TIDMCAML
RNS Number : 9212E
Central Asia Metals PLC
16 April 2014
16 April 2014
CENTRAL ASIA METALS PLC
("CAML" or the "Company" or "Group")
2013 Full Year Results
Central Asia Metals plc (AIM:CAML), a copper producing company,
today announces its full year results for the 12 months ended 31
December 2013.
Financial: Results enhanced by acquisition of the remaining 40%
ownership in Kounrad Copper Company
-- Gross revenue of $54.1 million (increase of 76%, 2012: $30.7 million)
-- Group EBITDA of $32.4 million (increase of 102 %, 2012: $16.0 million)
-- Operating profit of $27.9 million (increase of 86%, 2012: $15.0 million)
-- $27.8 million gain on fair value uplift as a result of the
40% acquisition of KCC on 21 October 2013
-- $14.1 million loss from discontinued operations (Mongolia)
-- Group profit for 2013 of $34.5 million (2012: $9.8 million)
-- Kounrad operating costs remain competitive and in the lower quartile of the cost curve
- C1 cash cost of $0.73/lb (2012: $0.71/lb)
- Fully inclusive cost in Kazakhstan $1.13/lb (2012: $0.98/lb)
-- Cash balances of $44.5 million as at 31 December 2013 (2012:
$33.9 million) and no outstanding debt
-- Proposed final dividend of 5 pence per share making a total
for 2013 of 9 pence per share (2012: 7 pence)
-- $3.2 million for acquisition of 50% share in Copper Bay project in Chile
Operational: First full year of production exceeded target
-- 2013 was the first full year of production at Kounrad with
the plant producing 10,509 tonnes, exceeding target by just over
5%
-- 10,689 tonnes of copper cathode sold at LME A grade quality
-- Zero lost time injuries reported in 2013
-- JORC compliant resources for Kounrad demonstrate over 600kt contained copper
2014 Outlook: Increased production and assessing opportunities
for growth
-- 2014 production target of 11,000 tonnes, Q1 2014 production
1,905 tonnes (13.7% YoY increase)
-- Focus on cash costs to remain in lower quartile of cost curve at Kounrad
-- Commitment to expansion of boiler house capacity at SX-EW plant
-- Complete Kounrad Transaction by end H1 2014
-- Continue appraisal of opportunities to grow the business and
create further shareholder value in the region and beyond
Nick Clarke, Chief Executive Officer of CAML, commented:
"We are pleased to announce robust financial results for the
period ending 31 December 2013, reflecting CAML's strong
operational and financial performance throughout the year. Not only
has our first full year of production at the Kounrad plant been a
great success but we have also maintained our position within the
lowest quartile of cash cost producers globally. We exceeded our
full year production target by just over 5%, with production of
10,509 tonnes of copper cathode and have set ourselves an increased
production target of 11,000 tonnes for 2014.
The proposed final dividend of 5 pence is evidence of our
commitment to provide a return to our shareholders and takes the
full year dividend to 9 pence. We have returned a total of $12.6
million in the year which represents 23% of attributable revenue.
In addition, our shareholders will benefit from further growth in
value as we assess opportunities to grow the business both in the
Central Asian region and globally."
Analyst presentation conference call
There will be an analyst presentation and conference call on 16
April 2014 at 09:30 (BST). The call can be accessed by dialling +44
(0)20 8515 2301 and quoting 'Central Asia Metals Results Call'. The
results presentation will available at
http://www.centralasiametals.com/ and following the presentation a
replay facility will be available.
Enquiries:
Central Asia Metals plc Nick Clarke +44 (0) 20 7898 9001
Nigel Robinson
Peel Hunt LLP Matthew Armitt +44 (0)20 7418 8900
Ross Allister
Mirabaud Securities LLP Peter Krens +44 (0)20 7878 3362
Bell Pottinger Mark Antelme +44 (0)20 7861 3894
Lorna Cobbett +44 (0)20 7861 3883
Notes to Editors
Central Asia Metals plc ("CAML" or the "Company") is an
AIM-listed UK company headquartered in London. CAML is a copper
producing company with its primary asset being the Kounrad copper
recovery plant in Kazakhstan. The Company also acquired a 50% stake
in the Copper Bay project in Chile in 2013.
The Company announced its maiden dividend in December 2012.
Chairman's Statement
Dear Shareholders
Key achievements
The year ending 31 December 2013 has been another successful
period in the development of the Company. We have delivered a
strong operational and financial performance and achieved a number
of significant corporate and operational milestones.
2013 was the Company's first 12-month reporting period of full
production at the Kounrad plant and we were pleased to have
produced 10,509 tonnes of copper which exceeded our production
target by over 5%. Further, all of the copper sold through our
marketing agreement with Traxys was LME Grade A quality.
We have maintained focus throughout the year on the low cost
nature of our operations, maintaining our position within the
lowest quartile of cash cost producers globally.
The combination of our operational strength at Kounrad and the
resilience of the copper price throughout 2013, enabled the Company
to build up significant cash balances which totalled $44.5 million
as at 31 December 2013.
Corporate Governance
Since the IPO in September 2010, the Company has sought to build
on the governance structures and internal control procedures in
place at that time. The Company is committed to upholding the
highest levels of Corporate Governance and the Board is well aware
that it operates in a challenging business environment.
We work hard to ensure that the appropriate level of business
controls are maintained across the Group's operations. A
combination of experienced management and regular communications
and training has led to further improvements across the Group since
the IPO.
In December 2013, Mr Kenges Rakishev was appointed to the CAML
Board as a Non-Executive Director. We are delighted to welcome
Kenges to the Board and believe that his knowledge of the business
environment in Kazakhstan and his entrepreneurial experience will
prove of great value to the Company in future years.
Commitments to a sustainable business
Within Kazakhstan we feel we have a positive role to play as we
develop our business. The Company is proud to contribute to the
wider Kazakhstan economy through our business operations and plan
to be there for the long term. The economic benefits generated for
our local communities are significant both in terms of the
employment opportunities and our social contributions.
As a responsible operator, we are also fully aware of our
obligations to the environment and are committed to the sound
management of our operating area in full compliance with the
applicable environmental regulations and laws of Kazakhstan.
Strategy and Growth
Since listing, the strategy and direction of the business has
been clear and focused on the delivery of the Kounrad project. The
Board is extremely proud of what has been achieved by the
management and staff during this period and the Company can
justifiably say that it has delivered on its key promises made at
the time of the IPO.
We are now entering an exciting period in the Company's
development and growth and are well placed to take advantage of
opportunities that may arise in the sector at this stage of the
economic cycle. The Company aims to complete the Kounrad
Transaction in the first half of 2014, and to subsequently update
shareholders on its plans to expand copper production on site. The
details and timing of this aspect of the Company's growth strategy
will be announced during the course of 2014 as events unfold.
In addition to consolidating our business in Kazakhstan, the
Company will be looking to identify attractive opportunities to
expand its portfolio of assets in Kazakhstan and elsewhere.
Returns to Shareholders
Our strong operational performance in 2013, has enabled the
Company to return funds to shareholders through its dividend policy
which was announced in December 2012. Having raised $60 million at
IPO in September 2010, the Company has already returned $21.6
million to shareholders through a combination of dividends and
share buybacks.
The CAML Board will propose a final dividend for 2013 of 5 pence
per ordinary share taking the total dividend for 2013 to 9 pence
per ordinary share. This will increase the amount returned to
existing shareholders since the commencement of production at
Kounrad to $28.6 million, or 47.6% of the amount raised at the
IPO.
It is the intention of the Board that the Group's dividend
policy, which is financed from the attributable revenue earned at
Kounrad, will remain in place as we look to build on the Company's
activities and create further shareholder value.
Outlook
As a copper producer the Company's fortunes are inextricably
linked to the commodity price cycle over which the Board has no
control. However, as a low cost producer, the Board is confident
that the Company will be able to operate profitably even if the
copper price should fall significantly below current levels.
Nigel Hurst-Brown
Chairman
Chief Executive Officer's Statement
Strong Operational Performance
The Company's first full year of production at the Kounrad
Project has been a great success. We produced 10,509 tonnes of
copper cathode and surpassed our production target by 5% whilst
maintaining a competitive cash cost base. During 2013, our C1 cash
cost of production was $0.73/lb (2012: $0.71/lb) and fully absorbed
costs within Kazakhstan were $1.13/lb (2012: $0.98/lb).
Since the Company's IPO in September 2010, management has
focused the Company's efforts towards early cash flowing projects
and away from exploration. The Kounrad SX-EW project in Kazakhstan
was identified as the project capable of delivering on this
objective and now, just three and a half years later, the Company
has a world-class facility that consistently produces high-quality
copper cathode at industry competitive cash costs.
The company took a decision pre-IPO to use the services of a
Chinese engineering group, BGRIMM, to undertake the design and
costing for our Kounrad SX-EW plant which resulted in significant
capital cost savings. The design of the plant along with the
dedication and professionalism of the Group's 217 employees at site
ensured that the plant ran efficiently and profitably.
The generation of $76m of project revenue at Kounrad during
2013, combined with the low costs of production has resulted in
healthy cashflows for the Group enabling us to instigate and
maintain an aggressive dividend policy. The full-year dividend
proposed for 2013 of 9 pence per share amounts to $12.6 million and
represents 23% of the Group's attributable revenue for the
year.
Capacity expansion at Kounrad
Having successfully met our 2013 production target we have
already committed to some minor expansion at the SX- EW plant in
advance of completing the ownership transaction with Mr Kenges
Rakishev. In January 2014, we announced that our targeted copper
production for the year at Kounrad would increase to 11,000 tonnes.
The increased capacity will be made possible due to the expansion
of the boiler house with the installation of additional coal-fired
boilers taking the boiler house capacity to 14Mw. In turn, this
will allow increased volumes of copper bearing solution to be
processed during winter operations.
Additional and more significant capacity expansion at Kounrad is
also being evaluated and management thinking is well advanced with
regard to the various options available at the site given its size
and characteristics. Management believes that the most efficient
means by which the resource base can be exploited over the
remaining life of the licence is an expansion of the existing
plant. This appears to offer the best value for shareholders whilst
managing the risks associated with expanding the leaching process
to the western dumps.
Further analysis and preliminary engineering design work with
BGRIMM and local design institutes is planned for early 2014. The
CAML Board will not make a definitive decision on the expansion
plans until the transaction with Mr Kenges Rakishev is
completed.
Corporate and Social Responsibility
Management is fully committed to adopting the highest possible
standards of Corporate and Social Responsibility and in line with
this commitment, in July 2013, I was delighted to appoint a
hydrogeologist and environmental engineer, Nick Shirley, as CSR
Director to lead the Kounrad Health and Safety and environmental
team.
The health and safety of our employees and contractors is our
number one priority and I am pleased to report that we have had no
lost-time injuries during the period. Indeed, since the
commencement of construction back in July 2010 we can report in
excess of 1.6m man-hours have been worked without a lost-time
injury.
Throughout 2013, we continued to build on the positive relations
we have developed with the local community and stakeholders. We
place great importance on such relationships and during the year we
contributed over $178,000 towards regional area local causes. We
also provided assistance to a number of community development
programmes with the focus being on health, welfare and
education.
Finally, we have placed particular emphasis during 2013 on
raising the environmental awareness of all our staff throughout the
Company through specialist training programmes. The aim of the
programmes is to ensure all staff are aware of the environmental
standards and requirements of the Company.
Kounrad Ownership
As reported last year, the transaction to amalgamate 100%
ownership of the Kounrad project within the Group has been going
through due process with the Kazakhstan authorities since early
2012. This remains the case as at 31 December 2013, although, as
announced on 27 June 2013, the nature of the transaction was
renegotiated during the year with Mr Kenges Rakishev.
Significantly, and as a consequence of the renegotiated
transaction, the transfer of the 40% interest in Kounrad Copper
Company LLP was registered on 21 October 2013. This was a notable
milestone for the Company, as this entity owns the SX-EW copper
plant which is responsible for the production and delivery of the
copper cathodes and is the key revenue generator for the overall
business.
On conclusion of this part of the overall transaction, and in
accordance with the contractual arrangements, Mr Kenges Rakishev
was duly appointed a Non-Executive Director to the CAML Board in
December 2013.
