TIDMCAML
RNS Number : 5134M
Central Asia Metals PLC
17 September 2019
17 September 2019
Central Asia Metals plc
(the 'Group', the 'Company' or 'CAML')
Interim Results for the Six Months Ended 30 June 2019
Central Asia Metals plc (AIM: CAML) is pleased to announce its
unaudited interim results for the six months ended 30 June 2019
('H1 2019' or the 'Period').
Financial summary
-- H1 2019 dividend of 6.5 pence per share (H1 2018: 6.5 pence)
-- Group gross revenue1 of $89.9 million (H1 2018: $102.4 million)
-- Sasa C1 zinc equivalent cash cost2 of $0.47 per pound (H1 2018: $0.44 per pound)
-- Kounrad C1 copper cash cost2 of $0.51 per pound (H1 2018: $0.53 per pound)
-- Group EBITDA1 of $56.7 million (H1 2018: $64.6 million), a margin of 63% (H1 2018: 63%)
-- Profit before tax of $35.5 million (H1 2018: $38.4 million)
-- EPS from continuing operations of 15.42 cents per share (H1 2018: 16.37 cents per share)
-- Group cash balance as at 30 June 2019 of $30.2 million3 (31 December 2018: $39.0 million)
-- H1 2019 debt repayments of $19.2 million
-- Group net debt1 as at 30 June 2019 of $100.4 million (31 December 2018: $110.3 million)
-- Free cash flow1 of $35.5 million (H1 2018: $32.4 million)
Operational summary
-- H1 2019, one lost time injury ('LTI') at Sasa (H1 2018: four)
o H1 2019 lost time injury frequency rate ('LTIFR') of 0.89 (H1
2018: 3.78)
-- Sasa zinc in concentrate production of 11,517 tonnes (H1 2018: 11,020 tonnes)
o Payable zinc sales of 9,708 tonnes (H1 2018: 9,256 tonnes)
-- Sasa lead in concentrate production of 14,357 tonnes (H1 2018: 14,386 tonnes)
o Payable lead sales of 13,731 tonnes (H1 2018: 13,701
tonnes)
-- Kounrad copper production of 6,594 tonnes (H1 2018: 6,747 tonnes)
o Copper sales of 6,461 tonnes (H1 2018: 6,044 tonnes)
Outlook
-- On course to achieve 2019 base metal production guidance of:
o 12,500 - 13,500 tonnes of copper
o 22,000 - 24,000 tonnes of zinc
o 28,000 - 30,000 tonnes of lead
[1] Gross revenue, EBITDA, net debt and free cash flow are
non-IFRS financial measures and are explained in the financial
review section
2 C1 cash costs are explained in the financial review section
3 The cash balance figure disclosed includes restricted cash balance
Nigel Robinson, Chief Executive Officer, commented:
"We have today released a strong set of financial results,
reflecting our reliable metal output and demonstrating that we have
maintained our low costs of production. We were pleased to have
sustained the EBITDA margin of 63% and to have generated an
increased free cash flow of 10% period on period.
"Despite a period of weak commodity prices leading to a 12%
reduction in revenue when compared to H1 2018, we have delivered
earnings per share ('EPS') of 15.42 cents, only 6% lower than the
previous corresponding period.
"We are today announcing a 6.5 pence interim dividend, which
represents 40% of our H1 2019 free cash flow. During H1 2019, we
have also added value for shareholders in repaying over $19 million
of our borrowings, ending the period with net debt of $100.4
million.
"While our business development activities have continued during
H1 2019, we aim to strike the right balance for our shareholders in
terms of capital allocation. Therefore, deleveraging and continuing
to pay the sector leading dividends, for which we have become
known, is a priority."
Analyst conference call
There will be an analyst conference call on Tuesday 17 September
2019 at 09:30 (BST) at the offices of Peel Hunt. The call can be
accessed by dialling 0808 109 0700 and quoting the confirmation
code 'CAML Interim Results'. Additionally, the presentation can be
viewed via a live webcast using the following link
https://webcasting.brrmedia.co.uk/broadcast/5d726e14276017390800a3bc.
The webcast and the Company's corporate presentation will be
available on the CAML website at www.centralasiametals.com.
For further information contact:
Central Asia Metals Tel: +44 (0) 20 7898 9001
Nigel Robinson, CEO
Gavin Ferrar, CFO
Louise Wrathall, Investor Relations louise.wrathall@centralasiametals.com
Peel Hunt (Nominated Advisor and Tel: +44 (0) 20 7418 8900
Joint Broker)
Ross Allister
James Bavister
David McKeown
BMO Capital Markets (Joint Broker) Tel: +44 (0) 20 7236 1010
Jeff Couch
Thomas Rider
Neil Elliot
Blytheweigh (PR Advisors) Tel: +44 (0) 20 7138 3204
Tim Blythe
Camilla Horsfall
Megan Ray
Note to editors:
Central Asia Metals, an AIM-listed UK company based in London,
owns 100% of the Kounrad SX-EW copper project in central Kazakhstan
and the Sasa zinc-lead mine in North Macedonia.
