Results for the quarter ended 30 June 2012
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For immediate release |
14 August 2012 |
Results for the Second Quarter and Half Year Ended 30June 2012
Centamin plc ("Centamin" or "the Company") (LSE: CEY, TSX: CEE) is pleased to announce its results for the second quarter ended 30June 2012.
To view the full document please follow the link below:
http://www.rns-pdf.londonstockexchange.com/rns/9329J_-2012-8-13.pdf
HIGHLIGHTS1
· Q2 gold production reached a record level of 67,422 ounces from the Sukari Gold Mine ("Sukari"), a 40% increase on Q2 2011
· Cash costs2 of US$565 per ounce (US$729 inclusive of fuel prepayments, see main text)
· Engagement on fuel subsidy ongoing
· Average gold sales price received of US$1,610 per ounce
· Underground mine achieved record quarterly ore production of 116kt, a 269% increase on Q2 2011
· Record mill utilisation of 89%, a 7% increase on Q2 2011
· Record mill throughput of 1,269kt, an increase of 49% on Q2 2011 with record monthly mill throughput in May of 453,457t
· Stage 4 (plant expansion to 10Mtpa) continues to progress well and is on track for commissioning to begin in Q1 2013. Expenditure to date is US$138.7 million
· With cash, bullion, gold sales receivable and liquid assets2 of US$183 million as at 30 June 2012, Centamin remains debt-free and unhedged
· 2012 production guidance of 250,000 ounces maintained, with cash costs of US$550 per ounce at subsidised fuel prices
· Drilling continued at Una Deriam, the first of Centamin's four exploration licenses in Ethiopia with drilling results expected in H2 2012
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|
Q2 2012 |
Q1 2012 |
Q2 2011 |
Q1 2011 |
|
Total Gold Production (oz) |
67,422 |
49,071 |
47,991 |
45,204 |
|
Cash Cost of Production 1,4 (US$/oz) |
565 |
609 |
498 |
501 |
|
Average Sales Price (US$) |
1,610 |
1,694 |
1,545 |
1,405 |
|
Revenue (US$M) |
96.8 |
87.7 |
77.9 |
89.0 |
|
EBITDA2,,3,4 (US$M) |
54.9 |
55.2 |
59.6 |
59.9 |
|
Basic EPS4 (cents) |
3.87 |
4.67 |
5.15 |
5.65 |
Josef El-Raghy, Chairman of Centamin, said: "Our team at Sukari has delivered a record quarter on tonnes mined from the underground and tonnes processed through the plant. Open pit tonnes mined increased significantly from Q1 as staged development in line with the optimised mine plan announced in May opened up additional mining faces. We have delivered our strongest operating quarter to date and remain on track to deliver our full year production guidance of 250,000 ounces."
Centamin will host a conference call on Tuesday, 14 August at 9.00am (London, UK time) to update investors and analysts on its results. Participants may join the call by dialling one of the following three numbers, approximately 10 minutes before the start of the call.
From UK: (toll free) 0800 368 1895
From Canada: (toll free) 1866 561 8617
From rest of world: +44 (0) 203 140 0693
Participant pass code: 401548#
A live audio webcast of the call will be available on:
http://mediaserve.buchanan.uk.com/2012/centamin140812/registration.asp
A group analyst briefing with be held simultaneously at 9.00am at the offices of Buchanan, 107 Cheapside, London, EC2V 6DN
A second call (Q&A only) will be held for North American analysts and investors at 2.00pm (London, UK time) / 9.00am EST. Participants may join the call by dialling one of the following three numbers, approximately 10 minutes before the start of the call.
