TIDMCAML
RNS Number : 0994Z
Central Asia Metals PLC
16 September 2020
16 September 2020
Central Asia Metals plc
(the 'Group', the 'Company' or 'CAML')
Interim Results for the Six Months Ended 30 June 2020
Central Asia Metals plc (AIM: CAML) is pleased to announce its
unaudited interim results for the six months ended 30 June 2020
('H1 2020' or the 'period').
H1 2020 operational summary
-- Post period end (14 September 2020) Sasa tailings storage facility 4 ('TSF4') leakage
o Work with relevant authorities ongoing to understand the root
cause and likely timings to recommence production
o Based on the initial information available, CAML believes that
the facility can be repaired and secured and that an extended
shutdown of the processing plant is unlikely
-- No lost time injuries in H1 2020 ('LTIs') (H1 2019: one)
-- Sasa zinc in concentrate production of 12,203 tonnes (H1 2019: 11,517 tonnes)
o Payable zinc sales of 10,273 tonnes (H1 2019: 9,708
tonnes)
-- Sasa lead in concentrate production of 15,140 tonnes (H1 2019: 14,357 tonnes)
o Payable lead sales of 14,445 tonnes (H1 2019: 13,731
tonnes)
-- Kounrad copper production of 6,607 tonnes (H1 2019: 6,594 tonnes)
o Copper sales of 6,600 tonnes (H1 2019: 6,461 tonnes)
H1 2020 financial summary
-- Dividend decision deferred pending greater clarity on TSF4 leakage
-- Group gross revenue 1 of $75.4 million (H1 2019: $89.9
million) and Group net revenue of $70.8 million (H1 2019: $85.6
million)
-- Group profit before tax of $24.3 million (H1 2019: $35.5 million)
-- Sasa C1 zinc equivalent cash cost reduced to $0.43 per pound (H1 2019: $0.47 per pound)
-- Kounrad C1 copper cash cost reduced to $0.48 per pound (H1 2019: $0.51 per pound)
-- Group EBITDA 1 of $42.5 million (H1 2019: $56.7 million)
-- EBITDA margin 1 of 56% (H1 2019: 63%)
-- EPS from continuing operations of 10.35 cents per share (H1 2019: 15.42 cents per share)
-- Cash in the bank as at 30 June 2020 of $44.0 million 2 (31 December 2019: $32.6 million 2 )
-- Group net debt 1 as at 30 June 2020 of $58.8 million (31 December 2019: $80.2 million)
-- Debt repayments of $19.2 million (H1 2019: $19.2 million)
-- Group free cash flow 1 of $21.1 million (H1 2019: $35.5 million)
-- Average metal prices received below H1 2019, but have
subsequently recovered strongly since 30 June 2020:
o Average copper price received of $5,605 per tonne (H1 2019:
$6,191 per tonne), against a current spot price of $6,760 per
tonne
o Average zinc price received of $1,964 per tonne (H1 2019:
$2,676 per tonne), against a current spot price of $2,457 per
tonne
o Average lead price received of $1,676 per tonne (H1 2019:
$1,930 per tonne), against a current spot price of $[1,899] per
tonne
Outlook
-- On course to achieve 2020 copper production guidance of:
o 12,500 - 13,500 tonnes of copper
-- Sasa processing facilities not currently operational while
TSF4 leakage investigation is underway
o Zinc and lead production guidance under review (previously
23,000 - 25,000 tonnes of zinc and 30,000 - 32,000 tonnes of
lead)
-- CAML Group management sustainability targets identified
-- Sasa Life of Mine study concluded, with mining method changes recommended
1 See Financial Review section for definition of non-IFRS
alternative performance measures
2 The cash balance figure disclosed includes restricted cash
balance
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014
Nigel Robinson, Chief Executive Officer, commented:
"We have today released a strong set of financial results,
demonstrating our reliable and low-cost metal output produced
safely. Under challenging H1 2020 operational and metal price
conditions due to COVID-19, we are pleased to have reported EBITDA
of $42.5 million. Indeed, delivering this result at a margin of
56%, during one of the most difficult and unusual periods in recent
history is, I believe, a testament to the fundamental strength of
our business and the quality of our operations and on-site teams.
We have continued to reduce our corporate debt facility, repaying
over $19 million during the first half of the year and we have
ensured we retained a strong balance sheet throughout the period. I
was pleased that during the period we published our first
sustainability report, detailing our efforts and achievements in
this important area of our business at the corporate level as well
as for Sasa and Kounrad.
"However, this strong performance has been somewhat overshadowed
by the tailings dam leakage that occurred at Sasa's TSF4 on Monday
14 September 2020, which has resulted in us temporarily stopping
production at the mine. Of most importance, no one was harmed in
the incident and we now have the situation under control. Site
management are working with the authorities to understand the root
cause so we can repair the facility and ensure that we can safely
operate again. Based on the initial information available, we
consider the likelihood of an extended shutdown of the processing
plant to be low.
"At the time of our H1 2020 operational update in July 2020, we
announced that we had some cases of COVID-19 at Kounrad. This has
been managed at site and there are currently no positive cases,
with those previously affected having now returned to work. Since
the period end, there have been a small number of COVID-19 cases at
Sasa and in the local town, Makedonska Kamenica, and I have
confidence that we are managing this situation as well as
possible.
"Post the period end, our operations team completed the Sasa
Life of Mine study, which builds upon the preliminary work
announced in January 2020. Changing the mining method from the
current sub-level caving to cut and fill stoping 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.
"At the time of our 2019 results, we took the difficult decision
not to recommend a final dividend given the uncertainties that were
facing our business and many others at that time. We have been able
to safely mitigate a number of these key risks or seen these
naturally recede. Post period end, we have seen a strengthening in
metals pricing and continued, consistent operational performance.
We had therefore planned to reinstate our dividend. However, given
the recent TSF4 leakage, we have decided to delay declaring our
interim dividend pending further clarity on the likely cost and
timing on rectifying this issue, and we aim to provide an update in
the near term."
Analyst conference call
There will be an analyst conference call on Wednesday 16
September 2020 at 09:30 (BST). The call can be accessed by dialling
+44 (0) 20 3003 2666 and quoting the confirmation code 'CAML
Interim Results'. Additionally, the presentation can be viewed via
a live webcast using the following link
https://webcasting.brrmedia.co.uk/broadcast/5f3e574fb14d87262643a3b1
. The webcast and the Company's corporate presentation will be
available on the CAML website at 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
Neil Elliot
Blytheweigh (PR Advisors) Tel: +44 (0) 20 7138 3204
Tim Blythe
Megan Ray
Rachael Brooks
Qualified Person Statement:
The technical information contained in this announcement has
been reviewed by Scott Yelland, CAML COO, a qualified Chartered
Engineer and Fellow of the Institute of Materials, Minerals and
Mining (FIMMM).
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 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
Chief Executive Officer Review
The first six months of 2020 were very positive for CAML, with
zinc and lead production from Sasa in North Macedonia and copper
production from Kounrad in Kazakhstan in line with expectations.
This result was achieved whilst having made COVID-19 related
operational changes to mitigate the risk of infection amongst the
workforce. CAML is pleased to also report a safe six months, with
no lost time injuries ('LTIs') at either operation.
Zinc and lead production at Sasa were 12,203 tonnes and 15,140
tonnes respectively. Payable zinc sales for the period were 10,273
tonnes and, for lead, were 14,445 tonnes, and H1 2020 gross revenue
from these metal concentrates was $38.4 million. This was 23% lower
than H1 2019 due to significantly lower commodity prices and higher
treatment charges (up 60% HoH) during the recent period, with the
zinc price received being on average 27% lower than the previous
corresponding period and the lead price 13% lower. Sasa's costs of
production are low by industry standards at $0.43 per pound of
zinc, and this resulted in a Sasa H1 2020 EBITDA of $19.5
million.
Kounrad produced 6,607 tonnes of copper cathode during the
period and sold 6,600 tonnes, generating gross revenue of $37.0
million from an average copper price received of $5,605 per tonne,
9% lower than that received in H1 2019. With a C1 cost of copper
production that is amongst the lowest in the world at $0.48 per
pound, Kounrad generated H1 2020 EBITDA of $27.1 million.
H1 2020 CAML Group EBITDA was $42.5 million. While this result
was 25% below that of H1 2019 due to weaker copper, zinc and lead
prices and increased treatment charges at Sasa, the margin of 56%
(down from 63% in H1 2019) in the commodity market environment
reflects strong cost control operationally. EPS of 10.35 cents was
33% below the previous corresponding period. In a challenging
period globally, it is important to note Group free cash flow
generation of $21.1 million.
Given this strong performance and improving commodity price
outlook for H2 2020, CAML had expected to reinstate its dividend.
However, given the recent TSF4 leakage, the Board has decided to
delay making a decision regarding the interim dividend pending
further clarity on the likely cost and timing on rectifying this
issue. Based on the initial information available from early
investigations, CAML believes that the facility can be repaired and
secured and considers the likelihood of an extended shutdown of the
processing plant to be low.
Much of CAML's H1 2020 community focused sustainability efforts
were related to COVID-19. The Company has provided financial and
community support to help both Kazakhstan and North Macedonia in
the fight against the pandemic. In Kazakhstan, this included the
Kounrad Foundation charity purchasing a polymerase chain reaction
('PCR') machine for Balkhash Central Hospital, which is soon to be
delivered, to ensure timely virus testing for the local population.
In North Macedonia, Sasa donated around $150,000 to provide support
for hospitals (approximately 50% of funds), as well as support for
the most vulnerable in the local community and a contribution to
the government's Ministry of Health COVID-19 fund.
CAML has during H1 2020 set its executive directors and senior
managers sustainability-related targets for 2020, and remuneration
will be linked to achievements in these important areas. These
targets cover health, safety and employee welfare and development
in general, as well as looking after the environment and
communities close to CAML operations.
The Company has completed its Life of Mine ('LoM') study and the
CAML Board recommends the transition of Sasa's Svinja Reka orebody
from the current sub-level caving mining method to a more selective
cut and fill stoping approach. A larger Ore Reserve will be
available for mining because of safer stress conditions under the
cut and fill methodology, which has meant that previously planned
pillars of ore at depth can now be extracted, as well as long term
improvements to the storage of tailings.