The Company will endeavour to complete the final part of the
transaction, the transfer of the subsoil use contract to our
subsidiary company, as quickly as possible through the help of Mr
Kenges Rakishev and our locally based management team. We remain
confident that it will be completed during the first half of
2014.
More detail on the transaction is set out below.
Copper Bay Limited
The Company made its first investment outside of the Central
Asia region during 2013 with the investment of $3.2 million for a
50% shareholding in Copper Bay Limited. The funds will be used to
complete a pre -feasibility study on the copper tailings project at
Chañaral Bay, Chile.
Management believe that the Chañaral Bay project has merit and
we look forward to working with the Copper Bay management team in
taking it to the next phase. The Company has the option to invest a
further $3 million to increase its shareholding to 75% in Copper
Bay Limited. It is currently envisaged that this further investment
would be used to complete a definitive feasibility study on the
project.
Mongolia
The Company's Mongolian assets were not progressed during the
year. Efforts to sell the Ereen and Handgait projects were
unsuccessful, however we continue to look to dispose of these
projects. Our application for a mining permit at the Alag Bayan
exploration project was not successful and as a result our
exploration licence expired.
Consequently, management took the decision to close down our
Mongolian operations and accordingly incurred a write down on the
asset values of $12.9 million. As at 31 December 2013, two of the
subsidiaries, New CAML Mongolia LLC and Mongolian Silver Mountain
LLC, had been sold locally for nil consideration and a third,
Bayanresources LLC was close to finalisation, also for nil
consolidation.
The Ereen and Handgait projects remain available for sale and
management hope to complete this process during 2014.
Outlook
The Company's primary objective for 2014 is to produce 11,000
tonnes of copper at Kounrad and remain in the lowest quartile of
the cash cost curve. Completion of the ownership transaction with
Mr Kenges Rakishev remains a key objective for the first half of
the year and this will then enable the Company to finalise its
expansion plans for the Kounrad SX-EW project.
Outside of Kazakhstan, we will look for other opportunities to
grow the business. We continue to evaluate other investment and
acquisition opportunities worldwide for the Company which would add
value to the shareholders and strengthen the Group's asset
portfolio.
I look forward to an exciting 2014 and would like to take this
opportunity to thank all the staff for their hard work and
dedication in making 2013 such a successful year for the
Company.
Nick Clarke
Chief Executive Officer
Kounrad Ownership
THE KOUNRAD TRANSACTION
-- September 2007, the Group awarded the Subsoil Use Contract
(SUC) to develop the Kounrad Project
-- SUC historically owned jointly on a 60:40 basis between Sary
Kazna LLP ("SK"), a 100% owned CAML subsidiary, and SEC Sary Arka
("SA"), a Kazakhstan government organisation
-- Kounrad Copper Company LLP ("KCC") incorporated in October
2008 to build and operate the SX-EW plant and owned on a 60:40
basis between the Group and SA
Changes in Ownership Structure - Initial deal with the SAT Group
- January 2012
-- January 2012, SA sells its 40% share in the Kounrad Project
to the SAT Group ("SAT"), based in Kazakhstan
-- January 2012, CAML agrees to purchase the 40% share from SAT
for a consideration of 8,616,593 ordinary shares in the Company
Revised deal with Mr Kenges Rakishev - June 2013 - the "Kounrad
Transaction"
During the early part of 2013, it was becoming clear to CAML
management that the above deal with the SAT Group was taking longer
to conclude than had been anticipated. A meeting was convened with
the major shareholder and effective owner of the SAT Group, Mr
Kenges Rakishev ("KR") in March 2013. The purpose of the meeting
was to understand where the possible problems and delays were
originating from and what could be done to expedite the
process.
The outcome of the meeting was a revised deal whereby KR
personally agreed to oversee the completion of the deal in exchange
for an enhanced ownership in the Company of 20% post completion of
the transaction. After careful consideration and deliberation, the
CAML Board decided to accept the offer from KR and on 27 June 2013
the Company announced a new Framework Agreement (the "Agreement")
for the acquisition of the remaining 40% of the Kounrad Project.
The Agreement superseded the previous arrangements with SAT.
The Agreement will result in CAML obtaining control over the
Kounrad Project in two transactions:
-- The first transaction ("KCC Transaction") will be effected by
the transfer of the remaining 40% share capital of KCC from SAT to
KR, followed by a subsequent transfer to CAML's wholly owned
subsidiary CAML Kazakhstan BV ("CAML BV")
-- The second transaction ("SUC Transaction") will be effected
by the transfer of the remaining 40% economic interest in the SUC
from SAT, once it acquired it from SA, to KR, followed by a
subsequent transfer to CAML's wholly owned subsidiary SK
-- The two elements of the deal together being referred to as
the "Kounrad Transaction". Both parts are required to be completed
for any consideration to be paid
-- In March 2014, the long stop date, namely the date by which
both parties committed to complete all aspects of the deal, was
extended by mutual agreement to 30 June 2014
The agreed purchase consideration consists of 21,211,751
Ordinary Shares in the capital of the Company ("CAML Shares") and
an entitlement to a cash payment in lieu of any benefits to which
KR might have been entitled to had the CAML Shares been issued to
KR on the transfer of the KCC interest to CAML BV, rather than on
completion.
The CAML Shares will be allocated in two tranches, with one
tranche of 15,336,096 Ordinary Shares (72.3% of the CAML Shares)
for the transfer of the 40% share capital of KCC to CAML BV (the
"CAML Shares 1"). The remaining 5,875,655 Ordinary Shares (27.7% of
the CAML Shares) for the transfer of the 40% economic interest in
the SUC to SK (the "CAML Shares 2").
As part of the Agreement, KR was to be appointed to the CAML
Board and this was duly completed on 9 December 2013.
Status of ownership changes as at 31 December 2013
-- The KCC transfer to the Group was registered on the 21 October 2013
-- The SUC Transaction remains outstanding as at the year end,
pending receipt of the relevant consent and waiver of the
pre-emptive rights of the government of the Republic of
Kazakhstan
The accounting treatment for the Kounrad Transaction is detailed
in note 20 to the accounts under Business Combinations.
Financial Review
Overview
The Company has reported another strong set of financial results
on the basis of its operational performance at Kounrad and the
associated low costs of production at this project. The resulting
cashflows have enabled the Company to return $19.7 million in
dividends to shareholders during 2013 as well as strengthen our
cash resources.
The year ending 31 December 2013 represented the Company's first
complete 12 months of production at the Kounrad SX-EW project
having commenced production of copper cathodes on 30 April
2012.
Further, on 21 October 2013, the ownership of Kounrad Copper
Company LLP increased from 60% to 100%. Consequently, the results
for 2013 comprise only 60% of the revenues and costs for the first
nine months of the year but 100% for the final three months of the
year.
The accounting treatment for the business combination resulting
from the acquisition of the additional 40% share in KCC resulted in
an uplift to the asset values of $46.4 million and an exceptional
gain in the Income Statement of $27.8 million.
The impact of the above two events make comparisons difficult
from the annually reported numbers in several of the notes to the
accounts. A more meaningful analysis of the reported revenues and
costs can be obtained in the table below Financial Performance -
Group vs Kounrad Project.
Details of the business combination and accounting treatment are
contained in note 20.
Income Statement
The Group operating profit for the 12 month period was $27.9
million (2012: $15.0 million).
Profit for the year from continuing operations increased
significantly to $48.6 million (2012: $10.3 million), but after
allowing for the one off exceptional gain associated with the
acquisition of the additional 40% in KCC of $27.8 million, the
profit is a more comparable $20.8 million (2012: $10.3 million).
This is still more than a 100% increase year on year.
During the year, the Group decided to write down the value of
all its Mongolian operations due to the protracted nature of its
efforts to sell the Ereen and Handgait assets and the unsuccessful
application for a mining licence at Alag Bayan in the Southern
Gobi.
Management reviewed the carrying value of these assets and
recognised an overall impairment loss of $12.9 million (2012:
nil).
The Group profit for the year after tax of $34.5 million (2012:
$9.8 million) resulted in earnings per share of 38.89 cents (2012:
11.42 cents) or 37.36 cents (2012: 11.03 cents) on a fully diluted
basis.
Revenue
10,500 tonnes of copper cathode were sold by Traxys as part of
the Company's off-take arrangements at Kounrad and a further 189
tonnes were sold locally. The Company achieved an average selling
price of $7,114 (2012: $7,995) per tonne and this generated
reported revenues for the Group of $54.1 million (2012: $30.7
million).
Revenues at the Kounrad Project level, assuming 100% ownership
throughout the 12 month period, were $76.0 million (2012: $51.1
million).
The Company has an offtake arrangement with Traxys to sell 90%
of its product through to 31 December 2015. As part of this
arrangement, Traxys takes the goods at the SX- EW plant at Kounrad
and is then responsible for transporting the goods to the end
customer.
The costs of marketing, distribution and selling associated with
this arrangement are borne by the Company and during 2013 a fixed
fee of $350 per tonne of copper shipped was negotiated with Traxys.
This amount was based on the actual costs incurred during the first
eight months of the arrangement in 2012 following the commencement
of production in late April 2012. During 2012, the Group reimbursed
Traxys for such costs directly.
As a consequence of the change in approach between 2012 and
2013, the Group has reported both a gross revenue and net revenue
line for 2013 which reflects the offset of the fixed fee from the
price of the copper achieved.
Managing the cost base
Cost of sales
The cost of sales for the period was $13.8 million (2012: $5.8
million) which included an additional $1.6 million of depreciation
and charges associated with the acquisition of the 40% interest of
KCC.
Financial Performance - Group vs Kounrad Project*
Reported Project Reported Project
2013 2013 2012 2012
$'000 $'000 $'000 $'000
--------------------------------- -------- ------- -------- -------
Gross Revenues 54,090 76,024 30,656 51,093
--------------------------------- -------- ------- -------- -------
Cost of producing copper cathode 6,047 8,479 2,682 5,068
Mineral Extraction Tax 3,070 4,383 1,799 2,998
Selling costs 2,964 4,200 1,289 2,147
--------------------------------- -------- ------- -------- -------
Total C1 costs 12,082 17,062 5,770 10,214
Local Administrative expenses 2,494 3,751 1,812 2,421
Corporate Overheads 7,068 7,068 6,696 6,696
--------------------------------- -------- ------- -------- -------
Total Costs 21,643 27,880 14,278 19,331
--------------------------------- -------- ------- -------- -------
Project EBITDA 48,144 31,762
--------------------------------- -------- ------- -------- -------
Depreciation and Amortisation 4,546 5,734 941 1,568
Excluded above (13) 440
--------------------------------- -------- ------- -------- -------
Operating Profit 27,913 14,997
--------------------------------- -------- ------- -------- -------
2013 2013 2012 2012
per tonne per lb per tonne per lb
------------------------------ --------- ------ --------- ------
C1 Unit costs 1,600 0.73 1,561 0.71
Depreciation 538 0.24 238 0.11
Local Administrative Expenses 352 0.16 368 0.17
------------------------------ --------- ------ --------- ------
2,489 1.13 2,167 0.98
Corporate Overheads 663 0.30 1,017 0.46
------------------------------ --------- ------ --------- ------
Fully Absorbed unit costs 3,152 1.43 3,184 1.44
------------------------------ --------- ------ --------- ------
* See note 5.
The table excludes all costs associated with the pilot plant
which is no longer operated.
The costs related to the physical production of copper cathodes
are the production labour, reagents and electricity, plus any other
SX- EW site related cost. These costs amounted to $6.1 million
(2012: $2.7 million).
Mineral Extraction Tax is charged by the Kazakhstan authorities
at the rate of 5.7% on the value of the metal recovered and during
the year this amounted to a further cost of $3.1 million (2012:
$1.8 million).
Distribution and selling costs
The major portion of the sales and distribution costs consist of
the fees paid to Traxys as part of the offtake agreements as noted
above. During 2013 the Company incurred costs of $2.6 million
(2012: $1.1 million) associated with these arrangements with
Traxys. Local sales and distribution costs on site were $0.4
million (2012: $0.2 million) for the period.