From Canada: (toll free) 1866 561 8617
From US: (toll free) 1866 928 6049
From rest of world: +44 (0) 203 140 0693
Participant pass code: 925269#
For more information please contact:
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Centamin plc Josef El-Raghy, Chairman Andrew Davidson,Head of Investor Relations and Business Development |
+44 (0) 20 7569 1670
+44 (0) 20 7569 1671 |
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Buchanan Bobby Morse Gabriella Clinkard |
+44 (0) 20 7466 5000 |
About Centamin plc
Centamin is a mining company that has been actively exploring in Egypt since 1995. The principal asset of Centamin is its interest in the large scale, low cost Sukari Gold Mine, located in the Eastern Desert of Egypt. 2010 was Sukari's maiden year of production, with 150,000 ounces of gold produced. In 2011, production expanded to over 200,000 ounces, with production forecast to increase further in the following years.
The Sukari Gold Mine is the first large-scale modern gold mine in Egypt. Centamin's operating experience in Egypt gives it a significant first-mover advantage in acquiring and developing other gold projects in the prospective Arabian-Nubian Shield.
In 2011 the Group acquired Sheba Exploration Plc ("Sheba") and now has interests in four mineral licences in Ethiopia where it is conducting further exploration activities.
CHAIRMAN'S STATEMENT
We have delivered our strongest operating quarter to date and remain on track to deliver our full year production guidance of 250,000 ounces. Sukari continues to be highly cash generative, with EBITDA of US$54.9 million in the quarter and cash, bullion and liquid assets of US$183 million as at 30 June 2012. Centamin remains 100% exposed to the high gold price environment through its unhedged position and the Company is projected to have sufficient funding from its cash flow and cash balance to fund its capex projects, including the Stage 4 expansion.
Our exploration and development strategy in Ethiopia progressed during the quarter, as drilling continued at the first of our four exploration licences in northern Ethiopia.
The full year cash cost guidance remains at US$550 per ounce at subsidised fuel prices and would increase by circa US$150 per ounce in the event that international fuel prices are levied.
OPERATIONAL REVIEW
Production
Sukari Gold Mine production summary:
|
|
|
Q2 2012 |
Q1 2012 |
HY 2012 |
Q2 2011 |
Q1 2011 |
HY 2011 |
|
Ore Mined - Open Pit |
('000t) |
1,816 |
1,003 |
2,819 |
1,039 |
1,212 |
2,251 |
|
Ore Grade Mined - Open Pit |
(Au g/t) |
1.07 |
0.83 |
0.99 |
NR |
NR |
NR |
|
Ore Grade Milled - Open Pit |
(Au g/t) |
1.19 |
1.21 |
1.20 |
NR |
NR |
NR |
|
Total Open Pit Material Mined |
('000t) |
6,579 |
4,819 |
11,398 |
3,030 |
4,552 |
7,582 |
|
Strip Ratio |
(waste/ore) |
2.6 |
3.8 |
3.0 |
1.9 |
2.8 |
2.4 |
|
|
|
|
|
|
|
|
|
|
Ore Mined - Underground Development |
('000t) |
53 |
47 |
100 |
39 |
41 |
80 |
|
Ore Mined - Underground Stopes |
('000t) |
63 |
25 |
88 |
4 |
- |
4 |
|
Ore Grade Mined - Underground |
(Au g/t) |
8.68 |
8.11 |
8.46 |
NR |
NR |
NR |
|
|
|
|
|
|
|
|
|
|
Ore Processed |
('000t) |
1,269 |
1,020 |
2,289 |
850 |
741 |
1,591 |
|
Head Grade |
(g/t) |
1.99 |
1.69 |
1.86 |
1.82 |
1.94 |
1.88 |
|
Gold Recovery |
(%) |
84.3 |
85.0 |
84.6 |
85.0 |
86.7 |
85.8 |
|
Gold Produced - Dump Leach |
(oz) |
1,318 |
1,903 |
3,221 |
2,765 |
2,676 |
5,441 |
|
Gold Produced - Total |
(oz) |
67,422 |
49,071 |
116,493 |
47,991 |
45,204 |
93,195 |
|
|
|
|
|
|
|
|
|
|
Cash Cost of Production |
(US$/oz) |
565 |
609 |
584 |
498 |
501 |
499 |
|
Open Pit Mining |
(US$/oz) |
194 |
166 |
NR |
NR |
NR |
NR |
|
Underground Mining |
(US$/oz) |
50 |
52 |
NR |
NR |
NR |
NR |
|
Processing |
(US$/oz) |
263 |
315 |
NR |
NR |
NR |
NR |
|
G&A |
(US$/oz) |
58 |
76 |
NR |
NR |
NR |
NR |
|
|
|
|
|
|
|
|
|
|
Gold Sold |
(oz) |
60,673 |
52,701 |
113,374 |
50,262 |
63,240 |
113,502 |
|
Average Realized Sales Price |
(US$/oz) |
1,610 |
1,694 |
1,649 |
1,545 |
1,405 |
1,467 |
Notes:- (1) Ore mined includes 104kt @ 0.50g/t delivered to the dump leach in Q2 2012 (264kt @ 0.42g/t in Q1 2012;
224kt @ 0.5g/t in Q2 11 and 435kt @ 0.6g/t in Q1 11).