Management's focus on business development has been maintained
and the team is currently reviewing a number of opportunities.
While CAML's priorities remain managing operations and delivering
shareholder value through dividends and deleveraging, growth by
acquisition remains an important capital allocation consideration,
with scale and liquidity becoming ever more important investor
considerations.
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. The TSF4 leakage
is under control and an investigation underway, and the Company
aims to repair and secure this facility as safely and swiftly as
possible. Kounrad remains on course to meet its 2020 guidance at
costs that are amongst the lowest in the world.
Sustainability review
Health and safety
No LTIs were reported at either Kounrad or Sasa during H1 2020.
There was one medical treatment injury ('MTI') at Sasa during H1
2020 and therefore one CAML Group total recordable injury ('TRI')
during H1 2020. CAML's H1 2020 lost time injury frequency rate
('LTIFR') is therefore zero, and its total recordable injury
frequency rate ('TRIFR') is 0.87, which are low by industry
standards. By 30 June 2020, 518 days had passed since the last LTI
at Sasa and 775 days since the last LTI at Kounrad.
No occupational health issues were identified at either Sasa or
Kounrad during H1 2020.
COVID-19
The Company has put in place many measures during H1 2020 to
ensure the health and wellbeing of its employees and contractors on
both sites, including:
- Establishing a COVID-19 'Crisis Committee', involving regular
calls between CAML Group and operations teams to coordinate
responses/actions and share ideas
- Staff at both operations instructed to work from home where possible
- A cessation of all but essential international travel
- A cessation of all but necessary visitors to site (subject to
authorisation from the relevant local General Director)
- Identification and close monitoring of team members most
vulnerable to COVID-19 with many temporarily removed from the
workplace
- The distribution of COVID-19 related PPE to employees and contractors
- Undertaking a detailed review of all activities at both sites
to ensure that social distancing is at the heart of operations
during the pandemic
- Changes made to canteen and transport arrangements at both
operations to increase social distancing
- Relevant government guidance reinforced, and increased hygiene
measures implemented on both sites
- Employees instructed to stay at home and the Company arranging
a test if they suffer from any potential COVID-19 symptoms
- Temperature testing on entry to transport buses and at the operation gates
To date, 39 Kounrad employees have tested positive for COVID-19,
and all are now recovered and working again. The team has begun to
bring back more team members onto the site, and currently has
approximately 13% of employees working from home. Post the period
end, there have been a number of cases in the town closest to the
Sasa mine, as well as seven employees at the mine who have tested
positive for COVID-19 in the last two months. Three of these team
members have to date recovered and returned to work.
Environment
Sasa
During H1 2020, there were no environmental incidents or high
potential incidents and Sasa's air quality and dust concentrations
remained within the 24-hour limit values.
Regarding water usage, last year Sasa was able to decrease its
net water consumption by 43% due to recycling initiatives. An
external study was planned for H1 2020 to analyse further increases
in the percentage of recycled waters used in the Sasa processing
plant. However, this was postponed due to COVID-19 related site
visitor restrictions. This study will commence as soon as
circumstances allow.
The Sasa team has been considering ways to reduce greenhouse gas
emissions and has commenced conversations with the local power
provider with a view to potentially purchasing more renewable
power. In addition, a study is also due to commence in H2 2020 into
the viability of generating wind and / or solar power at Sasa.
The Global Industry Standard on Tailings Management has now been
published and work is already underway on site to ascertain the
exact workstreams that would be required to ensure Sasa's
compliance.
Post the period end, there was a short-term leakage of tailings
from Sasa's TSF4 into the local river. The leakage was stopped soon
after and nobody has been harmed. All relevant parties have been
informed in North Macedonia and, in conjunction with the
appropriate national authorities, an investigation is now underway
to ascertain the volume of leaked material as well as the root
cause.
Kounrad
In H1 2020, there were no environmental incidents or high
potential incidents at Kounrad. An external laboratory tested
samples from 10 locations around the site during the period, with
the findings being that Kounrad's air quality and dust remain
within the permitted levels for the licence. External air quality
tests were also taken in Q2 2020, with no exceedances
identified.
In H1 2020, the Kounrad team commenced a study into the
viability of producing wind and / or solar power in Kazakhstan in
order to reduce the site's reliance on grid power, which is largely
coal-fired. If feasible, this could reduce Kounrad's Scope 2
emissions. The study is underway and is expected to be completed to
a 'scoping' level in H2 2020.
Community
Much of CAML's H1 2020 support for the communities around Sasa
and Kounrad has been related to the COVID-19 pandemic.
Sasa
During H1 2020, there were no serious complaints from the local
community.
In North Macedonia, Sasa made the decision to donate around
$150,000 towards the fight against COVID-19 including a national
contribution to the Ministry of Health, procurement of personal
protective equipment for medical staff and key members of the local
community, donations of food and hygiene products to the most
vulnerable, and additional automatic anaesthesia equipment for a
major hospital.
The first community training course run at the new Sasa-built
facility in Makedonska Kamenica was completed in Q1 2020. The three
trainees which passed the electrical maintenance course were
employed by Sasa. The employment of the four successful mechanical
maintenance course attendees has been postponed due to
COVID-19.
During H1 2020, CAML spent $0.1 million in total supporting
community projects, with some of the COVID-19 related spending
occurring in July 2020.
Kounrad
During H1 2020, there were no serious complaints from the local
community.
CAML's Kounrad Foundation charity in Kazakhstan purchased a
polymerase chain reaction ('PCR') machine for Balkhash Central
Hospital, close to the Group's copper operations, which will be
installed during H2 2020. At a cost of approximately $70,000, this
machine will enable timely COVID-19 testing for the local
population, as recommended by the World Health Organisation
('WHO'). The Kounrad Foundation also purchased an automatic back-up
power unit for the hospital to ensure security of electrical supply
during crucial medical treatments. Food and medical donations have
also been made to the most vulnerable.
During H1 2020, CAML spent $0.2 million supporting community
projects. The Kounrad Foundation's Crisis Centre project was also
largely completed during H1 2020 and was visited by the local Akim
(mayor) in June. This is a family support centre predominantly for
women and children leaving difficult domestic circumstances. The
Kounrad Foundation purchased and refurbished a building in the town
of Balkhash to create a temporary home for these individuals. The
Kounrad Foundation also completed refurbishment works in a centre
for the blind in Balkhash, as well as building and refurbishment
works for a centre for disabled people, also in Balkhash.
Our people
During H1 2020, CAML hired an experienced Group People Manager
to work with the two site-based Human Resources teams. The Company
considers this a key hire in proactively moving forward the
employee aspects of the business. Key areas of initial focus were
setting up an employee working group to ascertain how employees
will work and remain connected throughout COVID-19 challenges.
Employee handbook and policies are being refined, as well as HR
management plans for both sites. Training and development goals
will also be a key area of work.
Sustainability reporting
In Q2 2020, CAML published its first standalone Sustainability
Report, covering the 2019 activities corporately and at Sasa and
Kounrad. Also in Q2 2020, CAML retained consultants,
SustainAbility, part of the global ERM Group, to undertake a
stakeholder engagement exercise, which will further inform the
Group of its material topics, as identified through the 2019
desk-based materiality assessment. This work is underway and is
expected to be completed during H2 2020 in readiness for CAML's
2020 Sustainability Report.
2020 Sustainability targets
For the 2020 period, CAML executive directors and senior
managers will be appraised on the following key sustainability
performance areas.
Health and safety
-- Zero fatalities
-- 15% reduction in the two year average LTIFR of 2.01 to below 1.71
Environment
-- Zero severe or major environmental incidents
-- Complete Kounrad scoping study into the potential of
generating wind and / or solar power in Kazakhstan
Community
-- Zero severe or major community incidents
People
-- 100% of new joiners given full induction training and a training and development plan
-- Development of site people plans for both operations
Governance
-- Deliver audit plan for suppliers and contractors to ensure responsible supply chain
CAML's performance against these targets, as well as other
initiatives, will be reported upon in the 2020 Sustainability
Report, to be published in Q2 2021.
Operations review
Sasa
Production
In H1 2020, total mined ore was 416,055 tonnes and ore processed
was 419,856 tonnes. The head grades for H1 2020 were on average
3.37% for zinc and 3.82% for lead and H1 2020 metallurgical
recoveries were 86.3% for zinc and 94.3% for lead.
Sasa produces a zinc concentrate and a separate lead
concentrate. H1 2020 production was 24,510 tonnes of zinc
concentrate at an average grade of 49.8% and 21,035 tonnes of lead
concentrate at an average grade of 72.0%.
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, H1 2020 payable production
was 10,242 tonnes of zinc and 14,383 tonnes of lead.
Units H1 2020 H1 2019
Ore mined t 416,055 400,251
--------- -------- --------
Plant feed t 419,856 404,540
--------- -------- --------
Zinc grade % 3.37 3.28
--------- -------- --------
Zinc recovery % 86.3 86.7
--------- -------- --------
Lead grade % 3.82 3.76
--------- -------- --------
Lead recovery % 94.3 94.4
--------- -------- --------
Zinc concentrate t (dry) 24,510 23,306
--------- -------- --------
* Grade % 49.8 49.4
--------- -------- --------
* Contained zinc t 12,203 11,517
--------- -------- --------
Lead concentrate t (dry) 21,035 19,720
--------- -------- --------
* Grade % 72.0 72.8
--------- -------- --------
* Contained lead t 15,140 14,357
--------- -------- --------
Sales
Payable base metal in concentrate sales from Sasa for the
six-month period were 10,273 tonnes of zinc and 14,445 tonnes of
lead.
Global supply disruptions due to COVID-19 resulted in general
tightness in concentrate markets and lower treatment charges in
China. Two smelters in China were identified to diversify CAML's
customer base, and 3,261 dry tonnes of lead concentrate have been
shipped to them during H1 2020. Contracts are now in place with
these customers for approximately 15% of Sasa's 2020 lead product.
Through these lead concentrate sales, Sasa is benefitting from
reduced treatment charges albeit with an increase in freight
costs.
During H1 2020, Sasa sold 176,655 ounces of payable silver to
Osisko Gold Royalties, in accordance with its streaming
agreement.
New technology underground
During H1 2020, orders were placed for six new pieces of Epiroc
underground equipment and, during the period, four of the six
machines (three loaders and a boomer drill rig) arrived at site.