Administrative expenses
The Group employed 234 people on average during the year (2012:
259) with the majority employed on site at Kounrad. The Group
employs 40 (2012: 37) staff at Kounrad to oversee the technical and
commercial management of the operations in Kazakhstan together with
a small office headquarters in London of 7 (2012: 7) staff.
Group overheads for the year are $9.6 million (2012: $8.5
million) reflecting the growth of the Group during the period.
Depreciation and Amortisation
During the year depreciation and amortisation charges amounted
to $4.6 million (2012: $0.9 million). The large increase is due to
the impact of a full year charge in 2013 of $3.0 million compared
to only 6 months in 2012.
A further charge of $1.6 million was incurred in the period 3
months of 2013 as a result of the acquisition of KCC and the fair
value uplift.
Impact on unit costs of production
Given the changes in the business over the past two years, it is
difficult to ascertain the impact on the Group's productivity and
unit cost measures from the reported numbers above. The table above
reconciles the reported numbers from the Group accounts with those
reported internally at project level.
The Group's C1 cash costs of production remained competitive
throughout the year at $1,600 per tonne (2012: $1,561) or $0.73/lb
(2012: $0.71/lb). This represents a 2.5% increase year on year.
Given that the Group currently only has one significant project, it
seems reasonable to report the Group's unit cost base on a fully
inclusive basis. The fully inclusive unit costs are $3,152 (2012:
$3,184) or $1.43/b (2012: $1.44/lb).
The main change in the Group's unit costs during 2013 was the
increased unit costs for depreciation and amortisation.
Balance Sheet
As a result of the Kounrad Transaction there has been a
significant uplift to the Group's asset base. Property, plant and
equipment at Kounrad has increased to $77.7 million (2012: $20.3
million), whilst the intangible assets of the Group have also
increased to $16.7 million 2012: $7.5 million).
The cash reserves held within the Group also increased during
the year to $44.5 million (2012: $33.9 million) due to the strong
performance at Kounrad. As a consequence, the Group's total asset
base increased to $161.5 million (2012: $91.6 million).
During the year the Company took the opportunity to restructure
the balance sheet and transferred $61.4 million from the Share
Premium account to distributable reserves. The transfer was
approved by means of a court scheme and will facilitate the payment
of dividends by the Company for the foreseeable future. The agreed
equity consideration for the KCC element of the Kounrad Transaction
of $39.4 million is also repeated within other reserves. The shares
will only be issued on completion of the whole transaction.
Cashflows
During the year the Group generated $41.1 million (2012: $28.0
million) from operations which resulted in the Group's cash
balances increasing to $44.5 million (2012: 33.9 million) as at 31
December 2013.
The return of $19.7 million of funds to shareholders through
dividends was the main outflow of cash during the year within the
Group.
At Company level, all of the funds advanced to the Kounrad
subsidiaries for the development and construction of the project
since 2007 were fully repaid by late October 2013. This represented
a return of funds of $53.6 million in just 18 months of
production.
Taxation
The tax legislation in Kazakhstan is developing and at times the
interpretation and compliance can be challenging for businesses
operating in the country. During 2013, Sary Kazna LLP, the
Kazakhstan subsidiary that effectively manages the leaching process
on the Kounrad dumps and currently owns 60% of the subsoil use
contract, was subjected to a taxation charge of $3.7 million for
the classification of the Kounrad Resources onto a state approved
list.
This taxation charge is locally known as the Commercial
Discovery Bonus and is a required statutory payment to the
Kazakhstan authorities based on 0.1% of the estimated value of the
mineral resources discovered. The law supporting this taxation
charge is ambiguous and CAML management spent significant amounts
of time in seeking external legal and taxation advice to challenge
the payment. Despite the efforts of management, the conclusion of
the CAML Board was that any grounds for a legal challenge were
subjective and could have led to potential additional fines or
penalties and reputational risk. Consequently, the decision was
taken to pay the tax and accept the charge as the price for
compliance with local tax legislation.
The Group is also owed over $5.4 million (2012: $2.0 million) by
the Kazakhstan authorities for recoverable VAT. The amount has been
audited by the tax authorities on a number of occasions during
2013. The conclusion from the authority's audit work was that the
VAT amount claimed has been determined correctly and was supported
by the required documentary evidence. Despite this, the amount
remained unpaid as at 31 December 2013, and the Group has lodged an
appeal with the authorities to recover the tax owed with the
support of a local specialist tax firm.
Foreign Exchange
The Group operates overseas and is exposed to foreign currency
movements. On 11 February 2014, the Kazakhstan Tenge devalued by
almost 20% overnight as highlighted in note 21. Given that the
Group's operations in Kazakhstan generate their income in US
dollars through the export of copper, the immediate impact from a
purely financial standpoint was positive. It is estimated that
approximately 60% of the cost base in Kazakhstan is denominated in
Kazakhstan Tenge.
Nevertheless, the CAML Board was concerned about the impact of
such a devaluation on its local employees. Having monitored the
situation carefully in the days following the devaluation, and in
line with other large and responsible employers in the country, the
Board agreed to increase salaries for staff in the country by 10%
from the beginning of February 2014. The Board will continue to
monitor events in the country and respond accordingly.
The Group does not keep large amounts of cash in the Kazakhstan
Tenge and as at 31 December 2013 held the US dollar equivalent of
$0.6 million (2012: $0.2 million).
Dividend Policy
As a result of the Group dividend policy announced in December
2012, the Group returned a total of $19.7 million to shareholders
in 2013. This represented a 7 pence annual dividend for 2012 plus a
3.7 pence special dividend related to cost savings made on the
construction of the SX-EW plant. An interim dividend for 2013 of 4
pence per share was also announced on 27 September 2013 and paid on
15 November 2013.
As part of these annual results, the CAML Board is proposing a 5
pence per ordinary share final dividend for 2013 payable, subject
to the approval of shareholders on 20 June 2014 to those
shareholders on the Company's register on 30 May 2014, making a
total dividend for the year of 9 pence (2012: 7 pence).
Financing growth
As at 31 December 2013 the Group had $ 44.5 million of cash in
the bank of which $30.6 million was held in London and the balance
of $13.9 million in Kazakhstan to cover both working capital
requirements in country and also the 2013 Corporate Income Tax
which is due in April 2014.
The Group has no debts outstanding as at 31 December 2013 and
with the cash reserves at its disposal is confident that it has
sufficient funds available to finance both the dividend policy in
the coming years and also the capital expansion plans being
finalised for the Kounrad project.
The overall combination of no outstanding debt, a strong cash
balance and positive cashflows from Kounrad will provide the
Company with the financial flexibility and strength to support the
growth of the business.
Nigel Robinson
Chief Financial Officer
Consolidated Income Statement
for the year ended 31 December
Group
-----------------
2013 2012
Note $'000 $'000
--------------------------------------------------------------------------------------------- ---- -------- -------
Continuing operations
Gross revenue 5 54,090 30,656
--------------------------------------------------------------------------------------------- ---- -------- -------
Revenue 5 51,483 29,560
Cost of sales 6 (13,778) (5,770)
--------------------------------------------------------------------------------------------- ---- -------- -------
Gross profit 37,705 23,789
--------------------------------------------------------------------------------------------- ---- -------- -------
Distribution and selling costs 7 (357) (194)
Administrative expenses 8 (9,562) (8,509)
Other (expenses)/income (32) 317
Exchange rate differences gain/(loss) 159 (409)
--------------------------------------------------------------------------------------------- ---- -------- -------
Operating profit 27,913 14,995
--------------------------------------------------------------------------------------------- ---- -------- -------
Finance income 17 8
Finance costs (412) (220)
Gain on re-measuring to fair value the existing interest in KCC on acquisition of control 20 27,835 -
--------------------------------------------------------------------------------------------- ---- -------- -------
Profit before income tax 55,353 14,783
Income tax 9 (6,712) (4,477)
--------------------------------------------------------------------------------------------- ---- -------- -------
Profit for the year from continuing operations 48,641 10,306
--------------------------------------------------------------------------------------------- ---- -------- -------
Discontinued operations
Loss from discontinued operations (14,149) (512)
--------------------------------------------------------------------------------------------- ---- -------- -------
Profit for the year 34,492 9,794
--------------------------------------------------------------------------------------------- ---- -------- -------
Profit Attributable to:
* Owners of the parent 34,492 9,794
--------------------------------------------------------------------------------------------- ---- -------- -------
Earnings/(loss) per share from continuing and discontinued operations attributable to owners
of the parent during the year (expressed in cents per share)
Basic earnings/(loss) per share
From continuing operations 10 54.85 12.01
From discontinued operations (15.96) (0.60)
--------------------------------------------------------------------------------------------- ---- -------- -------
From profit for the year 38.89 11.42
--------------------------------------------------------------------------------------------- ---- -------- -------
Diluted earnings/(loss) per share
From continuing operations 10 52.69 11.63
From discontinued operations (15.96) (0.60)
--------------------------------------------------------------------------------------------- ---- -------- -------
From profit for the year 37.36 11.03
--------------------------------------------------------------------------------------------- ---- -------- -------
Consolidated Statement of Comprehensive Income
for the year ended 31 December
2013 2012
Note $'000 $'000
---------------------------------------------------------------------------- ---- -------- -------
Profit for the year 34,492 9,794
Other comprehensive expense:
Items that may be subsequently reclassified to profit or loss
Currency translation differences 15 (722) (1,355)
---------------------------------------------------------------------------- ---- -------- -------
Other comprehensive expense for the year, net of tax (722) (1,355)
---------------------------------------------------------------------------- ---- -------- -------
Total comprehensive income for the year 33,770 8,439
---------------------------------------------------------------------------- ---- -------- -------
Attributable to:
* Owners of the parent 33,770 8,439
* Non-controlling interests - -
---------------------------------------------------------------------------- ---- -------- -------
Total comprehensive income for the year 33,770 8,439
---------------------------------------------------------------------------- ---- -------- -------
Total comprehensive income attributable to equity shareholders arises from:
* Continuing operations 48,702 9,095
* Discontinuing operations (14,932) (656)
---------------------------------------------------------------------------- ---- -------- -------
33,770 8,439
---------------------------------------------------------------------------- ---- -------- -------
During 2013 the Group had no balances attributable to
non-controlling interests (2012: nil). Items in the statement above
are disclosed net of tax.
