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Press release from Marketwire

2012 Annual Results

Wednesday, March 27, 2013

2012 Annual Results03:51 EDT Wednesday, March 27, 2013PERTH, AUSTRALIA--(Marketwire - March 27, 2013) - Centamin plc ("Centamin" or "the Company")(LSE: CEY) (TSX: CEE)For immediate release 27 March 2013Centamin plc ("Centamin" or "the Company")(LSE:CEY, TSX:CEE)2012 Annual ResultsCentamin is pleased to announce its audited annual results for theperiod ended 31 December 2012.HIGHLIGHTS FOR THE YEAR (1) (2) (3)Centamin delivered strong operational and financial results in 2012,producing 262,828 ounces of gold (2011: 202,699 ounces) and generatingprofit after tax for the year of US$199 million (2011: US$194.0million). Through the Group's emphasis on rigorous cost control,Centamin has continued to reap the benefits of the high gold price, andthis was enhanced further by its debt-free and unhedged position. Nowin its third year of production, the Sukari Gold Mine is highly cashgenerative, providing EBITDA of US$233.3 million (2011: US$211.4million), a 10% increase on 2011, and a robust cash and cashequivalents balance of US$147.1 million (2011: US$164.2 million) as at31 December 2012.2012 presented some operating environment challenges, however a solidsecond quarter and a record fourth quarter of production have shownthat a substantially larger production profile is achievable forSukari. This potential for production growth combined with the Group'sreserves, a significant expansion programme, a solid financialposition, and an experienced team means Centamin is well positioned for2013, as is shown by the following:- Basic earnings per share 18.27 cents, up 2% on prior year.- Record EBITDA US$233.3 million, up 10% on the prior year.- Full year production was 262,828 ounces, a 30% increase on 2011and above guidance of 250,000 ounces.- Cash costs of production of US$669 per ounce (equivalent toUS$530 per ounce versus US$556 per ounce in 2011 at subsidized fuelprices).- Stage 4 plant expansion (to 10Mtpa) commissioning activitiesbegan in Q1 2013 with the new power station commissioned in January2013 and new blowers and compressors to be commissioned in Q2 2013.The bulk of commissioning will commence, and be complete, in the secondhalf of 2013. Expenditure to date is US$228.5 million of the totalforecast US$325 million including contingency.- Centamin remains debt-free and unhedged with cash, bullion onhand, gold sales receivable and available-for-sale financial assets ofUS$219.4 million as at 31 December 2012.- Drilling continued at the V-Shear porphyry and commenced at theKurdeman prospect.- A gravity survey, aimed at targeting and defining porphyriesbeneath the wadi sediments was completed late in 2012 with results duein Q2 2013.- Results in Ethiopia confirm the existence of low grademineralisation, with drilling continuing.During the year Centamin was involved in two separate court casesdirectly relevant to the operation of the mine at Sukari. The first ofthese was triggered by a decision taken by the Egyptian GeneralPetroleum Company (EGPC) to charge international prices, not local(subsidised) prices for the supply of Diesel Fuel Oil ("DFO"). Thesecond case saw a judgment by an Egyptian Administrative Court inrelation to the validity of the Company's 160km2 exploitation lease;although on 20 March 2013 the Supreme Administrative Court upheld theCompany's application to suspend this decision until the merits of theCompany's appeal are considered and ruled on, thus providing assurancethat normal operations would be able to continue during this process.Both of these cases are described in detail elsewhere in this report(refer to Note 20 of the Financial Statements). Every action is beingtaken to contest the decisions, including the making of formal legalappeals and, although their resolution may take some time, we remainconfident that a satisfactory outcome will ultimately be achieved.With respect to the DFO case, management however recognises thepractical difficulties associated with re-claiming funds from thegovernment and, for this reason, have fully provided against theprepayment of US$41.4 million as an exceptional item (refer to Note 6of the Financial Statements). In the meantime the Group is continuingto pay international prices for DFO.In addition the Group during the year received a demand from Chevronfor the repayment of fuel subsidies received in the period from late2009 through to January 2012, amounting to some US$60 million (EGP403million). No provision has been made in respect of the historicsubsidies prior to January 2012 as, based on legal advice that it hasreceived to date, the Company believes that the prospects of a courtfinding in its favour in relation to this matter remain strong.(1) Cash cost of production, EBITDA and cash, bullion on hand andavailable-for-sale financial assets are non-GAAP measures. For furtherinformation and a detailed reconciliation refer to the "Non-GaapFinancial Measures" at the end of the Financial Statements.(2) Basic EPS, EBITDA, Cash costs of Production reported includes anexceptional provision against prepayments recorded in Q4 to reflect theremoval of fuel subsidies which occurred in January 2012 (refer to Note6 of the Financial Statements for further details). The provision hadno impact on the 2011 results.(3) Historic cash cost of production,EBITDA and Basic EPS nowreflect adoption of IFRIC 20 (refer to Note 3 of the FinancialStatements for further details).