For further information, please visit www.centralasiametals.com
and follow CAML on https://twitter.com/CamlMetals
Chief Executive Officer Review
The CAML Board of Directors is pleased to declare an interim
dividend of 6.5 pence per ordinary share, which is in line with the
Company's stated policy and consistent with the previous
corresponding period. This will be paid on 25 October 2019 to
shareholders registered on 4 October 2019.
From an operational perspective, the first six months of 2019
have been very positive for CAML, with zinc and lead production
from Sasa in North Macedonia and copper production from Kounrad, in
Kazakhstan, on track to meet the Company's full year guidance.
Zinc and lead production at Sasa were 11,517 tonnes and 14,357
tonnes, respectively. Payable zinc sales for the period were 9,708
tonnes, and for lead were 13,731 tonnes, and H1 2019 gross revenue
from these metal concentrates was $49.9 million. This was 19% lower
than H1 2018 due to significantly lower commodity prices during the
recent period, with the zinc price received being on average 18%
lower than the previous corresponding period and the lead price 22%
lower. Sasa's costs of production are low by industry standards at
$0.47 per pound of zinc and this resulted in a Sasa H1 2019 EBITDA
of $31.7 million.
Kounrad produced 6,594 tonnes of copper cathode during the
period and sold 6,461 tonnes, generating gross revenue of $39.9
million from an average copper price received of $6,191 per tonne,
7% lower than that received in H1 2018. With a C1 cost of copper
production that is amongst the lowest in the world at $0.51 per
pound, Kounrad generated EBITDA of $28.7 million.
H1 2019 CAML Group EBITDA was $56.7 million. While this result
was 12% below that of H1 2018 due to weak commodity prices, the
margin of 63% was maintained, reflecting lower Kounrad and
corporate costs and well controlled Sasa costs. EPS of 15.42 pence
was only 6% below the previous corresponding period. Importantly,
the company generated $35.5 million of free cash flow, some 10%
higher than that generated in H1 2018.
While the CAML Board appreciates that workplace injuries are
never acceptable, mines are inherently challenging environments in
which to operate, and the Directors were encouraged that the number
of LTIs recorded for H1 2019 reduced to one from four when compared
to H1 2018. The underground operator injured at Sasa has now fully
recovered and returned to work. CAML's H1 2019 LTIFR is 0.89 and
its total recordable injury frequency rate ('TRIFR') is 1.78 which
is an improvement on the previous corresponding period.
CAML has spent $0.1 million in social contributions at Sasa and
has funded the Kounrad Foundation with a total of $0.2 million, of
which $0.1 million has been spent during the first six months of
the year. The Company continues to support many worthy causes close
to both operations, with particular emphasis on support for
children, education and sporting initiatives. In particular, the
new facilities purchased by the Kounrad Foundation for the Kind
Heart Centre for disabled children in Balkhash, Kazakhstan, were
renovated and an official opening ceremony held in April 2019.
Business development activities have continued during the period
with 17 opportunities screened, six non-disclosure agreements
signed, and two site visits undertaken. Reflecting the
opportunities recently reviewed, and cognisant of current market
sentiment, the Group is not currently in any advanced discussions
in this regard.
While the long-term outlook for the base metals produced is
compelling, there may continue to be short term weakness in
commodity prices given current global uncertainties. While this has
undoubtedly affected the Company's market valuation, CAML remains
in a strong position in the short and long term due to its
long-life assets, low production costs and ability to generate
significant free cash flow. This underscores CAML's continued
ability to deleverage and pay sector leading dividends, while
appraising projects which could add value for shareholders in the
future.
Operational Review
Sasa
Operations
Production
Sasa delivered a strong production performance during H1 2019
and is on track to meet its 2019 zinc and lead production guidance
of between 22,000 and 24,000 tonnes of zinc and between 28,000 and
30,000 tonnes of lead.
In H1 2019, total ore mined was 400,251 tonnes and ore processed
was 404,540 tonnes. The average mill head grades for H1 2019 were
3.28% for zinc and 3.76% for lead. The average H1 2019
metallurgical recoveries were 86.7% for zinc and 94.4% for
lead.