(2) Gold produced is gold poured and does not include gold-in-circuit at period end.
(3) Cash costs exclude royalties, exploration and corporate administration expenditure.
(4) Realised Sales Price reflects actual sales price realised during the period i.e. excludes Gold receivable.
(5) Historic Cash cost of production now reflect adoption of IFRIC 20.
NR - Not Reported.
Centamin delivered a record 67,422 ounces of gold production in Q2 2012, which is a 40% increase on Q2 2011.
Sukari's production profile for the year will see a larger proportion of ounces delivered in Q3 and Q4 due to increasing overall headgrade and as such our full year production guidance of 250,000 ounces remains intact.
On 30 May 2012, Centamin released an optimised 5 year mine plan highlighting the following:
· Increased mining rates of ore in the open pit in years 2014 and 2015
· Reduced strip ratio in 2014 to 6.72:1 (previously 14.5:1)
· Open pit mine life of 30 years at average grade of 1.09g/t
· Faster ramp up to 10Mtpa processing capacity following completion of Stage 4 expansion
Open Pit
The open pit delivered total material movement of 6.6Mt for the quarter, a significant increase of 37% on Q1 2012 as additional mining faces opened up and an increase of 117% on the corresponding quarter in 2011.
Ore production from the open pit was 1.8Mt at 1.07g/t with average head grade of ore fed to the plant of1.19g/t. The ROM ore stockpile balance increased by 278kt to 497kt by the end of the quarter.
Mining continued to focus in Stage 2A and Stage 2B down to the 1040RL and 1076RL respectively. In Stage 3 development work continued with minor production commencing in preparation for large scale load and haul activities.
Underground Mine
The underground mine achieved a record quarterly ore production with 116kt hauled to surface and ore production continues to ramp up whilst a significant focus on longer term development is also maintained.
Grades continued to be reasonably high, with a headgrade of 8.68g/t from the underground mine in Q2. The grade was below the annual production guidance range of 10-12g/t as the majority of the stope material for the quarter continued to be mined from the lower grade stockwork stopes.However, during the last part of the quarter, higher grade stope material was mined anddevelopment of access to the higher grade areas continues. Higher grade material is scheduled for mining in the remaining quarters and the annual grade guidance of 10-12g/t is maintained. The ratio of stoping ore to development ore mined increased this quarter, with 46% of development ore (53kt) and 53% of stoping ore (63kt) in Q2 2012.
A further 707.1 metres of development took place on the 875, 860, 850 and 845 levels to access additional stoping blocks that will be mined during 2012. A total of 2,922.9 metres of diamond drilling was done during the quarter for both short term stope definition and development whilst a further 1,978 metres of drilling to test the depth extensions below the current Amun zone and into the Horus zone was completed.
Development of the Ptah Decline, which will move towards the north of the Sukari deposit and provide access to the high grade Julius zone, began in October 2011 and had advanced 296.4 metres by the quarter end. The Ptah Decline will take underground activity away from the pit shell over the next two years, allowing Centamin to maintain two separate underground production sources once the Amun Decline becomes part of the open pit.