Statements of Financial Position
at 31 December
Group Company
---------------- ----------------
2013 2012 2013 2012
Note $'000 $'000 $'000 $'000
---------------------------------------------------------- ---- ------- ------- ------- -------
Assets
Non-current assets
Property, plant and equipment 11 77,716 20,287 198 10
Intangible assets 12 16,693 7,474 - 1,000
Investments - 4,006 7,990 5,042
Trade and other receivables 13 17,090 12,343 11,216 45,403
---------------------------------------------------------- ---- ------- ------- ------- -------
111,499 44,110 19,404 51,455
---------------------------------------------------------- ---- ------- ------- ------- -------
Current assets
Inventories 3,916 2,592 - -
Trade and other receivables 13 1,402 2,885 30,131 213
Restricted cash 14 1,734 - 1,649 -
Cash and cash equivalents 14 42,774 33,855 28,932 28,231
---------------------------------------------------------- ---- ------- ------- ------- -------
49,826 39,332 60,712 28,444
---------------------------------------------------------- ---- ------- ------- ------- -------
Assets of disposal group classified as held for sale 186 8,131 - 100
---------------------------------------------------------- ---- ------- ------- ------- -------
50,012 47,462 60,712 28,544
---------------------------------------------------------- ---- ------- ------- ------- -------
Total assets 161,511 91,573 80,116 79,999
---------------------------------------------------------- ---- ------- ------- ------- -------
Equity attributable to owners of the parent
Ordinary Shares 862 862 862 862
Share premium - 61,431 - 61,431
Treasury shares (4,100) (4,236) (4,100) (4,236)
Other reserves (restated) 15 44,140 4,347 44,588 4,218
Retained earnings 94,827 8,626 36,752 6,612
---------------------------------------------------------- ---- ------- ------- ------- -------
135,729 71,030 78,102 68,887
---------------------------------------------------------- ---- ------- ------- ------- -------
Non-controlling interests - - - -
---------------------------------------------------------- ---- ------- ------- ------- -------
Total equity 135,729 71,030 78,102 68,887
---------------------------------------------------------- ---- ------- ------- ------- -------
Liabilities
Non-current liabilities
Deferred tax liability 23 9,652 272 - -
Provisions for other liabilities and charges 3,667 2,139 - -
Borrowings - 150 - -
---------------------------------------------------------- ---- ------- ------- ------- -------
13,319 2,561 - -
---------------------------------------------------------- ---- ------- ------- ------- -------
Current liabilities
Obligations under finance leases - 19 - -
Trade and other payables 16 11,860 17,186 2,014 11,112
---------------------------------------------------------- ---- ------- ------- ------- -------
11,860 17,205 2,014 11,112
---------------------------------------------------------- ---- ------- ------- ------- -------
Liabilities of disposal group classified as held for sale 603 777 - -
---------------------------------------------------------- ---- ------- ------- ------- -------
12,463 17,982 2,014 11,112
---------------------------------------------------------- ---- ------- ------- ------- -------
Total liabilities 25,782 20,543 2,014 11,112
---------------------------------------------------------- ---- ------- ------- ------- -------
Total equity and liabilities 161,511 91,573 80,116 79,999
---------------------------------------------------------- ---- ------- ------- ------- -------
Consolidated Statement of Changes in Equity
for the year ended 31 December
Ordinary Share Treasury Other Retained Total
Shares Premium Shares Reserves Earnings Equity
Attributable to owners of the parent Note $'000 $'000 $'000 $'000 $'000 $'000
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
Balance as at 1 January 2012
(as previously reported) 862 61,431 (2,304) 4,717 872 65,578
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
Effect of prior period restatement - - - 1,383 (1,383) -
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
At 1 January 2012 (restated) 862 61,431 (2,304) 6,100 (511) 65,578
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
Total comprehensive (expense)/income 15 - - - (1,355) 9,794 8,439
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
Transactions with owners
Share based payments 8, 15 - - - 505 - 505
Forfeited options 10 - - - (126) - (126)
Reversal of stock option grants 15 - - - (777) 777 -
Purchase of treasury shares - - (1,982) - - (1,982)
Transfer of interest in JV - - - - 8,168 8,168
Dividends 19 - - - - (9,602) (9,602)
Sale of treasury shares 15 - - 50 - - 50
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
Total transactions with owners, recognised directly
in equity - - (1,932) (398) (657) (2,987)
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
Balance as at 31 December 2012 (restated) 862 61,431 (4,236) 4,347 8,626 71,030
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
Total comprehensive (expense)/income 15 - - - (722) 34,492 33,770
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
Transactions with owners
Share based payments 8, 15 - - - 1,588 - 1,588
Forfeited options 15 - - - (346) - (346)
Capital reduction - (61,431) - - 61,431 -
Promise of shares to be issued to KR on the
completion of KCC 15 - - - 39,409 - 39,409
Dividends - - - - (10,204) (10,204)
Sale of Mongolian assets - - - - 482 482
Correction to treasury shares 15 - - 136 (136) - -
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
Total transactions with owners, recognised directly
in equity - (61,431) 136 40,515 51,709 30,929
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
Balance as at 31 December 2013 862 - (4,100) 44,140 94,827 135,729
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
During 2013 the Group had no balances attributable to
non-controlling interests (2012: nil).
Company Statement of Changes in Equity
for the year ended 31 December
Ordinary Share Treasury Other Retained Total
Shares Premium Shares Reserves earnings Equity
Company Note $'000 $'000 $'000 $'000 $'000 $'000
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
Balance as at 1 January 2012
(as previously reported) 862 61,431 (2,304) 3,237 27,243 90,469
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
Effect of prior period restatement - - - 1,383 (1,383) -
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
At 1 January 2012 (restated) 862 61,431 (2,304) 4,620 25,860 90,469
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
Total comprehensive expense - - - (4) (10,423) (10,427)
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
Transactions with owners
Share based payments 8, 15 - - - 505 - 505
Forfeited options 15 - - - (126) - (126)
Reversal of stock option grants 15 - - - (777) 777 -
Purchase of treasury shares - - (1,982) - - (1,982)
Dividends - - - - (9,602) (9,602)
Sale of treasury shares 15 - - 50 - - 50
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
Total transactions with owners, recognised directly
in equity - - (1,932) (398) (8,825) (11,155)
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
Balance as at 31 December 2012 (restated) 862 61,431 (4,236) 4,218 6,612 68,887
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
Total comprehensive expense - - - (145) (21,087) (21,232)
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
Transactions with owners
Share based payments 8, 15 - - - 1,588 - 1,588
Forfeited options 15 - - - (346) - (346)
Capital reduction - (61,431) - - 61,431 -
Promise of shares to be issued to KR on the
completion of KCC 15 - - - 39,409 - 39,409
Dividend - - - - (10,204) (10,204)
Correction to treasury shares 15 - - 136 (136) - -
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
Total transactions with owners, recognised directly
in equity - (61,431) 136 40,515 51,227 30,447
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
Balance as at 31 December 2013 862 - (4,100) 44,588 36,752 78,102
--------------------------------------------------- ----- -------- -------- -------- -------- -------- --------
During 2013 the Group had no balances attributable to
non-controlling interests (2012: nil).
Statements of Cash flows
for the year ended 31 December
Group Company
As at 31 December As at 31 December
-------------------- --------------------
2013 2012 2013 2012
Note $'000 $'000 $'000 $'000
------------------------------------------------------- ---- ---------- -------- ---------- --------
Cash flows from operating activities
Cash generated from/(used in) operations 17 41,080 28,037 (6,281) (4,796)
Interest paid (190) (361) (9) (9)
Income tax paid (5,533) (9) - -
Receipt from sale of project Kenes - 200 - -
------------------------------------------------------- ---- ---------- -------- ---------- --------
Net cash generated from/(used in) operating activities 35,357 27,867 (6,290) (4,805)
------------------------------------------------------- ---- ---------- -------- ---------- --------
Cash flows from investing activities
Lost buyer deposit (Ereen) - 100 - 100
Payment to minorities (Tochtar) - (500) - -
Purchases of property, plant and equipment 11 (2,464) (5,438) (207) (11)
Proceeds from sale of property, plant and equipment 9 31 - -
Purchase of intangible assets 12 (5,750) (1,150) (50) (550)
Investment in Kounrad project - (1,267) (502) (1,267)
Investment in Copper Bay project - (3,222) -
Loans to JV Partners/Subsidiaries 22 - - 32,360 21,256
Interest received 17 15 - -
Acquisition of subsidiary, net of cash acquired 20 3,293 - - -
------------------------------------------------------- ---- ---------- -------- ---------- --------
Net cash (used in)/generated from investing activities (4,895) (8,209) 28,379 19,528
------------------------------------------------------- ---- ---------- -------- ---------- --------
Cash flows from financing activities
Dividends paid to owners of the parent 19 (19,739) - (19,739) -
Restricted cash 14 (1,734) - (1,649) -
Receipt of third party loan - Alag Bayan - 150 - -
Purchase of treasury shares - (1,983) - (1,983)
------------------------------------------------------- ---- ---------- -------- ---------- --------
Net cash used in financing activity (21,473) (1,833) (21,388) (1,983)
------------------------------------------------------- ---- ---------- -------- ---------- --------
Exchange losses/(gains) on cash and cash equivalents (65) 3 1 -
Net increase in cash and cash equivalents 17 8,924 17,828 701 12,740
Cash and cash equivalents at the beginning of the year 17 33,871 16,043 28,231 15,491
------------------------------------------------------- ---- ---------- -------- ---------- --------
Cash and cash equivalents at the end of the year 42,795 33,871 28,932 28,231
------------------------------------------------------- ---- ---------- -------- ---------- --------
Notes to the Consolidated Financial Statements
for the year ended 31 December 2013
1. General information
Central Asia Metals plc ("CAML" or the "Company") and its
subsidiaries (the "Group") are a mining and exploration
organisation with operations primarily in Kazakhstan and a parent
holding company based in the United Kingdom.
The Group's principal business activity is the production of
copper cathode at its Kounrad operations in Kazakhstan. The Group
also owns various exploration projects in Mongolia which are held
for sale and has recently invested in a copper tailings project in
Chile.
CAML is a public limited company, which is listed on the
Alternative Investment Market ("AIM") of the London Stock Exchange
Plc and incorporated and domiciled in the UK. The address of its
registered office is Masters House, 107 Hammersmith Road, London,
W14 0QH. The Company's registered number is 5559627.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all the years presented,
unless otherwise stated.
Basis of Preparation
The Group's consolidated financial statements have been prepared
in accordance with International Finance Reporting standards
("IFRS") as adopted by the European Union, IFRIC Interpretations
and the Companies Act 2006 applicable to companies reporting under
IFRS. The consolidated financial statements have been prepared
under the historical cost convention with the exception of assets
held for sale which have been held at fair value. The accounting
policies which follow set out those policies which apply in
preparing the financial statements for the year ended 31 December
2013. The Group financial statements are presented in US Dollars
($).
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated
financial statements are explained in note 3.
The Group commenced production of copper cathodes on 30 April
2012. The cathodes are produced by the SX-EW plant at Kounrad which
is owned and operated by Kounrad Copper Company LLP. Consequently
during 2012 the cost of sales and distribution and selling costs
refer to only eight months of operations.
On 21 October 2013, the ownership of Kounrad Copper Company LLP
increased from 60% to 100% following the acquisition of 40% of KCC.
Consequently, the results for 2013 comprise only 60% of the
revenues and costs for the first nine months of the year but 100%
for the final three months of the year.
The impact of the above two events make annual comparisons
difficult from the annually reported numbers in several of the
notes to the accounts. A more meaningful analysis of the reported
revenues and costs can be obtained from the Financial Review
above.
Where a change in the presentational format between the prior
year and current year financial statements has been made during the
year, comparative figures have been restated accordingly.
The financial information set out above does not constitute the
Group's statutory accounts for the year ended 31 December 2013, but
is derived from the Group's full financial accounts. The Group's
full financial accounts are prepared under International Financial
Reporting Standards as adopted by the European Union. The financial
statements are prepared on a going concern basis.
Basis of Consolidation
Joint Venture Accounting - Kounrad Project
The Kounrad Project ownership changes have taken a significant
amount of time to complete. Throughout the periods of joint
ownership and under the terms of the JOA, both of the parties had
an equal vote on all significant operational, financial and
planning matters. Consequently, it was concluded that Joint Control
existed over the Kounrad project and so, whilst the various
transactions have been negotiated and submitted for government
approval, the Kounrad Project has been accounted for in the
following manner;
1. The sub soil user licence operations under SK are classified
as a jointly controlled asset. The assets, liabilities, income and
expenditure have been proportionately consolidated on a 60:40
basis.
2. All of the operations conducted under Kounrad Copper Company
LLP have also been proportionately consolidated on a 60:40 basis as
it has been a jointly owned legal entity. During 2013 the Group
took advantage of the EU exemption which enabled it to delay
implementing revised accounting standards under IFRS 11 for joint
entities.
Business Combinations - Kounrad Project
Throughout 2013 the above Joint Venture Accounting has remained
in place although it is recognised that the completion of both
transactions (KCC and SUC) will result in a change in control of
the Kounrad Project from joint control to control by CAML.
As such an IFRS 3 "Business Combination" will be deemed to have
taken place upon completion.
Details of the accounting treatment for the business combination
are contained in note 20.
3. Critical accounting estimates and judgments
The Group has four key areas where critical accounting estimates
and judgements are required that could have a material impact on
the financial statements:
Impairment
As mentioned above estimates are required periodically to assess
assets for impairment. These estimates will incorporate the
expected future commodity prices, estimates of the ore reserves and
projected future costs of development and production. This includes
an assessment of the carrying values of assets held for sale.
The carrying value of the goodwill generated by accounting for
the business combination of the Group acquiring an additional 40%
in the Kounrad Project requires an annual impairment review. This
review will determine whether the value of the goodwill can be
justified by reference to the carrying value of the business assets
and the future discounted cash flows of the business.
