Deferred tax asset 236 266
Deferred tax liability (26,199) (26,089)
A taxable temporary difference arose as a result of the Kounrad
Transaction and CMK Resources Limited acquisition, where the
carrying amount of the assets acquired were increased to fair value
at the date of acquisition but the tax base remained at cost. The
deferred tax liability arising from these taxable temporary
differences has been reduced by $1,353,000 during the year (2019:
$1,436,000) to reflect the tax consequences of depreciating and
amortising the recognised fair values of the assets during the
year.
Currency (Debit)/credit
translation to income
At 1 differences statement At 31 December
January $'000
2019 $'000 2019 $'000
$'000
Other temporary differences (77) - (113) (190)
Deferred tax liability on fair value
adjustment on Kounrad Transaction (6,681) (51) 304 (6,428)
Deferred tax liability on fair value
adjustment on CMK acquisition (20,912) 575 1,132 (19,205)
Deferred tax liability, net (27,670) 524 1,323 (25,823)
31 Dec At 31
2020 Dec 2019
$'000 $'000
Deferred tax liability due within
12 months (963) (1,345)
Deferred tax liability due after
12 months (25,236) (24,744)
Deferred tax liability (26,199) (26,089)
All deferred tax assets are due after 12 months.
Where the realisation of deferred tax assets is dependent on
future profits, the Group recognises losses carried forward and
other deferred tax assets only to the extent that the realisation
of the related tax benefit through future taxable profits is
probable.
The Group did not recognise other potential deferred tax assets
arising from losses of $12,016,000 (2019: $7,417,000) as there is
insufficient evidence of future taxable profits within the entities
concerned. Unrecognised losses can be carried forward
indefinitely.
At 31 December 2020, the Group had other deferred tax assets of
$1,071,000 (2019: $2,810,000) in respect of share-based payments
and other temporary differences which had not been recognised
because of insufficient evidence of future taxable profits within
the entities concerned.
There are no significant unrecognised temporary differences
associated with undistributed profits of subsidiaries at 31
December 2020 and 2019, respectively.
Company
At 31 December 2020 and 2019 respectively, the Company had no
recognised deferred tax assets or liabilities.
At 31 December 2020, the Company had not recognised potential
deferred tax assets arising from losses of $12,016,000 (2019:
$7,417,000) as there is insufficient evidence of future taxable
profits. The losses can be carried forward indefinitely.
At 31 December 2020, the Company had other deferred tax assets
of $1,071,000 (2019: $2,810,000) in respect of share-based payments
and other temporary differences which had not been recognised
because of insufficient evidence of future taxable profits.
39. Events after the reporting period
Subsequent to year end, additional information was received in
March 2021 which is likely to lead to a reduction of the future
costs in relation to the Sasa asset retirement obligation. This is
owing to a notification regarding a potential amendment to the
environmental requirements in relation to the remedial work for TSF
3-2. Based upon this update, management are reviewing the impact to
the provision and will perform a full assessment in 2021 of the
restoration and relevant costs connected with the mine, TSF 3-2 and
TSF4 under the anticipated revision to the requirements of the
current legislating entities overseeing mining and related
activities in North Macedonia, based on a plan to be approved by
the Ministry of the Environment as well as in accordance with
international best practices.
In January CAML put in place hedging arrangements for a portion
of its 2021 metal production. Kounrad's Zero Cost Collar contract
for 30% of copper production includes a put option of $6,900 per
tonne and a call option of $8,380 per tonne. Sasa's zinc and lead
arrangements are swap contracts, with 30% of Sasa's payable zinc
production to be sold at $2,804 per tonne and 30% of its payable
lead production to be sold at $2,022 per tonne. These arrangements
ensure that CAML retains its leverage to strong copper, zinc and
lead prices, while protecting a meaningful proportion of revenues
during the higher capital expenditure period and continuing to
rapidly deleverage. The impact of this hedge in 2021 is currently
expected to be immaterial given the current commodity prices.
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END
FR UKVARASUOUUR
(END) Dow Jones Newswires
March 30, 2021 02:00 ET (06:00 GMT)
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