The anticipated capital cost of the Ptah Decline is US$18 million, which will see the decline reach the first ore blocks to be developed below the middle of the hill. It is expected that this initial development work will be complete in late 2012.
Processing
The plant performed at an annualised rate of 5 million tonnes per annum (Mtpa) consistently throughout the quarter, with productivity of 652 tonnes per hour(tph) for the quarter.
The quarterly throughput in the Sukari processing plant was 1,269kt, 49% higher than the corresponding quarter in 2011 and 24% higher than Q1.
Plant metallurgical recoveries were 84.3%, which is a 1% decrease on Q1. Recoveries are expected to increase with improvements to plant automation, which ensures we are operating within a tight band of pH control and thus optimising leach conditions on a continual basis. Centamin is also looking to improve its efficiency of carbon management and a short term measure is to replace some of the older fouled carbon with new virgin carbon on a periodic basis, which helps to maintain a higher amount of gold absorbed onto carbon and recovered. It has been identified that the existing carbon regeneration plant is unable to sufficiently regenerate the carbon. A new plant has been ordered and this will be installed in Q1 2013. This plant will have sufficient capacity to ensure all the carbon is regenerated effectively and is expected to improve recoveries by 3 -5%.
The dump leach operation produced 1,318oz in Q2, a 31% decrease on Q1. 104kt of low grade oxide ore at 0.50g/t was delivered to the pads in preparation for irrigation, bringing the total ore placed on the dump leach to approximately 6.0Mt at 0.50g/t. Dump leach volumes pumped back to the CIL Plant were deliberately reduced to minimise issues associated with the carbon fouling and carbon regeneration and the impact on recoveries.
Fuel Costs
As explained in the announcement on 28 March 2012, Sukari has benefited from the national industry subsidy in Egypt for diesel. As compared with international prices this has a beneficial effect of approximately US$150/oz. on the forecast cash costs of US$550/oz. for 2012 based on 250,000 ounces of production. The cash cost of US$565 per ounce for the quarter does not include the cost of purchasing fuel for the quarter at international prices.
Given the challenging political and fiscal conditions that Egypt is currently experiencing it was necessary during Q2 to continue to advance funds to our fuel supplier Chevron based on the international price of fuel to ensure continuous operations whilst negotiations are ongoing with the Egyptian Government on the path forward for fuel subsidies.Management are treating these fund advances as prepayments being calculated at the international fuel price approximately 85 cents/litre and at this stage are not expensed, however they represent roughly half of our fuel supply for Q1 and all the usage for Q2. Should these prepayments be expensed, the cash cost for Q1 would increase by US$108 to US$717 per ounce and for Q2 would increase by US$164 per ounce to US$729 per ounce and for the half year would increase by US$141 per ounce to US$725 per ounce.
Negotiations are ongoing with the Egyptian Government on the path forward for fuel subsidies but given the slow progress and short time periods for commencing legal action, the Board agreed to commence judicial review proceedings in Egypt. The Company, which has the support of the Egyptian Mineral Resource Authority in these negotiations and judicial review proceedings,does not believe that an instant move to international fuel prices is a reasonable outcome. The Company will look to recover any funds advanced thus far at this higher rate should negotiations or proceedings be concluded successfully. Centamin will update shareholders on these negotiations and proceedings and update full year cash cost guidance if necessary.
STAGE 4 EXPANSION
Construction continueson Stage 4 of the process plant expansion which will expand the Sukari capacity from 5Mtpa to 10Mtpa. The capital cost of the Stage 4 expansion is budgeted at US$287.6 million (excluding contingency) with expenditure to date of US$138.7 million.
Main Plant
Detailed engineering is 94% complete and the final issue, evaluation and award of equipment packages is ongoing.
Power Station
The engineering design and procurement are 100% complete.Civil, structural and mechanical works continue around power house, fuel treatment, workshop buildings and day tank area. Electrical work on cable tray installation and earthing are ongoing.
Sea Water Pipeline
Orders have been placed for motorized valves, flanges and above ground pipe work. The installation contract tender has been completed and awarded to Egyptian Maintenance Co. (EMC). Engineering for the Petroleum & Process Industries (ENPPI) are finalising the electrical equipment supply.