Mineral reserves and resources
The major value associated with the Group is the value of its
mineral resources. These resources are the Group's best estimate of
product that can be economically and legally extracted from the
relevant mining property. The Group's estimates are supported by
geological studies and drilling samples to determine the quantity
and grade of each deposit.
Significant judgement is required to generate an estimate based
on the geological data available. Ore resource estimates may vary
from period to period. This judgement has a significant impact on
impairment consideration and the period over which capitalised
assets are depreciated within the financial statements.
The resources have been independently verified by Wardell
Armstrong International and were classified as JORC Compliant in
2013.
Decommissioning and site rehabilitation estimates
Provision is made for the costs of decommissioning and site
rehabilitation costs when the related environmental disturbance
takes place. Provisions are recognised at the net present value of
future expected costs using discount rate of 6.40% (2012:
6.86%).
The provision recognised represents management's best estimate
of the costs that will be incurred, but significant judgement is
required as many of these costs will not crystallise until the end
of the life of the mine. Estimates are reviewed annually and are
based on current contractual and regulatory requirements and the
estimated useful life of mines. Engineering and feasibility studies
are undertaken periodically; however significant changes in the
estimates of contamination, restoration standards and techniques
will result in changes to provisions from period to period.
Business combination
The Kounrad Transaction will ultimately result in the Group
acquiring the 40% of the joint venture project at Kounrad that it
did not previously own. The assessment of the fair value uplift of
the underlying assets acquired and the treatment of the two legal
entities involved in the project as at the 31 December 2013 period
end required a high degree of judgement.
The assessment of the overall project as a business combination
for both legal entities, Kounrad Copper Company LLP and Sary Kazna
LLP, and the impact on that judgement caused by the different
stages of completion as at 31 December 2013 required a careful
review of the overall transaction as opposed to the specific nature
of the assets being acquired.
The fair value uplift of the assets acquired as a result of that
judgement and the resulting accounting treatment have resulted in a
significant change to both the income statement and the balance
sheet of the business. The details are explained in note 20.
4. Segmental information
The Board is the Group's chief operating decision-maker.
Management has determined the operating segments based on the
information reviewed by the Board for the purposes of allocating
resources and assessing performance. The Board considers the
business from a geographic prospective.
As at 31 December 2013, the Group only had one business segment
consisting of an SX-EW copper plant at Kounrad in Kazakhstan. The
Group operations are controlled from a head office in London, UK
but this does not represent a separate business segment.
Previously reported business segments within the Group, namely
all the Mongolian operations, are classified as held for sale as at
31 December 2013. As part of the sale process, in December 2013,
New CAML Mongolia LLC and Mongolian Silver Mountain LLC were sold
for nil consideration.
The Board assesses the performance of the Kounrad project based
on a number of key operational and financial measures which relate
to copper production output, revenues from the sales of copper and
the overall costs of producing the copper. All capital related
expenditure at the project is also closely monitored and
controlled.
The segmental results for the year ended 31 December 2013 are as
follows:
2013 2012
$'000 $'000
------------------------------------------------------------------------------------------ -------- -------
Gross revenue 54,090 30,656
Traxys buyers' fees (2,607) (1,097)
------------------------------------------------------------------------------------------ -------- -------
Revenue 51,483 29,559
------------------------------------------------------------------------------------------ -------- -------
Kounrad EBITDA 39,486 21,261
Unallocated costs including corporate (7,068) (5,189)
------------------------------------------------------------------------------------------ -------- -------
Group continuing operations EBITDA 32,418 16,072
Gain on re-measuring to fair value the existing interest in KCC on acquisition of control 27,835 -
Depreciation and amortisation (4,632) (984)
Exchange rate differences gain/(loss) 159 (409)
Other (expenses)/income, net (32) 317
Finance income 17 8
Finance costs (412) (220)
------------------------------------------------------------------------------------------ -------- -------
Profit before income tax 55,353 14,783
------------------------------------------------------------------------------------------ -------- -------
Income tax (6,712) (4,477)
------------------------------------------------------------------------------------------ -------- -------
Profit for the year from continuing operations 48,641 10,306
------------------------------------------------------------------------------------------ -------- -------
Loss from discontinued operations (14,149) (512)
------------------------------------------------------------------------------------------ -------- -------
Profit for the year 34,492 9,794
------------------------------------------------------------------------------------------ -------- -------
The total production at Kounrad for the 12 month period was
10,509 tonnes whilst the total quantity of copper sold was slightly
higher at 10,689 tonnes. The average price achieved from the sale
of copper was $7,114 per tonne.
EBITDA is a non-IFRS financial measure. CAML calculates EBITDA
as profit or loss for the period excluding the following items:
-- Income tax expense;
-- Finance income and expense;
-- Depreciation and amortisation; and
-- Discontinuing operations; and Gain on re-measuring to fair
value and other income or expenses.
EBITDA is intended to provide additional information to
investors and analysts. It does not have any standardised meaning
prescribed by IFRS and should not be considered in isolation or as
a substitute for measures of performance prepared in accordance
with IFRS. EBITDA excludes the impact of cash costs of financing
activities and taxes, and the effects of changes in operating
working capital balances, and therefore is not necessarily
indicative of operating profit or cash flow from operations as
determined under IFRS. Other companies may calculate EBITDA
differently.
A reconciliation between net profit for the period and EBITDA is
presented below:
2013 2012
$'000 $'000
------------------------------------------------------------------------------------------ -------- ------
Profit for the year 34,492 9,794
------------------------------------------------------------------------------------------ -------- ------
Plus/(less):
Income tax expense 6,712 4,477
Depreciation and amortisation 4,632 984
Finance expense 412 220
Exchange rate differences (gain)/loss (159) 409
Gain on re-measuring to fair value the existing interest in KCC on acquisition of control (27,835) -
Loss from discontinued operations 14,149 512
Other expenses/(income) 32 (317)
Finance income (17) (8)
------------------------------------------------------------------------------------------ -------- ------
Group continuing operations EBITDA 32,418 16,072
------------------------------------------------------------------------------------------ -------- ------
Unallocated costs including corporate 7,068 5,189
------------------------------------------------------------------------------------------ -------- ------
Kounrad EBITDA 39,486 21,261
------------------------------------------------------------------------------------------ -------- ------
Segmental assets and liabilities for the year ended 31 December
2013 are as follows:
Segmental assets Segmental liabilities
-------------------- -----------------------
31 Dec 13 31 Dec 12 31 Dec 13 31 Dec 12
$'000 $'000 $'000 $'000
-------------------------------- --------- --------- ----------- ----------
Kounrad 130,473 45,215 (23,165) (8,417)
Alag Bayan - 5,717 - (179)
Assets held for sale 186 8,131 (603) (777)
Unallocated including corporate 30,852 32,509 (2,014) (11,171)
-------------------------------- --------- --------- ----------- ----------
Total 161,511 91,572 (25,782) (20,544)
-------------------------------- --------- --------- ----------- ----------
5. Revenue
2013 2012
Group $'000 $'000
-------------------------- ------- -------
Main plant
International customers 53,197 28,885
Domestic customers 796 1,504
-------------------------- ------- -------
53,993 30,389
-------------------------- ------- -------
Pilot plant
International customers - 267
Domestic customers 97 -
-------------------------- ------- -------
97 267
-------------------------- ------- -------
Total Gross Revenue 54,090 30,656
-------------------------- ------- -------
Less: Traxys buyers' fees (2,607) (1,097)
-------------------------- ------- -------
Revenue 51,483 29,559
-------------------------- ------- -------
The Group sells and distributes its copper cathode product
primarily through an offtake arrangement with Traxys. The offtake
arrangements are for 90% of the SX-EW plant's output for the period
up until 31 December 2015. The copper cathodes are delivered from
the Kounrad site by rail under an FCA (Incoterms 2010) contractual
basis and delivered to the end customers in Turkey. As part of the
offtake arrangements, the Group sells the copper cathodes at a
price linked to the London Metal Exchange (LME) copper price based
on an agreed quotational period.
The offtake arrangements with Traxys started in May 2012 in line
with the commencement of production on site. Given the lack of
previous knowledge and experience of both the logistical issues and
costs associated with delivering the copper cathodes from Kounrad
to the end customers at that time, it was agreed to deliver the
cathodes on an "open book" basis for the remaining eight months of
2012. This basis allowed the Group to better understand the costs
and logistical issues involved during this learning period and
thereby agree rates for future periods on a more informed
basis.
Consequently, during 2012 the costs associated with the sales
and distribution of the copper cathodes from Kounrad to the end
customer were incurred by Traxys but paid for by the Group. During
2013, the costs of delivery to the end customers have been
effectively borne by the Group through means of an annually agreed
buyer's fee which is offset from the selling price (note 8).
During 2013 the Group sold 10,500 tonnes (2012: 6,083 tonnes) of
copper through the offtake arrangements. Some of the copper
cathodes are also sold locally and during 2013 a total of 189
tonnes (2012: 320 tonnes) were sold to local customers.
6. Cost of sales by nature
2013 2012
Group $'000 $'000
------------------------------ ------ -----
Main plant
Mineral extraction tax 3,070 1,799
Reagents and materials 3,192 1,446
Depreciation and amortisation 4,546 941
Employee benefit expense 2,021 909
Consulting and other services 835 327
------------------------------ ------ -----
13,664 5,422
------------------------------ ------ -----
Pilot plant 114 348
------------------------------ ------ -----
Total 13,778 5,770
------------------------------ ------ -----
7. Distribution and selling costs by nature
2013 2012
Group $'000 $'000
------------------------------ ----- -----
Main plant
Transportation costs 123 15
Employee benefit expense 60 10
Taxes and duties 45 114
Depreciation and amortisation 37 6
Other expenses 92 47
------------------------------ ----- -----
357 192
------------------------------ ----- -----
Pilot plant - 2
------------------------------ ----- -----
Total 357 194
------------------------------ ----- -----
The above distribution and selling costs are those incurred at
the Kounrad site in addition to the costs associated with the
offtake arrangements. Note 5 above refers to the costs associated
with the offtake arrangements with Traxys.
8. Administrative expenses by nature
2013 2012
Group $'000 $'000
------------------------------------ ----- -----
Employee benefit expense 4,459 4,815
Share based payments 1,588 505
Consulting and other services 1,522 1,348
Office related costs 1,087 1,254
Taxes and duties 857 551
Depreciation and amortisation 49 36
------------------------------------ ----- -----
Total from continuing operations 9,562 8,509
------------------------------------ ----- -----
Total from discontinuing operations 348 532
------------------------------------ ----- -----
Total 9,910 9,041
------------------------------------ ----- -----
9. Income tax
Group Company
------------ ------------
2013 2012 2013 2012
$'000 $'000 $'000 $'000
-------------------------------------- ----- ----- ----- -----
Current tax:
Current tax on profits for the year 6,778 4,478 - -
Adjustments in respect of prior years - - - -
-------------------------------------- ----- ----- ----- -----
Total current tax 6,778 4,478 - -
Deferred tax (note 23) (66) - - -
-------------------------------------- ----- ----- ----- -----
Income tax expense 6,712 4,478 - -
-------------------------------------- ----- ----- ----- -----
UK corporate income tax is calculated at 23.25% (2012: 24.5%) of
the estimated assessable profit for the year. Taxation for other
jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
The tax on the Group's profit before tax differs from the
theoretical amount that would arise using the UK statutory rate of
23.25% (2012: 24.5%) applicable to the profit of the Group, as
follows:
Group
----------------
2013 2012
$'000 $'000
------------------------------------------------------------ ------- -------
Profit before taxation 41,204 14,271
------------------------------------------------------------ ------- -------
Tax calculated at 23.25% (2012: 24.5%) 9,580 3,496
Effect of differences in foreign tax rates (218) 491
Expenses not deductible for tax purposes/non-taxable income (3,550) 1,753
Change in unrecognised deferred tax asset 966 (1,262)
Movement in other timing differences (66) -
------------------------------------------------------------ ------- -------
Income tax expense 6,712 4,478
------------------------------------------------------------ ------- -------
The tax on the Company's loss before tax differs from the
theoretical amount that would arise using the UK statutory rate of
23.25% (2012: 24.5%) applicable to the loss of the Company, as
follows:
Company
------------------
2013 2012
$'000 $'000
------------------------------------------------------------ -------- --------
Loss before taxation (21,087) (10,423)
------------------------------------------------------------ -------- --------
Tax calculated at 23.25% (2012: 24.5%) (4,903) (2,554)
Expenses not deductible for tax purposes/non-taxable income 3,532 1,850
Adjustments in respect of prior years - -
Change in unrecognised deferred tax assets 1,371 704
------------------------------------------------------------ -------- --------
Income tax expense - -
------------------------------------------------------------ -------- --------
From 1 April 2013, the main UK Corporation tax rate reduced from
24% to 23%. Further reductions in the main tax rate to 21% from 1
April 2014 and 20% from 1 April 2015 have been announced.