________________________________________________________________________Centamin will host a conference call on Wednesday, 27 March at 8.00am(London, UK time) to update investors and analysts on its results.Participants may join the call by dialling one of the following threenumbers, approximately 10 minutes before the start of the call.From UK: Canada: Rest of world:08082380673 +18664949885 +44 (0) 1452 569335Participant pass code: 24856273A second call (Q&A only) will be held for North American analysts andinvestors at 2.00pm (London, UK time) / 9.00am EST. Participants mayjoin the call by dialling one of the following three numbers,approximately 10 minutes before the start of the call.From Canada: US: Rest of world:+18664949885 +18666551591 +44 (0) 1452 569335Participant pass code: 24859029_____________________________________________________________________STRATEGIC REVIEWOur growth strategy seeks to optimise exposure through the mining valuechain: exploration, development and operations. Whilst disciplined andsustainable growth on our existing projects remains a key focus, wecontinue to evaluate potential opportunities to grow through theacquisition of projects which offer the potential for the Company torealise strong investment returns.2013 will mark the year when the Stage 4 plant expansion iscommissioned, the Sukari project concludes its investment phase and ourannual capital expenditure requirements for the mine begin to reducesignificantly.Based on the Company's calculation there was no 'Net Profit Share' dueto EMRA as at 30 June 2012, nor is any likely to be due as at 30 June2013. Furthermore, it is expected that there will be profit share dueto EMRA for the SGM financial year ending 30June 2014, based onproduction, gold price and operating expense forecasts. Followingdiscussions with EMRA and with a view to demonstrating goodwill towardthe Egyptian government, an advance payment has been made subsequent toyear endto the value of US$8.2 million.Maintaining our Social LicenseMaintaining good community relations is a core part of our operationalstrategy and corporate governance standards. As the first miningcompany in Egypt in modern times, we strive to set an example of asocially responsible industry through adopting a good neighbour policy.We take every action to ensure Sukari has the minimum impact on thesocial environment, as well as to deliver positive benefits to Egyptand the community as a result of our investment.In 2012 we nurtured dialogue, maintained open channels of communicationand built positive and constructive relations with all our stakeholdersincluding the community in areas in which we operate. The Boardapproved principles and strategies for the pursuit of corporatesustainable development (CSD) initiatives.Our work force is remunerated well above the average for Egypt and ourcareer development programmes are highly valued. In general we enjoy avery positive and constructive relationship with our employees.Unfortunately, however, we had two strikes at Sukari during the year.The first was a legal strike and was settled on the basis of a broadand above-inflation increase in employee allowance payments. Thesecond strike was illegal, involving only a small element of our workforce, and was settled with no pay increases and with the help of theMinistry of Labour. These disputes are set against a background ofmultiple and prolonged industrial disputes in many quarters of theEgyptian economy.Targets for 2013For the year 2013, we project production of 320,000 ounces at a cashoperating cost of US$700 per ounce, at international fuel prices, whichwill mark the third year of successive growth in output from Sukari,and another step on the way to our long-term target for the project of450-500,000 ounces per annum from 2015 onwards at anindustry-competitive cost of production. The key drivers of productiongrowth this year will be a continued period of elevated head gradesfrom both the open pit and underground mines and increasing theunderground ore tonnes mined to 500,000t, as well as commissioning ofthe Stage 4 plant expansion to double the processing plant's nameplatecapacity to 10 million tonnes per annum.Although construction of Stage 4 was steady during the first half of2012, the second half saw an impact from strikes at Sukari, in some ofthe ports and at some of the local Egyptian suppliers, as well astemporary disruptions to the operation's fuel supply and gold exports,hence our in-country working capital position. This translated todelivery delays for key items, materials and services and thus a delayto the anticipated commissioning of the expanded plant, the bulk ofwhich is now expected to commence in the second half of 2013 and withcompletion before the end of the year. As part of the implementationof Stage 4 the Company is in discussions with EMRA and other governmentdepartments in relation to securing the necessary permits to increasedaily ammonium nitrate ("AN") consumption and blasting accessories inorder to increase open pit mining rates to the required level to feedthe expanded plant. This process is expected to be completed duringthe year.The capital expenditure programme for 2013 has two key focus areas:completion of the Stage 4 plant expansion and the on-going developmentof the underground mine. The total Stage 4 capital expenditureestimate is US$325 million including contingency, with US$228.5 millionspent by the end of 2012 and the bulk of the remaining capitalexpenditure due in 2013. The budget for the underground expansion isUS$20 million and will take the new decline ("Ptah") to its targetdepth below the existing area of operation. Underground drilling willcontinue to test the potential for significant resource and reserveexpansion and the development of multiple production sources.CHAIRMAN'S STATEMENTDear Shareholders2012 represented the third full year of production at Sukari, a periodin which your company further extended its track record of successiveannual production growth. The operation delivered a record 262,828ounces of gold at a cash cost of production of US$669 per ounce, whichwas ahead of guidance of 250,000 ounces at US$700 per ounce (with fuelat international prices) set out at the beginning of the year. Theoperating team in Egypt deserve immense credit for this performance ina year