Tailings Storage Facility
The construction process for the Tailings Storage Facility ("TSF") is 85% complete.Construction by earthworks contractor together with mining is ongoing.
Costing
A breakdown of the major cost areas to date are as follows:
· Mining Equipment US$19.5M
· Processing Plant US$72.9M
· Power Plant US$33.1M
· Other US$13.2M
US$138.7M
Major contributors to the payments made in Q2 were as follows:
· Mining Equipment US$9.1M
· Processing Plant US$26.6M
· Power Plant US$1.2M
· Other US$2.5M
US$39.4M
The Stage 4 expansion project remains on schedule for commissioning in Q1 2013.
EXPLORATION UPDATE
Sukari Hill
Centamin's resources at Sukari are 13.13Moz Measured & Indicated and 2.3Moz Inferred, which include reserves of 10.1Moz. Drilling continued from the underground development drives and the drilling programme will build up to four underground based exploration/resource drill rigs throughout 2012.
We aim to continue adding ounces to Sukari's already significant resource base.
Regional Exploration
Drilling continued in the V- Shear and Kurdeman prospects. Drilling at V- Shear continued to test the extent of the porphyry as this represents the first significant zones of porphyry encountered away from the Sukari Hill. Assays are promising and the materiality of this discovery is currently being reviewed.
Growth Beyond Sukari
The third pillar of Centamin's growth strategy is growth beyond Sukari. Centamin has interests in 4 exploration licences in northern Ethiopia and drilling at the first property, Una Deriam, began in Q1. Ethiopia is a geologically prospective terrain that is historically underexplored. There is an emerging gold mining industry and significant artisanal gold mining activities. Through a well-funded and focused exploration effort, Centamin hopes to replicate its success in Egypt in exploring and developing gold assets.
During Q2 the Company continued diamond drilling at Una Deriam and samples have been dispatched to South Africa. Previous work on the tenement had outlined a 8km long gold in soil anomaly. Several historical open hole percussion drill holes confirmed the existence of significant sub-surface gold mineralisation with +20 metre intersections.
The acquisition of Sheba was part of the Company's plan to diversify into other countries in the prospective Arabian-Nubian Shield. Centamin intends to continue to grow and diversify its asset base through targeted acquisitions in the region and beyond.
FINANCIAL REVIEW
Centamin has a strong and flexible financial position with no debt, no hedging and cash, bullion and liquid assets of US$182.7m at 30June 2012. Cash, bullion and liquid assets is a non-GAAP financial measure and includes cash, bullion, gold sales receivable and liquid assets.
· Cash at Bank US$127.7 million
· Gold Sales Receivable US$27.3 million
· Liquid assets - listed equities US$7.7 million
· Bullion US$20.0million
Sukari generated revenue of US$96.8 million in Q2, a 10% increase on Q1. Revenue reported comprises proceeds from gold and silver sales.
Centamin's cash costs per ounce were lower than in Q1 primarily as a result of higher production and improved productivities compared to those reported in Q1. The production increase of 37% over Q1 was also driven to some extent by the higher grade ore being fed to the mills, (1.99g/t in Q2 compared to 1.69g/t in Q1) resulting in higher ounces produced (67,422 ounces in Q2 compared to 49,071 ounces in Q1) from a 28% increase in tonnes milled (circa 1Mt). Cash costs increased by 27% ($38.1 million in Q2 compared to $29.9 million in Q1). The major contributor to the higher costs in Q2 was the increase in production.
The Company reported a 9% decrease in EBITDA on Q2 2011 and a 1% decrease on Q1. Basic Earnings per Share for the quarter was 3.87 cents.Whilst there was a moderate decrease in the unit cash cost of production there was not a significant corresponding increase in EBITDA due to a build-up of gold inventory during the period (gold sales of 60,673 ounces versus production of 67,422 ounces).