The rate reductions were substantively enacted on 3 July 2013
and have been reflected in the calculation of deferred tax at the
statement of financial position date.
10. Earnings/(loss) per share
(a) Basic
Basic earnings/(loss) per share is calculated by dividing the
profit/(loss) attributable to owners of the Company by the weighted
average number of Ordinary Shares in issue during the year
excluding Ordinary Shares purchased by the Company and held as
treasury shares.
2013 2012
$'000 $'000
----------------------------------------------------------------------- ---------- ----------
Profit from continuing operations attributable to owners of the parent 48,641 10,306
Loss from discontinued operations attributable to owners of the parent (14,149) (512)
----------------------------------------------------------------------- ---------- ----------
Total 34,492 9,794
----------------------------------------------------------------------- ---------- ----------
Weighted average number of Ordinary Shares in issue 88,681,029 85,782,437
----------------------------------------------------------------------- ---------- ----------
$cents $cents
--------------------------------------------------------------------------------------------- ------- ------
Earnings/(loss) per share from continuing and discontinued operations attributable to owners
of the parent during the year (expressed in $ cents per share)
From continuing operations 54.85 12.01
From discontinued operations (15.96) (0.60)
--------------------------------------------------------------------------------------------- ------- ------
From profit for the period 38.89 11.42
--------------------------------------------------------------------------------------------- ------- ------
(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
and exercise of outstanding security warrants.
Restated
----------------------
2013 2012
$'000 $'000
-------------------------------------------------------------------------- ---------- ----------
Profit from continuing operations attributable to owners of the parent 48,641 10,306
Loss from discontinued operations attributable to owners of the parent (14,149) (512)
-------------------------------------------------------------------------- ---------- ----------
Total 34,492 9,794
-------------------------------------------------------------------------- ---------- ----------
Weighted average number of Ordinary Shares in issue 88,681,029 85,782,437
Adjusted for:
* Share Options 2,439,060 1,659,816
* Mirabaud Securities warrants 1,192,053 1,192,053
-------------------------------------------------------------------------- ---------- ----------
Weighted average number of Ordinary Shares for diluted earnings per share 92,312,142 88,634,306
-------------------------------------------------------------------------- ---------- ----------
Diluted earnings/(loss) per share $ cents $ cents
---------------------------------- ------- -------
From continuing operations 52.69 11.63
From discontinued operations (15.96) (0.60)
---------------------------------- ------- -------
From profit for the period 37.36 11.03
---------------------------------- ------- -------
11. Property, plant and equipment
Motor Vehicles
Construction in Plant and and Office
progress Equipment Equipment Total
Group $'000 $'000 $'000 $'000
----------------------------------- --------------- --------- -------------- -------
Cost
At 1 January 2012 19,357 3,689 828 23,874
Additions 5,111 - 327 5,438
Disposals - (127) (103) (230)
Transfers (20,373) 20,373 - -
Change in JV accounting (4,090) (2,355) (201) (6,646)
Exchange differences 39 37 12 88
----------------------------------- --------------- --------- -------------- -------
At 31 December 2012 44 21,617 863 22,524
Additions 933 617 412 1,962
Disposals - (160) (43) (203)
Transfers (526) 482 - (44)
Acquisition of Subsidiary 29 61,733 353 62,115
Exchange differences (4) (626) (24) (654)
----------------------------------- --------------- --------- -------------- -------
At 31 December 2013 476 83,663 1,561 85,700
----------------------------------- --------------- --------- -------------- -------
Accumulated depreciation
At 1 January 2012 - 1,072 339 1,411
Provided during the period - 1,174 155 1,329
Disposals - (118) (81) (199)
Change in JV accounting - (186) (100) (286)
Exchange differences - (16) (2) (18)
----------------------------------- --------------- --------- -------------- -------
At 31 December 2012 - 1,926 311 2,237
Provided during the period - 3,937 195 4,132
Disposals - (210) (29) (239)
Acquisition of Subsidiary - 1,871 70 1,941
Exchange differences - (79) (8) (87)
----------------------------------- --------------- --------- -------------- -------
At 31 December 2013 - 7,445 539 7,984
----------------------------------- --------------- --------- -------------- -------
Net book value at 1 January 2013 44 19,691 552 20,287
----------------------------------- --------------- --------- -------------- -------
Net book value at 31 December 2013 476 76,218 1,022 77,716
----------------------------------- --------------- --------- -------------- -------
Included within the line Acquisition of Subsidiary are a number
of adjustments resulting from the Kounrad Transaction, explained in
note 20. The adjustments comprise:
1. A proportionate increase (i.e. from 60% to 100%) in the
carrying values of Kounrad related property, plant and equipment of
$11,214,903 and accumulated depreciation of $605,294.
2. A fair value uplift applied to the Kounrad assets of
$46,392,000 (of which $27,835,000 results from measuring at fair
value the Group's 60% equity interest in KCC held before the
business combination). This fair value uplift resulted in an
additional depreciation charge of $1,335,856 during the year;
and
3. The transfer of assets related to the Kounrad project of
$4,508,743, previously recognised as investments.
The Company had $198,119 of office equipment at net book value
as at 31 December 2013 (2012: $9,543).
12. Intangible assets
Deferred Exploration and Computer
Goodwill Evaluation costs Mining Licences and Permits Software Total
Group $'000 $'000 $'000 $'000 $'000
----------------------------- -------- ---------------------------- --------------------------- --------- -------
Cost
At 1 January 2012 - 5,501 3,412 24 8,937
Additions - 1,067 49 34 1,150
Disposals - (23) (64) - (87)
Joint Venture adjustment - - (2,351) (5) (2,356)
Exchange differences - (137) 4 4 (129)
----------------------------- -------- ---------------------------- --------------------------- --------- -------
At 31 December 2012 - 6,408 1,050 57 7,515
Additions 260 5,476 14 5,750
Addition Goodwill (note 20) 9,278 - - - 9,278
Disposals - - (1) (32) (33)
Joint Venture adjustment - - 33 9 42
Transfer of Bayan Resources
to disposal group classified
as held for sale - (4,505) (1,000) - (5,505)
Exchange differences - (222) (23) (1) (246)
----------------------------- -------- ---------------------------- --------------------------- --------- -------
At 31 December 2013 9,278 1,941 5,536 47 16,801
----------------------------- -------- ---------------------------- --------------------------- --------- -------
Accumulated amortisation
At 1 January 2012 - 8 17 13 38
Provided during the year - - 1 31 32
Disposal - (8) (21) - (29)
Change in JV accounting - - - (3) (3)
Exchange differences - - 4 (1) 3
----------------------------- -------- ---------------------------- --------------------------- --------- -------
At 31 December 2012 - - 1 40 41
Provided during the year - 52 4 12 68
Disposal - - 24 (26) (2)
Change in JV accounting - - 1 3 4
Exchange differences - (1) (1) (1) (3)
----------------------------- -------- ---------------------------- --------------------------- --------- -------
At 31 December 2013 - 51 29 28 108
----------------------------- -------- ---------------------------- --------------------------- --------- -------
Net book value at 1 January
2013 - 6,408 1,049 17 7,474
----------------------------- -------- ---------------------------- --------------------------- --------- -------
Net book value at 31 December
2013 9,278 1,890 5,506 19 16,693
----------------------------- -------- ---------------------------- --------------------------- --------- -------
As a result of the Kounrad Transaction, explained within the
Chief Executive Officer's Statement, the Group has recognised
goodwill of $9,278,000.
During the year the Group also paid a Commercial Discovery Bonus
("CDB") of $3,680,486 ($2,208,292 on 60% consolidation basis) to
the Kazakhstan Government on completion of the exploration and
resource studies associated with the Kounrad waste dumps. The
completion of this work enabled the resources on site to be
registered as part of the Kazakhstan Government official list of
resources ('State Balance') and thereby facilitate their transfer
to a mining licence and the subsequent production of copper from
the resources. The amount of CDB has been capitalised under Mining
licences and permits during the year and will be amortised over the
remaining life of the mine.
The investment of $3,222,420 in Copper Bay has been classified
as an intangible asset and added to Mining licences and
permits.
During the year the Group reclassified the Alag Bayan project
(Bayanresources LLC) as held for sale and consequently made a full
write down of the assets held by the subsidiary.
The Company had no intangible assets as at 31 December 2013
(2012: $1,000,000). During the year the Company has reclassified
the Alag Bayan project to the assets classified as held for sale
and consequently fully impaired the asset.
Impairment test for goodwill
The Group currently only has one business segment, namely the
Kounrad project located in Kazakhstan. The goodwill associated with
this project and the Kounrad Transaction will be monitored by
management in the future but as at 31 December 2013 the goodwill
did not require impairment.
The recoverable amount of all CGUs has been determined based on
value-in- use calculations. These calculations use pre-tax cash
flow projections based on financial budgets approved by management
covering a five-year period. Cash flows beyond the five-year period
are extrapolated using the estimated growth rates stated below. The
growth rate does not exceed the long-term average growth rate for
the copper business in which the CGU operates.
13. Trade and other receivables
Group Company
-------------------- --------------------
31 Dec 13 31 Dec 12 31 Dec 13 31 Dec 12
$'000 $'000 $'000 $'000
---------------------------------------------------- --------- --------- --------- ---------
Trade receivables 5,715 2,176 58 114
Less: provision for impairment of trade receivables (33) - - -
---------------------------------------------------- --------- --------- --------- ---------
Trade receivables, net 5,682 2,176 58 114
Receivables from related parties 11,654 12,340 41,216 45,403
Prepayments 1,156 712 73 99
---------------------------------------------------- --------- --------- --------- ---------
18,492 15,228 41,347 45,616
---------------------------------------------------- --------- --------- --------- ---------
Less: non - current portion
Trade receivables (5,436) (3) - -
Receivables from related parties (11,654) (12,340) (11,216) (45,403)
---------------------------------------------------- --------- --------- --------- ---------
Current Portion 1,402 2,885 30,131 213
---------------------------------------------------- --------- --------- --------- ---------
The carrying value of all the above receivables is a reasonable
approximation of fair value.
The amounts receivable from related parties is a consequence of
the joint venture accounting treatment required at the Kounrad
project due to the nature of the ownership structure (note 20). The
amounts will disappear once the transaction to acquire 100% of the
project is completed.
The Group's main receivable is the VAT incurred on purchases
within Kazakhstan. As at 31 December 2013 a total of $5,436,475
(2012: $2,047,553) of VAT receivable was still owed to the Group by
the Kazakhstan authorities. The Group still remains confident about
its prospects to recover this outstanding debt and is working
closely with its advisers and local partners to achieve this. The
planned means of recovery will be through a combination of the
local sales of cathode copper to effectively offset VAT liabilities
and by a successful appeal to the authorities. An appeal was lodged
on 19 November 2013 by the local tax advisers and the outcome was
still pending as at 31 December 2013. However, as a result of the
above and the uncertainty regarding timing, the Group has
reclassified the VAT receivable from current to non-current.
Management's policy is to assess all trade and other receivables
for recoverability on a regular basis. A provision is made where
doubt exists and amounts are fully written off when information
comes to light that the amounts due will not be recovered.