where challenges were again presented and overcome. The abilityto perform well in all circumstances is key to a successful operation,particularly one that is growing as rapidly as Sukari, and shareholdersshould take comfort from the team's demonstrated ability to delivergrowth, whilst maintaining a strong emphasis on rigorous cost control.Sukari's safety performance was also a significant improvement on theprevious year with a lost time injury frequency rate of 0.69 per200,000 man-hours achieved during the period. It was again pleasing tonote that no significant environmental incidents have taken place.The Stage 4 expansion to double the processing plant's nameplatecapacity to 10 million tonnes per annum is the key to the next stage ofoutput growth and delivery of our stated long-term production targetfor Sukari of 450-500,000 ounces per annum from 2015 onwards. Theconstruction team made great inroads through 2012 on what is a majorconstruction effort, which continued to be funded out of the proceedsof production at Sukari. Although construction was steady during thefirst half of the year, the second half saw an impact from strikes,both at Sukari and within the local supply chain, and also disruptionsto gold exports and hence our in-country working capital position.This translated to delivery delays for key items, materials andservices, with the effect that the bulk of commissioning will commencein the second half of 2013 and be complete before year end. Thecapital cost estimate of the Stage 4 expansion which is funded by PGMout of cost recoveries, is US$325 million including contingency, withexpenditure at the end of 2012 of US$228.5 million.Production growth was complemented by continued drilling of Sukari Hillfrom both surface and underground, with the aim of replenishing andincreasing the resource and reserve base, and an update resource andreserve statement will be delivered in the second half of 2013. Theexpanding underground development in particular provides increasingdrilling access to the northern and depth extents of the deposit.Exploration activities continued on the seven other prospects in the160km2 Sukari exploitation lease within trucking distance of the Sukariplant. The first significant signs of low grade porphyry away fromSukari Hill were identified at the V-Shear prospect and work continuesto determine the extents and controls on this mineralisation.Elsewhere, on-going drilling at the Kurdeman prospect offers thepotential to fast-track high grade ore to supplement the existingunderground production. Further regional drilling of the Sukari licenceis planned for 2013.Drilling in Ethiopia continued on our four exploration licences in thenorth of the country. Centamin intends to continue to grow anddiversify its project pipeline through targeted acquisitions ofexploration and development prospects in the region and beyond.Despite the negative effect of having to pay higher costs for fuel formuch of 2012, costs that were incurred as direct consequence of adecision taken by EGPC, which we are robustly contesting in Court,financially, our position remains strong with approximately US$220million held in cash, bullion, gold sales receivables andavailable-for-sale financial assets, no debt and no hedging. Withrevenues of US$426 million and a profit for the year of US$199 million,Sukari continued to demonstrate in 2012 that it remains highly cashgenerative and well placed to fund its growth from cost recoveries. Wehave exited the year as we had planned with a strong cash position andhaving made a significant investment and progress toward completingStage 4. Completion of Stage 4 will mark the end of a major expansionand investment programme at Sukari.Our appeal against the 30 October 2012 ruling by the EgyptianAdministrative Court, which we believe is based on an incorrectassertion that there was a lack of evidence with respect to ourexploitation lease at Sukari, remains on-going. Very importantly on 20March 2013 the Supreme Administrative Court approved our application tosuspend enforcement of the 30 October ruling until the conclusion ofthe appeal process and this will allow operations at Sukari to continuewhilst the court process runs its course. We have full confidence inour legal title and our appeal case and also highlight the separatesupporting appeals lodged by the Ministry of Petroleum and the EgyptianMineral Resource Authority (EMRA). It is our belief that thisre-enforces the government's publicly-stated view that the terms of ourConcession Agreement are fair and that Centamin's continued investmentand operation at Sukari are both necessary and welcome. I would liketo thank the Minister of Petroleum and EMRA for standing by usthroughout the year and I look forward to the continued co-operation aswe deliver on our stated goals.I would like to close by thanking all those at Sukari, in Alexandria,London, Jersey and Perth for their efforts in 2012 as Centamincontinued on its journey to becoming an established gold producer. Ina year where there were many events that required your Board'sattention it was a year that the depth, professionalism and dedicationof your Non-Executive Directors came to the fore. I would like tothank deeply the Board for their counsel.Despite and because of the challenges that we have faced in 2012, yourcompany remains well positioned to deliver outstanding growth andshareholder returns in the coming years. I look forward to updatingyou further over the course of 2013 either at our AGM, which this yearwill be held in Jersey on 23 May, or at our presentation toshareholders that will be held in London on 16 May.Josef El-RaghyChairmanPlease click here for the full 2012 Annual Results This information is provided by RNS The company news service from the London Stock ExchangeENDFOR FURTHER INFORMATION PLEASE CONTACT: Contact Information: RNSCustomerServices0044-207797-4400rns@londonstockexchange.com