Post the period end, a new truck has been delivered to Sasa.
Newtrax equipment monitoring software was installed in Q1 2020
and is now operational on 11 of 17 machines, with plans to retrofit
this on the remaining machines in the near term. This software
produces weekly reports on vehicle utilisation, availability as
well as number of cycles completed. 'Real time' data will be
available once the installation of underground internet is
completed, which has been delayed due to COVID-19 travel and site
visit restrictions.
At Sasa, two underground loaders were fitted with remote loading
capabilities during the period. These machines are now operating in
this manner, with the result being that the operator is removed
from the working faces, thus improving safety.
Sasa Life of Mine study
Overview
In January 2020, CAML announced that the Board had agreed in
principle to transition the Svinja Reka operations at Sasa from the
current sub-level caving mining method to cut and fill stoping. The
operations team has been working on technical aspects and accurate
costs since then and has recently finalised much of this work
programme post the period end. The Board continues to recommend the
change of mining method, and this transition process will soon
commence.
In order to move to cut and fill stoping and therefore ensure
effective long-term operations for the life of the mine at Svinja
Reka, several practical changes will be implemented at site.
Underground extraction
Cut and fill stoping is a more selective mining method than
sub-level caving, which is expected to achieve greater recovery of
ore as well as reducing the dilution of ore with un-mineralised
material. It is a bottom-up mining method involving drilling,
blasting and mucking out of ore before filling voids. Mining at
Svinja Reka will be achieved with the same technical team and
workforce, using the same equipment that is currently on site and
being purchased as part of the fleet replacement programme that is
underway.
Backfill
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.
Tailings from the processing facilities will be sent to the
backfill plant to be thickened and pressed to contain 80% solids,
and then mixed with a slurry containing cement, fly ash and water
to produce a paste of the appropriate consistency. This is then
distributed underground to fill stopes.
Storage of tailings
Given that a major component of the backfill material will be
tailings generated from the Sasa processing plant, it is estimated
that approximately 45% 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. A drilling programme
to identify a suitable and stable location for this material is
being undertaken during H2 2020 and CAML is confident of positively
concluding this work. The Company is firmly committed to the
environmental and socially responsible disposal of tailings for the
long term.
More efficient underground access
In order to ensure efficient underground operations for the long
term, it is proposed (but not yet approved by the Board) to develop
a new decline from surface. This will provide faster and more
cost-effective access to the mine, reducing round trip cycles by
approximately 60% once completed. The decline, which would be
larger than the current access route, 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. If approved and
developed, 100% of Svinja Reka ore would be transported to surface
in trucks.
Svinja Reka Mineral Resources
Sasa's technical services team has updated the Mineral Resource
Estimate ('MRE') for the Svinja Reka deposit as of 30 June
2020.
Svinja Reka Grades Contained metal
Mt Pb (%) Zn (%) Ag(g/t) Pb (kt) Zn (kt) Ag(koz)
----- ------- ------- -------- -------- -------- --------
Indicated 12.7 4.7 3.3 25.7 588 421 10,463
----- ------- ------- -------- -------- -------- --------
Inferred 2.0 3.9 2.0 22.6 81 42 1,508
----- ------- ------- -------- -------- -------- --------
Total 14.7 4.5 3.1 24.8 669 463 11,972
----- ------- ------- -------- -------- -------- --------
Notes
- Mineral Resources have an effective date of 30 June 2020. The
Competent Person for the declaration of Mineral Resources is Jordan
Angelov, MSc. MAIG. Jordan Angelov is a Member of the Australian
Institute of Geoscientists and has some twenty years' experience in
the exploration, definition and mining of precious and base metal
Mineral Resources, and has sufficient experience relevant to the
style of mineralisation and type of deposit under consideration,
and to the type of activity which he is undertaking to qualify as a
'Competent Person' as defined by JORC and as required by the June
2009 Edition of the AIM Note for Mining and Oil & Gas
Companies. He has reviewed, and consents to, the inclusion in the
Interim Report of the matters based on their information in the
form and context in which it appears and confirms that this
information is accurate and not false or misleading.
- All Indicated Mineral Resources are reported within the
Exploitation Licence, approximately 600kt of the Inferred resources
reported at Svinja Reka exist outside of the Exploitation
Licence.
- Mineral Resources are reported as undiluted. No mining
recovery has been applied in the Statement.
- Tonnages are reported in metric units, grades in percent (%)
or grams per tonne (g/t), and the contained metal in metric units
or ounces. Tonnages, grades, and contained metal totals are rounded
appropriately.
- Rounding, as required by reporting guidelines, may result in
apparent summation differences between tonnes, grade and contained
metal content.
Prior Sasa MREs have been estimated by SRK Consulting. Depleted
resources only have been estimated by the Sasa technical team. This
Svinja Reka MRE has been estimated using a fully digitised block
model incorporating increased knowledge of geology and structural
controls, as well as over 5,000 additional composite samples. This
MRE demonstrates a larger resource tonnage than the previous MRE,
the same average lead grade and a slightly lower zinc grade.
Contained lead is up on the previous MRE despite H1 2020 depletion,
while contained zinc is approximately 26,000 tonnes lower after
accounting for H1 2020 depletion.
Svinja Reka Ore Reserves
The following Ore Reserve Statement has been prepared by the
Sasa technical team on the basis of a transition over four years
comprising a two year construction period followed by a two year
ramp up period from the sub-level caving mining method to cut and
fill. It takes into account the updated MRE and modifying recovery
and dilution factors appropriate for each of the two mining
methods.
Svinja Reka Grades Contained metal
Mt Pb (%) Zn (%) Ag(g/t) Pb (kt) Zn (kt) Ag(koz)
----- ------- ------- -------- -------- -------- --------
Probable 10.7 4.0 3.0 22.3 431 320 7,671
----- ------- ------- -------- -------- -------- --------
Total 10.7 4.0 3.0 22.3 431 320 7,671
----- ------- ------- -------- -------- -------- --------
Notes
- The Competent Person who has reviewed the Ore Reserves is
Scott Yelland, C.Eng, FIMMM, MSc, who is a full-time employee and
Chief Operating Officer of CAML. He is a mining engineer with over
36 years' experience in the mining and metals industry, including
operational experience in underground zinc and lead mines, and as
such qualifies as a Competent Person as defined in the JORC Code
(2012).
- All figures are rounded to reflect the relative accuracy of
the estimate and have been used to derive sub-totals, totals and
weighted averages. Such calculations inherently involve a degree of
rounding and consequently introduce a margin of error. Where these
occur, Sasa does not consider them to be material.
- The metal prices used to assess the Ore Reserve estimate in
the financial model are $2,250/t for zinc and $1,850/t for lead
- The standard adopted in respect of the reporting of Mineral
Resources and Ore Reserves is in accordance with the guidelines of
the 2012 Edition of the Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves (the 'JORC
Code').
The above Ore Reserve statement takes into account the reduced
dilution and an increase in ore recovery expected when using the
cut and fill method. This demonstrates a 20% larger Ore Reserve
than that previously stated with the same combined zinc and lead
grade.
Production profile
Cut and fill stoping will commence in H2 2022, with
approximately 90% of ore being extracted using this method by
2024.
Post the installation and Q1 2020 commissioning of the tertiary
crusher, the Sasa processing plant now has an increased annual
throughput capacity up to 850,000 tonnes. Once the Svinja Reka
operations have fully transitioned to cut and fill stoping, an
underground production rate of 900,000 tonnes should be achieved
from 2024. Production guidance should be maintained at current
levels throughout the construction period, and should increase
towards 900,000 tonnes during the ramp-up period and
thereafter.
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, 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 to $19 million, with $5
million required during 2021. Expenditure will be predominantly on
the following three components:
- Paste plant and associated reticulation - approximately $13 million
- Decline development (if approved) - approximately $2.5 million
- Dry stack tailings related expenditure - approximately $3 million
Annual sustaining capex going forward, including capital
development, is expected to remain between $8 and $10 million.
Capital costs required to increase processing plant capacity in
2023 and 2024 is expected to be within the sustaining capex
range.
Kounrad
CAML is pleased to report a period of strong operational
performance at Kounrad, with copper cathode production of 6,607
tonnes for the first six months of 2019 (H1 2019: 6,594 tonnes).
The Company is on course to achieve its full year 2020 copper
production guidance of between 12,500 tonnes and 13,500 tonnes.
Copper sales during H1 2020 were 6,600 tonnes (H1 2019: 6,461
tonnes), with the majority of the cathode sold to CAML's offtake
partner, Traxys . The quality of cathode produced remains
excellent, at a purity level of 99.998%, and continues to meet the
requirements of the customers.
During the period, irrigation rates to the dumps were closely
controlled and kept below the limit of three litres per square
metre per hour. This application rate has been demonstrated to
result in optimum leaching rates of the dump materials.
During Q2 2020, 1,567 replacement new anodes (equivalent to 70%
of total cell inventory in EW1) were installed, with the remaining
balance of around 600 anode plates scheduled to be replaced in Q4
2020.
Work continued with the high-density polyethylene lining of the
excavated interceptor trench which has been extended north around
Dump 21. A total of 920 metres of the trench were lined in H1 2020,
equating to 95% of the complete length.
Kounrad's EP2 mixer-settler unit, used in the solvent extraction
part of the process, was taken off-line to undertake renewal of the
acid resistant fibreglass reinforced plastic linings. The work was
completed without disruption to production by the end of H1
2020.
Preparation of the leaching blocks for winter operations
commenced in Q2 2020 with around 15% of the blocks completed by the
end of H1 2020, in line with expectations.
Financial Review
Overview
CAML is pleased to report a strong set of financial results,
which demonstrate consistent operational performance and effective
cost control. However, the results reflect a period of weak
commodity prices due to the COVID-19 pandemic, with gross revenue
and EBITDA lower than the previous corresponding period.
The Group generated H1 2020 EBITDA of $42.5 million (H1 2019:
$56.7 million), representing a decrease of 25% from the prior
corresponding period due to the decline in commodity prices and an
increase in treatment charges. The EBITDA margin however remained
strong at 56% (H1 2019: 63%), given the global conditions, which
reflects the Group's ability to maintain low costs across the
operations.