14. Cash and cash equivalents
Group Company
-------------------- --------------------
31 Dec 13 31 Dec 12 31 Dec 13 31 Dec 12
$'000 $'000 $'000 $'000
---------------------------------------------------------- --------- --------- --------- ---------
Cash at bank and on hand 32,774 33,855 28,932 28,232
Short term deposits 10,000 - - -
---------------------------------------------------------- --------- --------- --------- ---------
42,774 33,855 28,932 28,232
---------------------------------------------------------- --------- --------- --------- ---------
Cash at bank and on hand included in assets held for sale 21 16 - -
---------------------------------------------------------- --------- --------- --------- ---------
Total cash and cash equivalent 42,795 33,871 28,932 28,232
---------------------------------------------------------- --------- --------- --------- ---------
Restricted cash 1,734 - 1,649 -
---------------------------------------------------------- --------- --------- --------- ---------
Total cash and cash equivalent including restricted cash 44,529 33,871 30,581 28,232
---------------------------------------------------------- --------- --------- --------- ---------
The cash balance as at 31 December 2013 including restricted
cash was $44,528,881 (2012: $33,871,138). The restricted cash
balance relates primarily to the capital reduction scheme completed
in August 2013.
An amount of $10.0 million (2012: nil) was held in a short term
deposit account as at 31 December 2013 and had been set aside to
satisfy the 2013 corporate income tax liability in Kazakhstan which
falls due in April 2014.
68.7% of the Group's cash and cash equivalents including
restricted cash at the year end were held by an AA- rated bank
(2012: 83.4%). The rest of Group's cash was held within mix of
institutions with credit rating between B - B1 (2012: B+ - B1).
15. Other reserves
Shares Currency
Share Option Reserve to Translation
Reserve be issued Reserve Total Group
Group $'000 $'000 $'000 $'000
-------------------------------------------------------------- ------------ ---------- ----------- -----------
Balance as at 1 January 2012 (as previously reported) 3,466 - 1,251 6,100
-------------------------------------------------------------- ------------ ---------- ----------- -----------
Effect of prior period restatement 1,383 - - 1,383
-------------------------------------------------------------- ------------ ---------- ----------- -----------
At 1 January 2012 4,849 - 1,251 6,100
-------------------------------------------------------------- ------------ ---------- ----------- -----------
Currency translation differences - - (1,355) (1,355)
Reversal of stock option grants (777) - - (777)
Exercised options (126) - - (126)
Share based payments 505 - - 505
-------------------------------------------------------------- ------------ ---------- ----------- -----------
At 31 December 2012 4,451 - (104) 4,347
-------------------------------------------------------------- ------------ ---------- ----------- -----------
Currency translation differences - - (722) (722)
Promise of shares to be issued to KR on the completion of KCC - 39,409 - 39,409
Exercised options (346) - - (346)
Correction of treasury shares (136) - - (136)
Share based payments 1,588 - - 1,588
-------------------------------------------------------------- ------------ ---------- ----------- -----------
At 31 December 2013 5,557 39,409 (826) 44,140
-------------------------------------------------------------- ------------ ---------- ----------- -----------
On 21 October 2013, the Group completed the transfer from KR to
the Group of an additional 40% of Kounrad Copper Company LLP taking
its ownership to 100%. This transfer forms part of overall
transaction (the Kounrad Transaction). The Company agreed to issue
15,336,096 ordinary shares in CAML UK as consideration for the 40%
interest in KCC albeit the shares would only be issued once the
whole Kounrad Transaction was completed (note 20).
As at 31 December 2013, the Kounrad Transaction had not been
fully completed as the transfer of the 40% in the sub soil user
rights were still awaiting Government approval. Consequently, the
shares were not issued as at 31 December 2013 and have been
classified as a contingent equity consideration.
16. Trade and other payables
Group Company
-------------------- --------------------
31 Dec 13 31 Dec 12 31 Dec 13 31 Dec 12
$'000 $'000 $'000 $'000
------------------------------------------------- --------- --------- --------- ---------
Trade payables 222 1,767 208 1,349
Dividends payable 1,012 9,603 1,012 9,603
Corporation tax, social security and other taxes 10,626 5,816 794 160
------------------------------------------------- --------- --------- --------- ---------
11,860 17,186 2,014 11,112
------------------------------------------------- --------- --------- --------- ---------
The carrying value of all the above payables is equivalent to
fair value.
As at 31 December 2013, the main liabilities of the Group are
the Corporate Income tax liability at Kounrad for the 12 months
ending 31 December 2013. The Group made a net provision for this
liability of $8,367,253 (2012: $4,271,306) having paid an amount of
$1,302,000 in advance in December 2013.
The Company provided $1,011,446 as an allowance for the accrued
dividend on the 15,336,096 shares payable to KR as part of the
completion of the Kounrad Transaction. The dividend associated with
the remaining 5,875,655 shares for the outstanding 40% transfer of
the subsoil use contract of the Kounrad project has been classified
as a contingent liability (note 18).
17. Cash generated from operations
Group Company
As at 31 December As at 31 December
------------------- -------------------
2013 2012 2013 2012
Note $'000 $'000 $'000 $'000
---------------------------------------------------------------------- ---- ---------- ------- --------- --------
Profit/(Losses) before income tax including discontinued operations 41,204 14,271 (21,087) (10,423)
---------------------------------------------------------------------- ---- ---------- ------- --------- --------
Adjustments for:
Depreciation 11 4,564 1,329 18 9
Amortisation 12 68 32 - -
Foreign exchange 594 759 (1,111) (79)
Lost buyer deposit (Ereen) - (100) - (100)
Gain on re-measuring to fair value the existing interest in KCC on
acquisition of control (27,835)
Change in provision for doubtful receivables 33 - - -
Impairment of Mongolian Intercompany receivables - - 13,691 4,756
Impairment of Mongolian intangible assets and investments 12,879 - 1,927 -
Impairment of Sary Kazna non-Kounrad interest receivable - - - 3,268
Reversal of intercompany receivable impairment - - - (1,068)
Share based payments 15 1,588 505 1,588 505
Cash settled share options and EBT shares 15 (482) - (482) -
Finance income (17) (15) (391) -
Finance costs 581 361 9 9
Changes in working capital:
Inventories 306 (2,050) - -
Trade and other receivables 13 10,444 (2,152) 82 (2,749)
Trade and other payables 13 (2,969) 6,579 (525) 1,078
Movement in provisions 122 352 - -
Transfer of interest in JV - 8,168 - -
---------------------------------------------------------------------- ---- ---------- ------- --------- --------
Cash generated from/(used) in operations 41,080 28,037 (6,281) (4,796)
---------------------------------------------------------------------- ---- ---------- ------- --------- --------
18. Contingencies
As at 31 December 2013, the Group had a contingent liability
related to the Kounrad Transaction of GBP235,026, equivalent to
$387,511. This is based on the value of the 2013 interim dividend
of 4 pence per share which was paid in November 2013 and the agreed
consideration of 5,875,655 ordinary shares in the Company for the
transfer of the subsoil use contract as part of the Kounrad
Transaction. As this element of the Kounrad Transaction had not
been completed as at 31 December 2013 it is considered to be a
contingent liability and the amount will only be paid on completion
of the whole Kounrad Transaction.
19. Dividend per share
The Company announced a dividend policy on 13 December 2012. In
line with that policy, the Company paid $14,306,000 in 2013 which
consisted of a special dividend of 3.7 pence per share and an
annual dividend for 2012 of 7 pence per share.
In November 2013, an amount of $5,432,584 was paid representing
a 2013 interim dividend of 4 pence per share. The final dividend in
respect of the year ended 31 December 2013 of 5 pence per share
will be recommended at the forthcoming Annual General meeting
(AGM).
20. Business combination
On 27 June 2013, the Company announced a new framework agreement
(the Agreement) for the acquisition of the remaining 40% of the
Kounrad Project. The Agreement superseded the previous arrangements
with SAT and more details on the background and history to the
Kounrad Project ownership changes can be found within the Chief
Executive Officer's Statement within the Strategic Report.
The Agreement will result in CAML obtaining control over the
Kounrad Project in two transactions:
-- The first transaction ("KCC Transaction") was effected by the
transfer of the remaining 40% share capital of KCC from SAT to Mr
Kenges Rakishev ("KR"), followed by the subsequent transfer to
CAML's wholly owned subsidiary CAML Kazakhstan BV ("CAML BV"),
which was registered on 21 October 2013.
-- The second transaction ("SUC Transaction") will be effected
by the transfer of the remaining 40% economic interest in the
subsoil use contract ("SUC") from SAT to KR, followed by a
subsequent transfer to CAML's wholly owned subsidiary SK. The
transfer to KR and then to SK remained outstanding as at 31
December 2013.
The agreed purchase consideration consists of 21,211,751
ordinary shares in the capital of the Company ("CAML Shares") and
an entitlement to a cash payment in lieu of any benefits to which
KR might have been entitled to had the CAML Shares been issued to
KR on the transfer of the KCC interest to CAML BV, rather than on
completion, capped at GBP904,120. In March 2014 the parties to the
Agreement recognised that an amount of GBP848,470 had accrued under
this entitlement, and agreed that a further entitlement capped at
GBP1.1 million would accrue to KR. The parties have also agreed to
change the longstop date from 31 March 2014 to 30 June 2014. The
above cash entitlements are only payable to KR upon the completion
of the Kounrad Transaction.
The CAML Shares will be allocated in two tranches, with one
tranche of 15,336,096 Ordinary Shares (72.3% of the CAML Shares)
for the transfer of the 40% share capital of KCC to CAML BV (the
"CAML Shares 1"). The remaining 5,875,655 Ordinary Shares (27.7% of
the CAML Shares) for the transfer of the 40% economic interest in
the SUC to SK (the "CAML Shares 2").
As part of the Agreement, KR was to be appointed to the CAML
Board and this was duly completed on 9 December 2013.
Status of ownership changes as at 31 December 2013
The transfer of the 40% interest of KCC to the Group was
registered on 21 October 2013. The SUC Transaction remains
outstanding as at the year end, pending receipt of the relevant
waiver of the pre-emptive rights and approvals of the Republic of
Kazakhstan.
The submission of all the relevant documentation to facilitate
the transfer to SK was submitted to the relevant authorities on 6
March 2013.
The Agreement stipulated that the whole transaction would be
completed by the longstop date of 31 March 2014. At a CAML Board
meeting in March 2014, KR indicated that this would not be possible
but that a revised longstop date of 30 June 2014 would be achieved.
On 28 March 2014, the Company announced the extension to the
longstop date.
Upon the completion of both the KCC Transaction and the SUC
Transaction there will result in a change in control of the Kounrad
Project from joint control to control by CAML. As such an IFRS 3
"Business Combination" will be deemed to have taken place upon
completion. The nature of the Kounrad project is such that both KCC
and the SUC are interlinked and neither could operate in isolation
effectively or commercially. Consequently, it is also felt by
management that the acquisition of each entity can be considered to
form the parts of a single business combination.
Whilst the SUC Transaction was not complete at 31 December 2013,
and will not be accounted for until such time as it is complete, it
is apparent from their inter-dependency that both transactions fall
under the scope of IFRS 3.
KCC Transaction
Consequently, in accordance with IFRS 3 "Business Combinations",
the Group recognized the acquired assets and liabilities based upon
their fair values. Management made a preliminary assessment on a
provisional basis at the time of the completion but recognise that
they may be required to reassess these values within 12 months from
the date of acquisition should a material change arise. Any
revisions to the provisional values will be reflected as of the
acquisition date.
The following table summarises the consideration paid for KCC,
the fair value of assets acquired and the liabilities assumed.
Consideration at 21 October 2013, $'000
----------------------------------------------------- ------
Equity instrument (promise of 15.3m Ordinary Shares) 39,409
Dividends payable 1,012
----------------------------------------------------- ------
Total consideration 40,421
----------------------------------------------------- ------
Provisional Fair
Recognised amounts of identifiable assets acquired and liabilities assumed Value
--------------------------------------------------------------------------- ----------------
Cash and cash equivalents 3,293
Property, plant and equipment 29,130
Inventories 1,630
Trade and other receivables 14,342
Trade and other payables (3,941)
Other liabilities and charges (4,033)
Deferred tax liabilities (note 23) (9,278)
--------------------------------------------------------------------------- ----------------
Total identifiable net assets 31,143
Purchase consideration 40,421
Provisional goodwill 9,278
--------------------------------------------------------------------------- ----------------
Goodwill arising on acquisition comprises $9,278,000 being the
amount, calculated in accordance with IFRS, to recognise a deferred
tax liability on the difference between the provisional fair value
of newly consolidated assets and liabilities and their tax base.