CORPORATE UPDATE
Chief Executive Officer Appointment Process
Having reviewed the market for potential candidates, the Board is currently re-assessing its options for ensuring that the Company has the right leadership to best further its future development. A further update will be given in due course.
Investor Relations and Business Development Officer Appointment
Andrew Davidson, a qualified geologist and formerly Director of Equity Research, Metals and Mining at Numis Securities joined the Company as Head of Investor Relations and Business Developmenton 13 August 2012.
Outlook
Centamin remains focused on progressing all three pillars of our growth strategy. At Sukari, we are committed to delivering on our full year production guidance of 250,000 ounces, a 25% increase in production from 2011. The full year cash cost forecast remains at US$550 per ounce at subsidised fuel prices and in the event that international fuel prices are levied, would increase to approximately US$700 per ounce. Even with these higher costs, Centamin is still projected to be able to fund its 2012 capex projects from Sukari cash flow and we remain a relatively low cost operation. With the ramp up of the construction efforts on the Stage 4 expansion, we are on track to become a significant mid-tier gold producer from the large scale Sukari gold deposit. The regional exploration efforts within the 160km2 Sukari tenement continue to look promising and with the commencement of drilling at Una Deriam in Ethiopia our diversification within the highly prospective and under-explored Arabian Nubian Shield is underway.
Josef El-Raghy
Chairman
14 August 2012
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This document contains "forward-looking information" which may include, but is not limited to, statements with respect to the future financial or operating performance of Centamin plc ('Centamin' or 'the Company'), its subsidiaries (together 'the Group'), affiliated companies, its projects, the future price of gold, the estimation of mineral reserves and mineral resources, the realization of mineral reserve and resource estimates, the timing and amount of estimated future production, revenues, margins, costs of production, estimates of initial capital, sustaining capital, operating and exploration expenditures, costs and timing of the development of new deposits, costs and timing of future exploration, requirements for additional capital, foreign exchange risks, governmental regulation of mining operations and exploration operations, timing and receipt of approvals, consents and permits under applicable mineral legislation, environmental risks, title disputes or claims, limitations of insurance coverage and regulatory matters. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "targets", "aims", "anticipates" or "believes" or variations (including negative variations) of such words and phrases, or may be identified by statements to the effect that certain actions, events or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved.
Forward-looking statements involve known and unknown risks, uncertainties and a variety of material factors, many of which are beyond the Company's control which may cause the actual results, performance or achievements of Centamin, its subsidiaries and affiliated companies to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Readers are cautioned that forward-looking statements may not be appropriate for other purposes than outlined in this document. Such factors include, among others, future price of gold; general business, economic, competitive, political and social uncertainties; the actual results of current exploration and development activities; conclusions of economic evaluations and studies; fluctuations in the value of the U.S. dollar relative to the local currencies in the jurisdictions of the Company's key projects; changes in project parameters as plans continue to be refined; possible variations of ore grade or projected recovery rates; accidents, labour disputes or slow-downs and other risks of the mining industry; climatic conditions; political instability, insurrection or war, civil unrest or armed assault; labour force availability and turnover; delays in obtaining financing or governmental approvals or in the completion of exploration and development activities; as well as those factors referred to in the section entitled "Risks and Uncertainties"section of the Management discussion & analysis. The reader is also cautioned that the foregoing list of factors is not exhausted of the factors that may affect the Company's forward-looking statements.
Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking statements contained herein are made as of the date of this document and, except as required by applicable law, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.
QUALIFIED PERSON AND QUALITY CONTROL
Information of a scientific or technical nature in this document was prepared under the supervision of Andrew Pardey, BSc. Geology, Chief Operating Officer of Centamin plc and a qualified person under the Canadian National Instrument 43-101.
Refer to the technical report entitled "Mineral Resource and Reserve Estimate for the Sukari Gold Project, Egypt" dated 14 March 2012 and filed on SEDAR at www.sedar.com, for further discussion of the extent to which the estimate of mineral resources/reserves may be materially affected by any known environmental, permitting, legal, title, taxation, socio-political, or other relevant issues.
This information is provided by RNS
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