Earnings per share ('EPS') from continuing operations was 10.35
cents (H1 2019: 15.42 cents).
CAML generated $21.1 million (H1 2019: $35.5 million) of free
cash flow. The Group has continued to deleverage, having repaid
debt of $19.2 million during the period ending June 2020. In
addition, overdraft facilities of $9.1 million (H1 2019: nil) were
drawn down during the period resulting in net debt of $58.8 million
(2019: $80.2 million).
Sasa's H1 2020 EBITDA was $19.5 million (H1 2019: $31.7
million), with a margin of 51% (H1 2019: 63%). Whilst sales volumes
for both zinc and lead were higher during H1 2020 compared to H1
2019, zinc and lead prices declined during H1 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 $27.1 million (H1 2019: $28.7 million). At
73% (H1 2019: 72%), the EBITDA margin increased period on period
despite the decline in copper price, due to effective cost control
and a weakening of the local currency during the period. 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
32% to $24.3 million (H1 2019: $35.5 million). This was primarily
as a result of reduced revenue due to falling commodity prices as
low costs of production were maintained.
Revenue
CAML generated H1 2020 gross revenue of $75.4 million (H1 2019:
$89.9 million), which is reported after deduction of treatment
charges, but before deductions which include offtake buyer's fees
and silver purchases for the silver stream. Net revenue after these
deductions was $ 70.8 million (H1 2019: $85.6 million).
Sasa
Operationally, Sasa performed strongly with a total of 10,273
tonnes (H1 2019: 9,708 tonnes) of payable zinc in concentrate and
14,445 tonnes (H1 2019: 13,731 tonnes) of payable lead in
concentrate sold during H1 2020.
The zinc price achieved declined by 27% to an average of $1,964
per tonne (H1 2019: $2,676 per tonne) and, for lead, the price
declined by 13% to an average of $1,676 per tonne (H1 2019: $1,930
per tonne), leading to a reduction in gross revenue generated from
the mine. Revenue also declined due to higher global treatment
charges during the period of $9.9 million (H1 2019: $6.2 million).
Sasa generated H1 2020 gross revenue of $38.4 million (H1 2019:
$49.9 million). During H1 2020 the offtake buyer's fee for Sasa was
$0.5 million (H1 2019: $0.6 million).
Zinc and lead concentrate sales agreements have been arranged
with Traxys through to 31 December 2022 for 100% of Sasa
production. Two smelters in China were identified to diversify
CAML's customer base and 3,261 dry tonnes of lead concentrate were
shipped to them during H1 2020. Contracts are now in place with
these customers for approximately 15% of Sasa's 2020 lead product.
Through these lead concentrate sales, Sasa is benefitting from
reduced treatment charges that have resulted from global COVID-19
related supply disruptions.
Sasa has an existing silver streaming agreement with Osisko Gold
Royalties whereby Sasa receives approximately $5 per ounce from its
silver production for the life of the mine.
Kounrad
A total of 6,542 tonnes (H1 2019: 6,125 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 58 tonnes (H1 2019: 336 tonnes) were sold
locally. Total Kounrad copper sales were 6,600 tonnes (H1 2019:
6,461 tonnes).
While copper cathode sales volumes increased when compared to H1
2019, revenue declined due to an 9% decrease in the average copper
price received, which was $5,605 per tonne in H1 2020 (H1 2019:
$6,191 per tonne). This generated gross revenue for Kounrad of
$37.0 million (H1 2019: $39.9 million). During H1 2020, the
offtaker's fee for Kounrad was $1.2 million (H1 2019: $1.1
million).
Cost of sales
Group cost of sales for the period was $34.7 million (H1 2019:
$36.0 million). This includes depreciation and amortisation charges
during the period of $14.4 million (H1 2019: $15.3 million).
Sasa
Sasa's cost of sales for the period was lower than the previous
corresponding period at $ 25.1 million (H1 2019: $25.4 million).
These costs reflect lower concession fees amounting to $ 1.1
million (H1 2019: $1.3 million). This tax is calculated at the rate
of 2% on the value of metal recovered during the period and a
reduction resulted from the lower average zinc and lead prices
during the period. During H1 2020, the North Macedonian Denar,
which is pegged to the Euro, averaged 55.71 against the US Dollar
(H1 2019: 54.43) resulting in some savings to the cost base.
Kounrad
Kounrad's H1 2020 cost of sales was $9.6 million (H1 2019: $10.6
million) which is lower than H1 2019. This decrease was partly due
to a reduction in mineral extraction tax paid ('MET'). MET is
charged by the Kazakhstan authorities at the rate of 5.7% (H1 2019:
5.7%) on the value of metal recovered during the period. MET for
the period was $2.1 million (H1 2019: $2.3 million) and a reduction
resulted from the lower average copper price during the period.
During the period, the Kazakhstan Tenge depreciated against the
US Dollar. The average exchange rate for the period was 404 KZT/USD
(H1 2019: 379 KZT/USD), with the Kazakhstan Tenge being worth on
average 6% less in US Dollar terms in H1 2020 compared to H1 2019.
This resulted in a benefit for the cost base, including lower
depreciation and amortisation charges during the period of $2.0
million (H1 2019: $2.6 million).
C1 cash cost of production
C1 cash cost of production is a standard metric used in the
mining industry to allow comparison across the sector. In line with
the Wood Mackenzie approach, CAML calculates C1 cash cost by
including all direct costs of production at Kounrad and Sasa
(reagents, power, production labour and materials, as well as
realisation charges such as freight and treatment charges) in
addition to local administrative expenses. Royalties, depreciation
and amortisation charges are excluded from C1 cash cost.
H1 2020 H1 2019
Sasa zinc equivalent C1 cash cost ($/lb) 0.43 0.47
-------- --------
Kounrad copper C1 cash cost ($/lb) 0.48 0.51
-------- --------
Cu equivalent production (t) 14,683 15,072
-------- --------
Group Cu equivalent C1 cost ($/lb) 1.03 0.90
-------- --------
Fully inclusive Cu equivalent cost of production
($/lb) 1.46 1.44
-------- --------
Sasa
Sasa's C1 zinc equivalent cash cost of production for H1 2020
was $0.43 per pound (H1 2019: $0.47 per pound). The reason for the
$0.04 per pound decrease was primarily due to the increased
production volumes and a lower proportion of pro-rata zinc costing
resulting from the zinc equivalent calculation due to the decline
in zinc revenue versus lead in H1 2020 compared to H1 2019. This
decrease in C1 zinc equivalent cash cost resulted despite an
increase in zinc treatment charges for H1 2020. The on-site costs,
which CAML can control, amounted to $35.5 per tonne (H1 2019: $36.4
per tonne) demonstrating continued cost control. The comparative
period H1 2019 on-site costs have been updated from $35.4 per tonne
to $36.4 per tonne to include Sasa related costs incurred by other
Group entities.
Kounrad
Kounrad's C1 cash cost of production remains firmly in the
lowest quartile of the copper industry cost curve at $0.48 per
pound (H1 2019: $0.51 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 H1 2020 C1
copper equivalent cash cost was $1.03 per pound (H1 2019: $0.90 per
pound). This number is calculated based on Sasa's H1 2020 zinc and
lead payable production, which equates to 8,076 copper equivalent
tonnes (H1 2019: 8,478 copper equivalent tonnes) added to Kounrad's
H1 2020 copper production of 6,607 tonnes (H1 2019: 6,594
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.
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 period increased to $1.46 per pound
(H1 2019: $1.44 per pound). The small increase of $0.02 per pound
reflects the higher Group C1 cash cost as explained above, however
the impact of this increase was countered by lower MET, concession
fees, finance costs and capital expenditure.
Administrative expenses
During the period, administrative expenses were lower at $7.1
million (H1 2019: $7.3 million), largely due to a reduced
share-based payment charge of $0.3 million (H1 2019: $0.5 million).
As there was no 2019 final dividend, no additional dividend
entitlement options vested during H1 2020. In addition, no share
options were awarded to staff during H1 2020.
Finance costs
The Group incurred lower finance costs of $3.5 million (H1 2019:
$6.2 million) given the reducing debt balance and reduced interest
rate.
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
During the period, there were additions to property, plant and
equipment of $ 4.7 million (H1 2019: $5.2 million). The additions
were a combination of $ 0.6 million (H1 2019: $0.6 million) Kounrad
sustaining capital expenditure and $ 4.1 million (H1 2019: $2.7
million) Sasa sustaining capital expenditure. Sasa's TSF4
construction was completed in 2019 and therefore no construction
costs were incurred during H1 2020 (H1 2019: $1.1 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. The initial component of this replacement process will
include the purchase of six new units in 2020, and additional units
will also be purchased each year in 2021, 2022 and 2023. During H1
2020, orders were placed for the six new pieces of Epiroc
underground equipment and, during the period, four of the six
machines (three loaders and a boomer drill rig) arrived at site. A
second boomer and a truck are due to be delivered to Sasa in Q3
2020.
As at 30 June 2020, current trade and other receivables were
$8.1 million (31 December 2019: $6.3 million), which includes trade
receivables from the offtake sales of $2.7 million and (31 December
2019: $1.5 million) and $2.5 million in relation to prepayments and
accrued income (31 December 2019: $2.2 million).
Non-current trade and other receivables were $3.3 million (31
December 2019: $3.4 million). As at 30 June 2020, a total of $3.2
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
liabilities.
As at 30 June 2020, current trade and other payables were $ 8.2
million (31 December 2019: $12.3 million). The reduction from 31
December 2019 reflects the inclusion of accruals for year-end
related expenditure including annual staff bonuses as at 31
December 2019.
As at 30 June 2020, non-current and current borrowings were
$50.6 million (31 December 2019: $69.5 million) and $48.4 million
respectively (31 December 2019: $39.3 million). The reduction of
$9.8 million reflects debt repaid during the period of $19.2
million, drawdowns on overdrafts of $9.1 million and finance
charges of $0.3 million unwinding directly attributable fees.
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 debt is subject to financial covenants which include
the monitoring of gearing, debt service ratios, and leverage ratios
with which the Company has complied.
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 with the fixed
interest rate reduced to 2.4% to 2.5% dependent on conditions. In
June 2020, a new $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. These funds have been fully drawn
and provide the Group with additional financial flexibility.