The goodwill is not deductible for tax purposes.
The fair value of the 15,336,096 Ordinary Shares promised as
part of the consideration paid for the 40% share capital of KCC was
determined based on the published share price on the date of
registration, 21 October 2013. An equity instrument of $39,408,839
was recognised within other reserves recorded by the Group to
recognise its promise to issue the shares on completion of the
Kounrad Transaction. A further amount of $1,011,446 in lieu of the
agreement to pay the interim dividend to KR was accrued within the
Group and Company liabilities (note 16).
Acquisition-related costs of $221,264 have been charged to
administrative expenses in the consolidated income statement for
the year ended 31 December 2013.
The Group recognised a gain of $27,835,000 as a result of
measuring at fair value its 60% equity interest in KCC held before
the business combination. The gain is included in other income, as
a line item "Gain on re-measuring to fair value the existing
interests in KCC on acquisition of control", in the Group's income
statement for the year ended 31 December 2013. The fair value
uplift applied to the assets acquired as part of the transaction
has all been applied to the plant and equipment of KCC resulting in
an uplift of $46,392,000 to the carrying value.
The revenue included in the consolidated statement of
comprehensive income since registration of the transfer of the 40%
interest in KCC on 21 October 2013 and contributed by KCC was
$20,183,301. KCC also contributed profit of $10,265,727 over the
same period.
Had KCC been consolidated from 1 January 2013, the consolidated
statement of income would show pro-forma revenue of $72,186,537 and
profit of $49,836,183.
SUC Transaction - not completed as at 31 December 2013
Given that the SUC Transaction had not been completed at the
year end, it continues to be accounted for as a jointly controlled
asset. The acquisition of the remaining 40% economic interest in
the SUC will also be accounted for in accordance with IFRS 3 once
completion occurs. This is expected during the first half of
2014.
As at 31 December 2013, It was estimated that a gain of
$14,052,000 would have been recognised as a result of measuring at
fair value the Group's 60% economic interest in the SUC held prior
to the business combination had it occurred at that date. As with
the KCC Transaction, this will be recognised in other income in the
Group's income statement on the date of completion.
21. Events after the reporting period
KZT devaluation
On 11 February 2014 Kazakhstan's Central Bank decided to stop
supporting the Tenge exchange rate and decrease currency
interventions. As a result, the exchange rate of the Tenge (KZT)
depreciated to 185 KZT for 1 US dollar (USD), approximately 20%
compared to the rate used for 31 December 2013 accounting
purposes.
Whilst no adjustment to the accounts has been made to reflect
this devaluation, it is worth noting that the impact on the results
as at 31 December 2013 was an effective reduction in the Kazakhstan
corporate income tax (CIT) and mineral extraction tax (MET)
liability of approximately $1.9 million based on the revised
exchange rate offset by an effective reduction in the outstanding
VAT receivable balance of approximately $1 million.
At the Group level it is also worth noting that the devaluation
will impact on the net asset position of the Group in future
reporting periods. A devaluation impact on the net assets of $41.9
million denominated in KZT as at 31 December 2013 is 20% or $8.4
million.
Kounrad Transaction
Whilst the SUC Transaction remained outstanding at the year end,
the submission of all the relevant documentation for the transfer
to SK was submitted to the relevant authorities on 6 March
2014.
In March 2014 the parties to the Agreement recognised that an
amount of GBP848,470 had accrued under the original cash
entitlement, and that a further entitlement capped at GBP1.1
million could accrue to KR. The parties have also agreed to change
the longstop date from 31 March 2014 to 30 June 2014. The above
cash entitlements are only payable to KR upon the completion of the
Kounrad Transaction.
Whilst the SUC Transaction was not complete at 31 December 2013,
and will not be accounted for until such time as it is complete, it
is apparent from their inter-dependency that both transactions fall
under the scope of IFRS 3 (notes 2 and 20).
22. Related party transactions
The Group had the following related party balances and
transactions during the year ended 31 December 2013. Related
parties are those entities owned or controlled by the Company,
which is the ultimate controlling party of the Group.
Transactions between the Company and related parties:
Amounts receivable based on the Kounrad Transaction
31 Dec 13 31 Dec 12
$'000 $'000
-------------------- --------- ---------
CAML Kazakhstan BV
Current portion 30,000 -
Non-current portion 11,216 -
-------------------- --------- ---------
Total 41,216 -
-------------------- --------- ---------
On 21 October 2013, the transfer of the remaining 40% in Kounrad
Copper Company LLC was registered. The acquisition was registered
under the ownership of CAML Kazakhstan BV which is a 100%
controlled subsidiary of the Company. The agreed consideration for
the acquisition was 15,336,096 Ordinary Shares in the Company and
the value of the 2013 interim dividend associated with those
shares. The dollar equivalent of the consideration as at 21 October
2013 is $40,421,000, which is at year end USD/GBP closing rate
equates to $41,216,433.
Directors' Remuneration, EBT shares and options
Directors' remuneration, including Non-Executive Directors,
during the year was as follows:
2013 2013 2013 2013 2012
Basic salary/fees Annual Bonus Benefits in kind Total Total
Group $ $ $ $ $
------------------------ ----------------- ------------ ---------------- --------- ---------
Executive Directors:
Nick Clarke 406,695 406,695 5,527 818,917 1,005,663
Nigel Robinson 258,095 258,095 10,152 526,342 771,128
Howard Nicholson 258,095 258,095 3,641 519,831 878,788
Non-Executive Directors
Dr Michael Price 70,389 - 4,794 75,183 67,648
Nigel Hurst-Brown 70,389 - - 70,389 63,391
Robert Cathery 54,747 - - 54,747 47,544
Nurlan Zhakupov 54,747 20,000 - 74,747 47,544
Kenges Rakishev 5,214 - - 5,214 -
------------------------ ----------------- ------------ ---------------- --------- ---------
Directors' emoluments 1,178,371 942,885 24,114 2,145,370 2,881,706
------------------------ ----------------- ------------ ---------------- --------- ---------
The emoluments of the highest paid Director totalled $818,917 in
2013 (2012: $1,005,663). Details of the Directors' interests in the
Ordinary Shares of the Company are set out in the Governance Report
and below. No Director has a service agreement with the Company
that is terminable on more than 12 months' notice.
Directors' EBT share awards
As at 31 Dec As at 31 Dec
2013 2012
Number Number
--------------------------- ------------ ------------
CN Hurst-Brown 250,543 250,543
M A Price 300,543 300,543
N Clarke 1,342,887 1,342,887
H Nicholson 446,715 646,715
N Robinson 646,715 646,715
--------------------------- ------------ ------------
Total Directors' Interests 2,987,403 3,187,403
--------------------------- ------------ ------------
The above shares were awarded to the Directors of the Company as
part of the EBT incentive scheme. All the share awards were made
prior to the IPO and vested upon its successful completion.
Directors' Options awards
During 2013 the Company awarded the following New Scheme options
to the Directors of the Company.
24 Jul 13 08 May 12
Group Number Number
----------------- --------- ---------
Nick Clarke 110,403 219,298
Nigel Robinson 70,063 164,473
Howard Nicholson 70,063 164,473
Nurlan Zhakupov - 100,000
----------------- --------- ---------
Total 250,529 648,244
----------------- --------- ---------
Kounrad Transaction
Mr Kenges Rakishev (KR) will become a major shareholder of CAML
upon completion of the Kounrad Transaction. He was appointed to the
CAML Board on 9 December 2013. As a consequence, KR must be
considered a related party in any dealings he has with the
Group.
Whilst the SUC Transaction completes, KR has a 40% interest in
the licence associated with that operation. As far as the Group is
aware, the Group does not have any other dealings with companies
associated with KR. As part of the obligations on KR for completing
the Kounrad Transaction, he will be required to sign a relationship
agreement with CAML setting out the terms of the relationship
between KR and the Group.
As part of KR's business interests outside of the Kounrad
Transaction and his dealings with the Group, KR recently announced
the proposed acquisition of a 46.5% share in BTA Bank JSC. At the
same time as this announcement by KR, JSC Kazkommertsbank also
announced the proposed acquisition of a 46.5% interest in BTA Bank
JSC. The Group uses the facilities of JSC Kazkommertsbank within
Kazakhstan for normal day-to-day banking.
Other Related Parties
As at 31 December 2013, all the intercompany loans together with
all the outstanding interest receivable from both Sary Kazna LLP
and Kounrad Copper Company LLP had been fully repaid.
As at 31 December 2013, $10,315,600 of intercompany loans and
management fee receivable with the Mongolian subsidiaries had been
written off during the 12 month period as part of the Group
impairment testing (2012: $4,327,306) together with a further
$3,375,576 of interest receivable (2012: $428,935).
The Company also received interest income during the year of
$391,348 (2012: $2,836,988) and management fee income from Sary
Kazna LLP of $60,000 (2012: $60,000).
23. Deferred income tax
Group
The movements in the Group's deferred tax assets and liabilities
are as follows:
Group
-----------------------------------------------------------------
Currency Credited
At 1 January translation to income At 31 December
2013 Acquisition differences statement 2013
$'000 $'000 $'000 $'000 $'000
------------------------------------------------ ------------ ----------- ----------- --------- --------------
Other timing differences (272) (179) 11 66 (374)
Deferred tax liability on fair value adjustment - (9,278) - - (9,278)
Tax losses - - - - -
------------------------------------------------ ------------ ----------- ----------- --------- --------------
Deferred tax liability, net (272) (9,457) 11 66 (9,652)
------------------------------------------------ ------------ ----------- ----------- --------- --------------
Reflected in the balance sheet as:
Deferred tax assets - - - - -
Deferred tax liabilities (272) (9,457) 11 66 (9,652)
------------------------------------------------ ------------ ----------- ----------- --------- --------------
Deferred tax liability, net (272) (9,457) 11 66 (9,652)
------------------------------------------------ ------------ ----------- ----------- --------- --------------
A deferred tax liability of $9.3 million has been recognised in
respect of the Kounrad Copper Company LLP acquisition that occurred
in the year (2012: nil). The net assets of KCC were recognised in
the consolidated financial statements at their fair values at the
date of acquisition. The tax base of the individual assets and
liabilities remains the same as the pre- acquisition tax base as
the transaction is considered to be non-taxable. A taxable
temporary difference arises as a result of the acquisition of the
long term assets where the carrying amount is increased to fair
value at the date of acquisition but its tax base remains at
cost.
The deferred tax liability arising from this taxable temporary
difference is recognised in the consolidated financial statements
to reflect the future tax consequences of recovering the long term
assets recognised at fair value. The resulting deferred tax
liability affects goodwill.
Where the realisation of deferred tax assets is dependent on
future profits, the Group recognises losses carried forward and
other deferred tax assets only to the extent that the realisation
of the related tax benefit through future taxable profits is
probable.
The Group did not recognise other potential deferred tax assets
arising from losses of $4.5 million (2012: $2.1 million) as there
is insufficient evidence of future taxable profits. Unrecognised
losses can be carried forward indefinitely.
At 31 December 2013, the Group had other deferred tax assets of
$4.9 million (2012: $3.5 million) in respect of the exploration
assets pool, depreciation, share-based payments and other temporary
differences which had not been recognised because of insufficient
evidence of future taxable profits.
There are no significant unrecognised temporary differences
associated with undistributed profits of subsidiaries at 31
December 2013 and 2012, respectively.
Company
At 31 December 2013 and 2012 respectively, the Company had no
recognised deferred tax assets or liabilities.
At 31 December 2013, the Company had not recognised potential
deferred tax assets arising from losses of $2.2 million (2012: $1.1
million) as there is insufficient evidence of future taxable
profits. The losses can be carried forward indefinitely.
At 31 December 2013, the Company had other deferred tax assets
of $4.9 million (2012: $3.5 million) in respect of share-based
payments and other temporary differences which had not been
recognised because of insufficient evidence of future taxable
profits.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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