As of 30 June 2020, the Group had cash in the bank of $44.0
million and gross debt of $99.0 million. Gross debt comprises $89.0
million in corporate debt through Traxys Europe S.A. and the $10.0
million of North Macedonian overdraft facilities.
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 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 30 June 2020 as receipt of
the amount is dependent on the outcome of the reinspection.
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 H1 2020 global health, economic
and metal price challenges. Net cash flow generated from operations
of $ 25.8 million (H1 2019: $40.0 million).
During the period, debt repayments of $19.2 million were made
(H1 2019: $19.2 million) , plus interest paid totalling $ 2.9
million (H1 2019: $5.2 million). Drawdowns on overdrafts during the
period were $9.1 million (H1 2019: nil).
Taking into account capital expenditure, CAML's free cash flow
for H1 2020 was $ 21.1 million. (H1 2019: $35.5 million).
$ 0.6 million (H1 2019: $2.0 million) of North Macedonia
corporate income tax was paid in cash during the period in addition
to a $2.3 million (H1 2019: $2.1 million) non-cash payment against
VAT and corporate income tax receivable. $5.0 million (H1 2019:
$6.8 million) of Kazakhstan corporate income tax was paid during
the period.
Dividend
The CAML Board of Directors has decided to defer a decision
regarding the CAML interim dividend pending clarity on the timing
and likely financial impact of the TSF4 leakage.
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 30 June 2020.
The prices of copper, zinc and lead have been impacted in H1
2020 by concerns over global demand due to the outbreak of the
COVID-19 pandemic although commodity prices have improved post
period end.
During H1 2020, both the Kounrad facility in Kazakhstan and the
Sasa mine in North Macedonia continued to operate with no
disruptions to production or sales due to COVID-19. The Company has
put in place many measures during H1 2020 to try to ensure the
safety of its employees and contractors on both sites. Along with
many other countries, the governments of Kazakhstan and North
Macedonia had have begun to ease lockdown restrictions on the
movement of people, business operations and socialising.
The CAML Board has considered and debated a range of substantial
possible scenarios on the Group's operations, financial position
and forecasts covering a period of at least the next 12 months
considering 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
information.
On 14 September 2020, there was a short-term leakage of tailings
from Sasa's TSF4 into the local river and as a result the
processing plant is not currently operational. The expected impact
of this incident is comfortably within the sensitivity parameters
applied when undertaking going concern analysis.
Further information on these forecasts and the stress tests
performed is included in note 3 of the financial information.
Non-IFRS financial measures
The Group uses alternative performance measures, which are not
defined by generally accepted accounting principles ('GAAP') such
as IFRS, as additional performance measures. 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:
Six months ended
30-Jun-20 30-Jun-19
$'000 $'000
------------------------------------ --------- ---------
Profit for the period 18,304 27,558
------------------------------------ --------- ---------
Plus/(less):
Income tax expense 6,065 8,202
Depreciation and amortisation 14,650 15,320
Foreign exchange loss 370 12
Other income (299) (151)
Finance income (83) (159)
Finance costs 3,472 6,208
Profit from discontinued operations (23) (272)
EBITDA 42,456 56,718
------------------------------------ --------- ---------
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.
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 period. This balance does
not include the restricted cash balance of $3.7 million (2019: $4.0
million):
30-Jun- 31-Dec-19
20
$'000 $'000
-------------------------- -------- ---------
Borrowings 99,045 108,768
Cash and cash equivalents (40,258) (28,566)
Net debt 58,787 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:
Six months ended
30-Jun-20 30-Jun-19
$'000 $'000
------------------------------------------------ --------- ---------
Net cash generated from operating activities 25,787 39,955
Less: Purchase of property, plant and equipment (4,622) (4,437)
Less: Purchase of intangible assets - (18)
Free cash flow 21,125 35,500
------------------------------------------------ --------- ---------
Directors' Responsibility Statement
The Directors confirm that, to the best of their knowledge, the
interim financial information has been prepared in accordance with
IAS 34 "Interim Financial Reporting" as adopted by the European
Union and the AIM Rules for Companies, and that the interim results
include a fair review of the information required.
On behalf of the Board
Gavin Ferrar
Chief Financial Officer
15 September 2020
INDEPENT REVIEW REPORT TO Central Asia Metals Plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly
financial report for the six months ended 30 June 2020 which comprise:
-- the condensed consolidated interim statement of financial position as at 30 June 2020;
-- the condensed consolidated interim income statement and
condensed consolidated interim statement of comprehensive income
for the period then ended;
-- the condensed consolidated interim statement of changes in equity;
-- the condensed consolidated interim statement of cash flows;
-- notes to the consolidated interim financial information.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The interim report, including the financial information
contained therein, is the responsibility of and has been approved
by the Directors. The Directors are responsible for preparing the
interim report in accordance with the rules of the London Stock
Exchange for companies trading securities on AIM which require that
the half-yearly report be presented and prepared in a form
consistent with that which will be adopted in the Company's annual
accounts having regard to the accounting standards applicable to
such annual accounts.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2020 is not prepared, in all material respects, in accordance
with the rules of the London Stock Exchange for companies trading
securities on AIM.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
rules of the London Stock Exchange for companies trading securities
on AIM and for no other purpose. No person is entitled to rely on
this report unless such a person is a person entitled to rely upon
this report by virtue of and for the purpose of our terms of
engagement or has been expressly authorised to do so by our prior
written consent. Save as above, we do not accept responsibility for
this report to any other person or for any other purpose and we
hereby expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
London
15 September 2020
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT (unaudited)
for the six months period ended 30 June 2020
Six months ended
30-Jun-20 30-Jun-19
Note $'000 $'000
---------------------------------------------------- ---- ------------ ------------
Continuing operations
Revenue 70,807 85,564
---------------------------------------------------- ---- ------------ ------------
Presented as:
Gross revenue 75,416 89,881
Less:
Silver stream purchases (2,949) (2,632)
Offtake buyers' fees (1,660) (1,685)
---------------------------------------------------- ---- ------------ ------------
Revenue 70,807 85,564
---------------------------------------------------- ---- ------------ ------------
Cost of sales (34,656) (36,028)
Distribution and selling costs (1,237) (882)
Gross profit 34,914 48,654
---------------------------------------------------- ---- ------------ ------------
Administrative expenses (7,108) (7,256)
Other income (net of other expenses) 299 151
Foreign exchange loss (370) (12)
Operating profit 27,735 41,537
---------------------------------------------------- ---- ------------ ------------
Finance income 83 159
Finance costs (3,472) (6,208)
Profit before income tax 24,346 35,488
Income tax 6 (6,065) (8,202)
---------------------------------------------------- ---- ------------ ------------
Profit for the period from continuing operations 18,281 27,286
---------------------------------------------------- ---- ------------ ------------
Discontinued operations
Profit for the period from discontinued operations 23 272
---------------------------------------------------- ---- ------------ ------------
Profit for the period 18,304 27,558
---------------------------------------------------- ---- ------------ ------------
Profit attributable to:
* Non-controlling interests 8 66
* Owners of the parent 18,296 27,492
---------------------------------------------------- ---- ------------ ------------
18,304 27,558
---------------------------------------------------- ---- ------------ ------------
Earnings per share from continuing and discontinued $ $
operations attributable to owners of the parent cents cents
during the period (expressed in cents per share)
---------------------------------------------------- ---- ------------ ------------
Basic earnings per share
From continuing operations 7 10.35 15.42
From discontinued operations 0.01 0.15
---------------------------------------------------- ---- ------------ ------------
From profit for the period 10.36 15.57
---------------------------------------------------- ---- ------------ ------------
Diluted earnings per share
From continuing operations 7 10.09 15.00
From discontinued operations 0.01 0.15
---------------------------------------------------- ---- ------------ ------------
From profit for the period 10.10 15.15
---------------------------------------------------- ---- ------------ ------------
Total distribution and selling costs in the comparative period
previously recognised as a deduction from gross revenue have been
reclassified below revenue for comparability.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
for the six months period ended 30 June 2020
Six months ended
------------------------------------------------------ --------------------
30-Jun-20 30-Jun-19
$'000 $'000
------------------------------------------------------ --------- ---------
Profit for the period 18,304 27,558
Other comprehensive expense:
Items that may be reclassified subsequently to profit
or loss:
Currency translation differences (483) (2,903)
Other comprehensive expense for the period, net
of tax (483) (2,903)
------------------------------------------------------ --------- ---------
Total comprehensive income for the period 17,821 24,655
------------------------------------------------------ --------- ---------
Attributable to:
* Non-controlling interests 8 66
* Owners of the parents 17,813 24,589
------------------------------------------------------ --------- ---------
Total comprehensive income for the period 17,821 24,655
------------------------------------------------------ --------- ---------
Total comprehensive income/(expense) attributable to equity
shareholders arises from:
- Continuing operations 17,798 24,383
- Discontinued operations 23 272
----------------------------- ------ ------
17,821 24,655
----------------------------- ------ ------
CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
(unaudited)
as at 30 June 2020
Unaudited Audited
------------- -------------
30-Jun-20 31-Dec-19
Note $'000 $'000
-------------------------------------------- ------ ------------- -------------
Assets
Non-current assets
Property, plant and equipment 8 397,844 406,387
Intangible assets 9 56,995 58,676
Deferred income tax asset 13 275 266
Other non-current receivables 11 3,303 3,389
-------------------------------------------- ------ ------------- -------------
458,417 468,718
-------------------------------------------- ------ ------------- -------------
Current assets
Inventories 10 6,725 7,283
Trade and other receivables 11 8,078 6,276
Restricted cash 3,708 4,013
Cash and cash equivalents 40,258 28,566
-------------------------------------------- ------ ------------- -------------
58,769 46,138
-------------------------------------------- ------ ------------- -------------
Assets of the disposal group classified
as held for sale 32 219
-------------------------------------------- ------ ------------- -------------
58,801 46,357
-------------------------------------------- ------ ------------- -------------
Total assets 517,218 515,075
-------------------------------------------- ------ ------------- -------------
Equity attributable to owners of the
parent
Ordinary shares 1,765 1,765
Share premium 191,184 191,184
Treasury shares (4,925) (6,526)
Currency translation reserve (100,956) (100,473)
Retained earnings 267,307 250,480
354,375 336,430
-------------------------------------------- ------ ------------- -------------
Non-controlling interests (1,327) (1,324)
-------------------------------------------- ------ ------------- -------------
Total equity 353,048 335,106
-------------------------------------------- ------ ------------- -------------
Liabilities
Non-current liabilities
Borrowings 14 50,645 69,473
Silver streaming commitment 20,038 20,755
Deferred income tax liability 13 25,050 26,089
Lease liability 640 748
Provision for other liabilities and charges 9,403 9,027
-------------------------------------------- ------ ------------- -------------
105,776 126,092
-------------------------------------------- ------ ------------- -------------
Current liabilities
Borrowings 14 48,400 39,295
Silver streaming commitment 1,718 2,140
Trade and other payables 12 8,227 12,305
Provisions for other liabilities and
charges 32 46
-------------------------------------------- ------ ------------- -------------
58,377 53,786
Liabilities of disposal group classified
as held for sale 17 91
-------------------------------------------- ------ ------------- -------------
58,394 53,877
-------------------------------------------- ------ ------------- -------------
Total liabilities 164,170 179,969
-------------------------------------------- ------ ------------- -------------
Total equity and liabilities 517,218 515,075
-------------------------------------------- ------ ------------- -------------
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
(unaudited)
for the six months period ended 30 June 2020
Currency Non-controlling
Ordinary Share Treasury translation Retained interest Total
shares premium shares reserve earnings Total equity
----------------- ------------ ----------- ------------ -------------- ------------ ------- --------------- -------
Attributable
to owners of
the parent $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
----------------- ------------ ----------- ------------ -------------- ------------ ------- --------------- -------
Balance as at
1 January 2020 1,765 191,184 (6,526) (100,473) 250,480 336,430 (1,324) 335,106
------------------ ------------ ----------- ------------ -------------- ------------ ------- --------------- -------
Profit for the
period - - - - 18,296 18,296 8 18,304
Other
comprehensive
expense- currency
translation
differences - - - (483) - (483) - (483)
Total
comprehensive
income/(expense) - - - (483) 18,296 17,813 8 17,821
------------------ ------------ ----------- ------------ -------------- ------------ ------- --------------- -------
Transactions
with owners
Share based
payments - - - - 275 275 - 275
Exercise of
options - - 1,601 - (1,622) (21) - (21)
Disposal of
subsidiaries (122) (122) (11) (133)
Total transactions
with owners,
recognised
directly
in equity - - 1,601 - (1,469) 132 (11) 121
------------------ ------------ ----------- ------------ -------------- ------------ ------- --------------- -------
Balance as at
30 June 2020 1,765 191,184 (4,925) (100,956) 267,307 354,375 (1,327) 353,048
------------------ ------------ ----------- ------------ -------------- ------------ ------- --------------- -------
Currency Non-controlling
Ordinary Share Treasury translation Retained interest Total
shares premium shares reserve earnings Total equity
----------------- ------------ ----------- ------------ -------------- ------------ -------- --------------- --------
Attributable
to owners of
the parent $'000 $'000 $'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
period - - - - 27,492 27,492 66 27,558
Other
comprehensive
expense -
currency
translation
differences - - - (2,903) - (2,903) - (2,903)
Total
comprehensive
income/(expense) - - - (2,903) 27,492 24,589 66 24,655
------------------ ------------ ----------- ------------ -------------- ------------ -------- --------------- --------
Transactions
with owners
Share based
payments - - - - 529 529 - 529
Exercise of
options - - - - (536) (536) - (536)
Dividends - - - - (18,164) (18,164) - (18,164)
Total transactions
with owners,
recognised
directly
in equity - - - - (18,171) (18,171) - (18,171)
------------------ ------------ ----------- ------------ -------------- ------------ -------- --------------- --------
Balance as at
30 June 2019 1,765 191,184 (6,526) (92,357) 239,602 333,668 (1,318) 332,350
------------------ ------------ ----------- ------------ -------------- ------------ -------- --------------- --------
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
(unaudited)
for the six months period ended 30 June 2020
Six months ended
30-Jun-20 30-Jun-19
Note $'000 $'000
------------------------------------------- ------- --------- -----------
Cash flows from operating activities
Cash generated from operations 15 34,346 56,095
Interest paid (2,932) (5,243)
Corporate income tax paid (5,627) (10,897)
Net cash flow generated from operating
activities 25,787 39,955
-------------------------------------------- ------- --------- -----------
Cash flows from investing activities
Purchases of property, plant and equipment 8 (4,622) (4,437)
Proceeds from sale of property, plant
and equipment 300 1
Deferred consideration paid - (6,500)
Purchase of intangible assets - (18)
Interest received 83 159
Decrease in restricted cash 305 170
-------------------------------------------- ------- --------- -----------
Net cash used in investing activities (3,934) (10,625)
-------------------------------------------- ------- --------- -----------
Cash flows from financing activities
Proceeds from borrowings 14 9,105 -
Repayment of borrowings 14 (19,200) (19,200)
Dividend paid to owners of the parent - (18,164)
Receipt/(settlement) on exercise of
share options 6 (536)
Net cash used in financing activity (10,089) (37,900)
-------------------------------------------- ------- --------- -----------
Effect of foreign exchange losses on
cash and cash equivalents (148) (68)
-------------------------------------------- ------- --------- -----------
Net increase/(decrease) in cash and
cash equivalents 11,616 (8,638)
-------------------------------------------- ------- --------- -----------
Cash and cash equivalents at 1 January 28,672 34,707
-------------------------------------------- ------- --------- -----------
Cash and cash equivalents at 30 June 40,288 26,069
-------------------------------------------- ------- --------- -----------
Cash and cash equivalents at 30 June 2020 includes cash at bank
on hand included in assets held for sale of $30,000 (30 June 2019:
$71,000). The consolidated statement of cash flows does not include
the restricted cash balance of $3,708,000 (30 June 2019:
$4,206,000).
The brought forward cash and cash equivalents as at 1 January
2020 has been reclassified to exclude the overdrafts drawdown of
$895,000. The overdrafts arrangement are not repayable on demand
and therefore represents a form of financing and not a component of
cash and cash equivalents.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION
For the six months period ended 30 June 2020
1. General information
Central Asia Metals plc ('CAML' or the 'Company') and its
subsidiaries (the 'Group') are a mining organisation with
operations in Kazakhstan and North Macedonia and a parent holding
company based in England 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.
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 Shuak project. In February 2020, the Group liquidated
CMK Resources Limited, a wholly owned subsidiary.
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.
The condensed consolidated interim financial information
incorporates the results of Central Asia Metals plc and its
subsidiary undertakings as at 30 June 2020 and was approved by the
Directors for issue on 15 September 2020. The condensed
consolidated financial statements are unaudited and do not
constitute statutory accounts as defined in Section 434 of the
Companies Act 2006. The information for the year ended 31 December
2019 included in this report was derived from the statutory
accounts for that year, which were prepared in accordance with
International Financial Reporting Standards ('IFRSs') issued by the
International Accounting Standards Board ('IASB') and
interpretations issued by the International Financial Reporting
Interpretations Committee ('IFRIC') of the IASB, as adopted by the
EU up to 31 December 2019, a copy of which has been delivered to
the Registrar of Companies. The report of the auditors on those
accounts was unqualified, but contained a Material Uncertainty in
relation to going concern arising from the COVID-19 pandemic and
did not contain a statement under 498(2) 498(3) of the Companies
Act 2006.
This condensed consolidated interim financial information has
been reviewed, not audited.
2. Basis of preparation
The condensed consolidated interim financial information for the
six months ended 30 June 2020 has been prepared in accordance with
IAS 34, 'Interim financial reporting' as adopted by the European
Union. The condensed interim financial information should be read
in conjunction with the annual financial statements for the year
ended 31 December 2019, which have been prepared in accordance with
International Financial Report Standards ('IFRS') as adopted by the
European Union.
Principal risks and uncertainties
In preparing the condensed consolidated interim financial
information management is required to consider the principal risks
and uncertainties facing the Group.
In management's opinion the principal risks and uncertainties
facing the Group are unchanged since the preparation of the
consolidated financial statements for the year ended 31 December
2019, although the funding risks associated with COVID-19 are
considered to have reduced based on commodity markets now being
able to price in risks more effectively, the additional overdraft
facilities drawn by the Group and the experience gained whilst
operating effectively through the pandemic to date. Those risks and
uncertainties, together with management's response to them are
described in the Principal Risks and Uncertainties section of the
2019 Annual Report and Accounts.
During the first half of 2020, the COVID-19 pandemic has
significantly impacted global markets. COVID-19 has not resulted in
any material disruption to the Group's operations. The Group has
put in place many measures during H1 2020 to mitigate the
associated risks and to try to ensure the health and wellbeing of
its employees and contractors on both sites. These measures include
a cessation of all but necessary visitors to site, changes made to
operations to increase social distancing, increased hygiene
measures and self-isolation for employees with COVID-19
symptoms.
The 2019 Annual Report and Accounts indicated that a material
uncertainty existed that may cast doubt on the Groups ability to
continue as a going concern. During the period ended 30 June 2020,
no such material uncertainty is considered to exist. Further
information on the going concern assessment is included in note 3
of the financial information.
3. Accounting policies
The accounting policies, methods of computation and presentation
used in the preparation of the condensed consolidated interim
financial information are the same as those used in the Group's
audited financial statements for the year ended 31 December
2019.
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 30 June 2020.
The prices of copper, zinc and lead have been impacted in H1
2020 by concerns over global demand due to the outbreak of the
COVID-19 pandemic although commodity prices have improved post
period end.
During H1 2020, both the Kounrad facility in Kazakhstan and the
Sasa mine in North Macedonia continued to operate with no
disruptions to production or sales due to COVID-19. The Company has
put in place many measures during H1 2020 to try to ensure the
safety of its employees and contractors on both sites. Along with
many other countries, the governments of Kazakhstan and North
Macedonia had have begun to ease lockdown restrictions on the
movement of people, business operations and socialising.
The CAML Board has considered and debated a range of substantial
possible scenarios on the Group's operations, financial position
and forecasts covering a period of at least the next 12 months
considering 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
information.
On 14 September there was a short-term leakage of tailings from
Sasa's TSF4 into the local river and as a result the processing
plant is not currently operational. The Company has engaged all
advisers and consultants involved in the construction of the
Facility, together with its own management to ensure that the
Company mitigates any financial loss and any environmental and
local community impact. The Company is confident that it has
complied with all construction and licence regulations in the
construction of the Facility. There has been no report of any
health and safety issues and nor is there likely to be. The
expected impact of this incident is comfortably within the
sensitivity parameters applied when undertaking going concern
analysis.
In forming this assessment, management note the following:
-- Until the TSF4 leakage on 14 September, the operations have
maintained production throughout the period with no significant
disruption to supply chain or offtake. Whilst a number of COVID-19
cases arose at both Kounrad and Sasa the Company's protocols were
implemented and production was sustained whilst ensuring the health
of the workforce.
-- There is now greater clarity regarding the response of
governments to COVID-19 and the risk of protracted lockdowns
suspending mining and processing operations in a broad-based manner
is considered low.
-- Whilst the risk of localised outbreaks of COVID-19 remains
that may cause operational stoppages to safeguard safety, it is
considered highly unlikely such a scenario would involve both
operations simultaneously for two months or an individual operation
for the extended periods to create a liquidity or covenant
issue.
-- With regards to the TSF4 leakage, based on the initial
information available from early investigations, the Board consider
that it is reasonable that the Facility can be secured and an
extended shutdown of the processing plant is unlikely.
Taxation
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected total annual profit or
loss.
Changes in accounting policies
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.
4. Critical accounting judgements and estimates
The preparation of condensed consolidated interim financial
information requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and expense.
Actual results may differ from these judgements and estimates.
In preparing this condensed consolidated interim financial
information, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements for the year ended 31 December
2019 which can be obtained from www.centralasiametals.com .
5. Segmental information
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 segment results for the six months ended 30 June 2020 are as
follows:
Unaudited
------------------------------------- ------- -------- ----------- --------
Kounrad Sasa Unallocated Total
------------------------------------- ------- -------- ----------- --------
$'000 $'000 $'000 $'000
------- -------- ----------- --------
Gross revenue 36,976 38,440 - 75,416
Silver stream purchases - (2,949) - (2,949)
Offtake buyers' fees (1,210) (450) - (1,660)
------------------------------------- ------- -------- ----------- --------
Revenue 35,766 35,041 - 70,807
------------------------------------- ------- -------- ----------- --------
EBITDA 27,092 19,501 (4,137) 42,456
Depreciation and amortisation (2,045) (12,487) (118) (14,650)
Foreign exchange gain/(loss) 80 (434) (16) (370)
Other income/(expense) 103 290 (94) 299
Finance income 6 - 77 83
Finance costs (83) (158) (3,231) (3,472)
------------------------------------- ------- -------- ----------- --------
Profit/(loss) before income tax 25,153 6,712 (7,519) 24,346
------------------------------------- ------- -------- ----------- --------
Income tax (6,065)
------------------------------------- ------- -------- ----------- --------
Profit for the period after taxation
from continuing operations 18,281
------------------------------------- ------- -------- ----------- --------
Profit from discontinued operations 23
------------------------------------- ------- -------- ----------- --------
Profit for the period 18,304
------------------------------------- ------- -------- ----------- --------
Depreciation and amortisation includes amortisation on the fair
value uplift on acquisition of Sasa and Kounrad of $6,132,000.
The segment results for the six months ended 30 June 2019 are as
follows:
Unaudited
------------------------------------- ------- -------- ----------- --------
Kounrad Sasa Unallocated Total
------------------------------------- ------- -------- ----------- --------
$'000 $'000 $'000 $'000
------- -------- ----------- --------
Gross revenue 39,949 49,932 - 89,881
Silver purchases for silver stream - (2,632) - (2,632)
Offtake buyers' fees (1,133) (552) - (1,685)
------------------------------------- ------- -------- ----------- --------
Revenue 38,816 46,748 - 85,564
------------------------------------- ------- -------- ----------- --------
EBITDA 28,745 31,656 (3,683) 56,718
Depreciation and amortisation (2,718) (12,482) (120) (15,320)
Foreign exchange rate (loss)/gain (89) 63 14 (12)
Other income 65 32 54 151
Finance income 5 1 153 159
Finance costs (54) (320) (5,834) (6,208)
------------------------------------- ------- -------- ----------- --------
Profit/(loss) before income tax 25,954 18,950 (9,416) 35,488
------------------------------------- ------- -------- ----------- --------
Income tax (8,202)
------------------------------------- ------- -------- ----------- --------
Profit for the period after taxation
from continuing operations 27,286
------------------------------------- ------- -------- ----------- --------
Profit from discontinued operations 272
------------------------------------- ------- -------- ----------- --------
Profit for the period 27,558
------------------------------------- ------- -------- ----------- --------
Depreciation and amortisation includes amortisation on the fair
value uplift on acquisition of Sasa and Kounrad of $6,329,000.
A reconciliation between profit for the year and EBITDA is
presented in the Financial Review section.
Group segmental assets and liabilities as at the 30 June 2020
are as follows:
Segmental Assets Non-current Asset Segmental Liabilities
additions
---------------------- -------------------- -------------------- -----------------------
30-Jun-20 31-Dec-19 30-Jun-20 30-Jun-19 30-Jun-20 31-Dec-19
$'000 $'000 $'000 $'000 $'000 $'000
---------------------- --------- --------- --------- --------- ----------- ----------
Kounrad 73,830 76,118 721 642 (10,355) (11,017)
Sasa 407,668 411,899 3,997 3,806 (62,297) (55,269)
Assets held for sale 32 219 - - (17) (91)
Unallocated including
corporate 35,688 26,839 1 778 (91,501) (113,592)
---------------------- --------- --------- --------- --------- ----------- ----------
Total 517,218 515,075 4,719 5,226 (164,170) (179,969)
---------------------- --------- --------- --------- --------- ----------- ----------
6. Income tax
Six months ended
-------------------------------------- ----------------------
30-Jun-20 30-Jun-19
$'000 $'000
Current tax on profits for the period 6,823 8,493
Deferred tax credit (note 13) (758) (291)
---------------------------------------- ---------- ----------
Income tax expense 6,065 8,202
---------------------------------------- ---------- ----------
Taxation for each jurisdiction is calculated at the rates
prevailing in the respective jurisdictions.
Corporate income tax is calculated at 19% (H1 2019: 19%) of the
assessable profit for the period for the UK parent company, 20% for
the operating subsidiaries in Kazakhstan (H1 2019: 20%) and 10% (H1
2019: 10%) for the operating subsidiaries in North Macedonia.
Deferred tax assets have not been recognised on tax losses
primarily at the parent company and Copper Bay subsidiaries as it
remains uncertain whether these entities will have sufficient
taxable profits in the future to utilise these losses.
7. Earnings 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 period
excluding ordinary shares purchased by the Company and held as
treasury shares.
Six months ended
---------------------------------------------------- --------------------------
30-Jun-20 30-Jun-19
$'000 $'000
---------------------------------------------------- ------------ ------------
Profit from continuing operations attributable to
owners of the parent 18,273 27,220
---------------------------------------------------- ------------ ------------
Profit from discontinued operations attributable
to owners of the parent 23 272
---------------------------------------------------- ------------ ------------
Total 18,296 27,492
---------------------------------------------------- ------------ ------------
Weighted average number of ordinary shares in issue 176,498,266 176,498,266
---------------------------------------------------- ------------ ------------
Earnings per share from continuing and discontinued
operations attributable to owners of the parent
during the period (expressed in $ cents per share) $ cents $ cents
From continuing operations 10.35 15.42
From discontinued operations 0.01 0.15
---------------------------------------------------- ------------ ------------
From profit for the period 10.36 15.57
---------------------------------------------------- ------------ ------------
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.
Six months ended
---------------------------------------------------- ----------------------------
30-Jun-20 30-Jun-19
$'000 $'000
---------------------------------------------------- ------------- -------------
Profit from continuing operations attributable
to owners of the parent 18,273 27,220
---------------------------------------------------- ------------- -------------
Profit from discontinued operations attributable
to owners of the parent 23 272
---------------------------------------------------- ------------- -------------
Total 18,296 27,492
---------------------------------------------------- ------------- -------------
Weighted average number of ordinary shares in issue 176,498,266 176,498,266
Adjusted for:
- Share Options 4,523,208 4,943,720
---------------------------------------------------- ------------- -------------
Weighted average number of ordinary shares for
diluted earnings per share 181,021,474 181,441,986
---------------------------------------------------- ------------- -------------
Diluted earnings per share $ cents $ cents
From continuing operations 10.09 15.00
From discontinued operations 0.01 0.15
---------------------------------------------------- ------------- -------------
From profit for the period 10.10 15.15
---------------------------------------------------- ------------- -------------
8. Property, plant and equipment
Motor
vehicles
and
Construction Plant Mining ROU Mineral
in progress and equipment assets assets Land rights Total
------------------------- ------------------ --------------- -------- --------- ------ --------- -------
$'000 $'000 $'000 $'000 $'000 $'000 $'000
------------------------- ------------------ --------------- -------- --------- ------ --------- -------
Cost
At 1 January 2020 14,373 128,655 1,426 2,985 619 341,801 489,859
Additions 4,626 14 - 79 - - 4,719
Disposals (3) (1,580) - (37) - - (1,620)
Change in estimate
- asset retirement
obligation - (83) - - - - (83)
Transfers (14,913) 14,913 - - - - -
Exchange differences (173) (1,513) (80) (90) 4 1,400 (452)
At 30 June 2020 3,910 140,406 1,346 2,937 623 343,201 492,423
------------------------- ------------------ --------------- -------- --------- ------ --------- -------
Accumulated depreciation
At 1 January 2020 - 42,850 316 1,301 - 39,005 83,472
Provided during
the period - 5,033 59 190 - 8,472 13,754
Disposals - (1,579) - (37) - - (1,616)
Exchange differences - (973) (16) (42) - - (1,031)
------------------------- ------------------ --------------- -------- --------- ------ --------- -------
At 30 June 2020 - 45,331 359 1,412 - 47,477 94,579
------------------------- ------------------ --------------- -------- --------- ------ --------- -------
Net book value
at 30 June 2020 3,910 95,075 987 1,525 623 295,724 397,844
------------------------- ------------------ --------------- -------- --------- ------ --------- -------
The decrease in estimate in relation to the asset retirement
obligation of $83,000 is due to adjusting the provision recognised
at the net present value of future expected costs using latest
assumptions on inflation rates and discount rates.
During the period there were total disposals of property, plant
and equipment at cost of $1,620,000 with accumulated depreciation
of $1,616,000. The Group received $300,000 consideration for these
assets and therefore a profit of $296,000 was recognised in other
income.
9. Intangible assets
Computer
Mining software
licences and website
Goodwill and permits Total
------------------------------- ---------- ------------- ------------ -------
$'000 $'000 $'000 $'000
------------------------------- ---------- ------------- ------------ -------
Cost
At 1 January 2020 30,672 37,494 529 68,695
Exchange differences (416) (473) - (889)
At 30 June 2020 30,256 37,021 529 67,806
-------------------------------- ---------- ------------- ------------ -------
Accumulated amortisation
At 1 January 2020 - 9,492 527 10,019
Provided during the period - 935 - 935
Exchange differences - (143) - (143)
-------------------------------- ---------- ------------- ------------ -------
At 30 June 2020 - 10,284 527 10,811
-------------------------------- ---------- ------------- ------------ -------
Net book value at 30 June 2020 30,256 26,737 2 56,995
-------------------------------- ---------- ------------- ------------ -------
Impairment assessment
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. In light of the current economic environment and with
depressed commodity prices the Company has reviewed the recoverable
amounts of the two projects as at 30 June 2020.
Kounrad project
The Kounrad project located in Kazakhstan has an associated
goodwill balance of $8,495,000 (31 December 2019: $8,999,000).
While assessing the project for impairment the key economic
assumptions used in the review were a five-year forecast average
nominal copper price of $5,581 per tonne (2019: $6,372) and a
long-term price of $6,607 per tonne (2019: $6,595) 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 $21,761,000 (31 December 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.
At 30 June 2020, the Group has tested 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 8.60% (2019:
8.07%) was applied to calculate the present value of the CGU. The
increase in the discount rate from the 31 December 2019 was
supported by a detailed WACC calculation and due to the increased
country risk profile as a result of the recent economic conditions
surrounding COVID-19. The key economic assumptions used in the
review were a five-year forecast average nominal zinc and lead
price of $2,089 (2019: $2,220) and $1,807 (2019: $1,986) per tonne
respectively and a long-term price of $2,337 (2019: $2,358) and
$1,936 (2019: $1,900) per tonne respectively. Zinc and lead
treatment charges are forecast to reduce in future periods
returning to historic averages by 2022.
Management then performed sensitivity analyses whereby certain
parameters were flexed downwards 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 5%
Long-term lead price reduced by 3%
Discount rate increased to 9%
Production decreased by 2.5%
Treatment charges increased by 15%
Operational expenditure increased by 4%
Capital expenditure increased by 20%
This is a simple sensitivity analysis and does not take into
account any of management's mitigation factors should these changes
occur. The Board considers the base case forecasts to be
appropriate and balanced best estimates.
10. Inventories
30-Jun-20 31-Dec-19
$'000
$'000
--------------- ---------- ---------
Raw materials 6,276 6,431
Finished goods 449 852
--------------- ---------- ---------
6,725 7,283
--------------- ---------- ---------
The Group recognise all inventory at the lower of cost and net
realisable value and did not have any slow-moving, obsolete or
defective inventory as at 30 June 2020 and therefore there were no
write-offs to the Income Statement during the period (H1 2019:
nil). The total inventory recognised through the Income Statement
was $2,506,000 (H1 2019: $2,592,000).
11. Trade and other receivables
30-Jun-20 31-Dec-19
Current receivables $'000 $'000
------------------------ ---------- ---------
Trade receivables 2,693 1,493
Prepayments 1,045 893
Accrued income 1,444 1,302
VAT receivable 934 1,101
Other receivables 1,962 1,487
8,078 6,276
------------------------ ---------- ---------
Non-current receivables
Prepayments 314 441
VAT receivable 2,989 2,948
3,303 3,389
------------------------ ---------- ---------
As at 30 June 2020, the total Group VAT receivable was
$3,923,000 (31 December 2019: $4,049,000) which included an amount
of $3,187,000 (31 December 2019: $3,086,000) of VAT owed to the
Group by the Kazakhstan authorities. During the period ended 30
June 2020, the Kazakhstan authorities refunded $125,000. The Group
is working closely with its advisors to recover the remaining
portion. The planned means of recovery will be through a
combination of the local sales of copper cathode to offset VAT
liabilities and by a continued dialogue with the authorities to
receive the remaining portion.
12. Trade and other payables
30-Jun-20 31-Dec-19
Current payables $'000 $'000
------------------------------------------------- ---------- ---------
Trade and other payables including accruals 7,046 11,035
Corporation tax, social security and other taxes 1,181 1,270
8,227 12,305
------------------------------------------------- ---------- ---------
13. Deferred income tax asset and liability
The movements in the Group's deferred tax asset and liabilities
are as follows:
Currency Credit
to income
translation statement
At 1-Jan-20 differences $'000 At 30-Jun-20
$'000 $'000 $'000
---------------------------------------- --------- ------------- -------------------- ----------- --------------
Other timing differences (190) 17 79 (94)
Deferred tax liability on fair value
adjustment on Kounrad transaction (6,428) 361 144 (5,923)
Deferred tax liability on fair value
adjustment on CMK acquisition (19,205) (88) 535 (18,758)
Deferred tax liability, net (25,823) 290 758 (24,775)
--------------------------------------------------- ------------- -------------------- ----------- --------------
Reflected in the statement of financial
position as:
---------------------------------------- --------- ------------- -------------------- ----------- --------------
Deferred tax asset 266 (15) 24 275
--------------------------------------------------- ------------- -------------------- ----------- --------------
Deferred tax liability (26,089) 305 734 (25,050)
--------------------------------------------------- ------------- -------------------- ----------- --------------
A taxable temporary difference arose as a result of the Kounrad
Transaction and CMK Group (Sasa) 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 $679,000 during the period to reflect the tax
consequences of depreciating and amortising the recognised fair
values of the assets during the period.
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.
14. Borrowings
30-Jun-20 31-Dec-19
$'000 $'000
--------------------- ----------- ---------
Secured: Non-current
Bank loans 50,645 69,473
---------------------- ----------- ---------
Secured: Current
Bank loans 38,400 38,400
Unsecured: Current
Bank overdrafts 10,000 895
---------------------- ----------- ---------
Total current 48,400 39,295
99,045 108,768
--------------------- ----------- ---------
The carrying value of loans approximates fair value:
30-Jun-20 31-Dec-19
$'000 $'000
----------------- ----------- ---------
Traxys bank loan 89,045 107,873
Bank overdrafts 10,000 895
99,045 108,768
----------------- ----------- ---------
The movement on the borrowings can be summarised as follows:
$'000
------------------------------------------------------- -------------
Balance at 1 January 2020 108,768
Repayment of borrowings (19,200)
Finance charge interest 2,913
Finance charge unwinding of directly attributable fees 372
Interest paid (2,913)
Overdrafts drawdown 9,105
Balance at 30 June 2020 99,045
-------------------------------------------------------- -------------
During the period, $19,200,000 of the principal amount of Group
debt was repaid as well as a further $2,856,000 interest. As at 30
June 2020, non-current and current borrowings were $50,645,000 and
$48,400,000 respectively (31 December 2019: $69,473,000 and
$38,400,000 respectively).
The Group holds one corporate debt package with Traxys Europe
S.A. repayable on 4 November 2022. Interest is 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 debt is subject to financial covenants which include the
monitoring of gearing and leverage ratios and these are all
currently complied with.
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 to 2.4% to 2.5% dependent on conditions. This
overdraft has been fully drawdown as at 30 June 2020 (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 was fully drawdown as at 30 June 2020.
15. Cash generated from operations
Six months ended
Adjustments for: 30-Jun-20 30-Jun-19
$'000 $'000
------------------------------------------------- --------- ---------
Profit before income tax including discontinued
operations 24,369 35,760
Adjustments for:
Depreciation and amortisation 14,650 15,320
Silver stream commitment (1,139) (1,126)
(Profit)/loss on disposal of property, plant and
equipment (note 8) (296) 132
Foreign exchange loss 370 12
Share based payments 275 529
Finance income (83) (159)
Finance costs 3,472 6,208
Changes in working capital:
Inventories 558 89
Trade and other receivables (4,008) 1,288
Trade and other payables (4,208) (1,912)
Provisions for other liabilities and charges 386 (46)
Cash generated from operations 34,346 56,095
------------------------------------------------- --------- ---------
16. 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 30
June 2020 as receipt of the amount is dependent on the outcome of
the reinspection.
17. Dividend per share
The CAML Board of Directors has decided to defer a decision
regarding the CAML interim dividend pending clarity on the timing
and likely financial impact of the TSF4 leakage (H1 2019: 6.5 pence
per ordinary share).
18. Related party disclosure
The Kounrad Foundation, a charitable foundation through which
Kounrad donates to the community, was advanced $62,473 (H1 2019:
$184,000). This is a related party by virtue of common
directors.
19. Subsequent events
Since the period end, there have been a small number of COVID-19
cases at Sasa and in the local town, Makedonska Kamenica.
Production and sales volumes at Sasa have been unaffected. The
price of zinc, lead and copper have generally improved post the
period end.
On 14 September there was a short-term leakage of tailings from
Sasa's TSF4 into the local river. The leakage was stopped soon
after. The processing plant is not currently operational as work is
required in order to secure the facility before operations can
re-commence and therefore the annual production guidance of 23,000
- 25,000 tonnes of zinc and 30,000 - 32,000 tonnes of lead are
under review. Based on the initial information available from early
investigations, the Board consider that it is reasonable that the
Facility can be secured and the likelihood of an extended shutdown
of the processing plant is low. The Company has engaged all
advisers and consultants involved in the construction of the
Facility, together with its own management to ensure that the
Company mitigates any financial loss and any environmental and
local community impact. The Company is confident that it has
complied with all construction and licence regulations in the
construction of the Facility. There has been no report of any
health and safety issues and nor is there likely to be. The interim
dividend decision has been deferred pending greater clarity on this
issue.
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END
IR SFMEFIESSESU
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