These recovery results represent a marked improvement for both
zinc and lead. For zinc, the stirred media detritor ('SMD') mill
that was installed in Q2 2018 has been modified and is now
delivering broadly consistent recovery results and, in addition, a
lead re-grind mill has been included in the circuit, which has
aided the rejection of zinc from the lead circuit.
Sasa produces a zinc concentrate and a separate lead concentrate
that contains silver. Total H1 2019 production was 23,306 tonnes of
zinc concentrate at an average grade of 49.4% and 19,720 tonnes of
lead concentrate at an average grade of 72.8%.
Sasa typically receives from smelters approximately 84% of the
value of its zinc in concentrate and approximately 95% of the value
of its lead in concentrate. Accordingly, H1 2019 payable production
of zinc was 9,652 tonnes and of lead was 13,639 tonnes. Given that
deliveries from Sasa to the smelters occur on a regular basis,
payable base metal in concentrate sales for the six-month period
were similar at 9,708 tonnes of zinc and 13,731 tonnes of lead.
During H1 2019, Sasa delivered 169,623 ounces of payable silver
to Osisko Gold Royalties, in accordance with its streaming
agreement.
Units H1 2019 H1 2018
Ore mined t 400,251 390,932
--------- -------- --------
Plant feed t 404,540 393,605
--------- -------- --------
Zinc grade % 3.28 3.34
--------- -------- --------
Zinc recovery % 86.7 83.8
--------- -------- --------
Lead grade % 3.76 3.91
--------- -------- --------
Lead recovery % 94.4 93.5
--------- -------- --------
Zinc concentrate t (dry) 23,306 22,624
--------- -------- --------
- Grade % 49.4 48.7
--------- -------- --------
- Contained zinc t 11,517 11,020
--------- -------- --------
Lead concentrate t (dry) 19,720 19,712
--------- -------- --------
- Grade % 72.8 73.0
--------- -------- --------
- Contained lead t 14,357 14,386
--------- -------- --------
Tailings
During H1 2019, construction of Tailings Storage Facility 4
('TSF4') continued, with the construction of the dam materially
completed during the period. Post the period end, lining of the
facility was completed, which was a requirement of the North
Macedonian authorities. Commissioning of the facility is expected
during Q4 2019.
In February 2019, CAML instructed Golder Associates, global
tailings dam experts, to perform a review of the current Sasa
tailings storage facility 3.2 ('TSF3.2'). This work concluded that
there are no high-risk areas, and that the dam is unlikely to fail
due to liquefaction, a common cause of tailings dam failure, as the
cycloned material is not saturated. Other risks, which are typical
of similar tailings facilities, are being effectively managed by
the Sasa team. The dam is of 'downstream' construction, which is
widely viewed as the safest design.
During H1 2019, the Church of England Pensions Board sent
letters to many mining companies requesting information on tailings
storage facilities following the January 2019 Brumadinho disaster
in Brazil. CAML has fully complied with this disclosure request,
which can be found at
https://www.centralasiametals.com/corporate-social-responsibility/tailings.
Sasa's future
In 2018, Sasa initiated a 'Life of Mine Study', in order to
review current mining practices and identify opportunities. In
particular, the study has been focussing on the optimisation of
metal production through consideration of alternative mining
methods, processing technologies and modern safe working practices.
The study is scheduled for completion at the end of 2019.
In order to ascertain the most appropriate approach to mining
and processing, including the potential to increase production, a
review of current and historical extraction and mining practices
has been undertaken.
During H1 2019, the operations team has been focussed on
improving mine planning, including updating 2D paper and
spreadsheet-based systems with 3D design and scheduling according
to international best practice. As part of this work, geotechnical
mapping and rock mass characterisation is being revisited,
including updating of ground support standards and the introduction
of more effective support systems such as cable bolts and wet mix
shotcrete.
While studies have been underway, positive changes already
implemented or agreed underground include:
-- Remote control loader units have been purchased and will be commissioned in Q4 2019
-- Explosive cartridge loaders have been introduced
-- Telescopic jumbo feeds have been introduced for in-cycle support installation
-- Underground drainage has been reviewed and additional pumps ordered
-- Optimised side loading has been introduced
In addition, 3D geological modelling using Leapfrog software has
also been introduced on site. Post the period end, an experienced
Group geologist has been hired, who will assist with geology as and
where required at Kounrad and for business development, but whose
primary responsibility will be at Sasa.
Independent ventilation studies have also been undertaken, to
ensure optimal solutions for moving to deeper areas of the mine in
the future, plus potentially increasing production. Going forward,
ventilation will also be modelled in 3D software.
In terms of metallurgy, CAML has, in H1 2019, instigated some
new initiatives on site. The purchase of a new tertiary crusher at
a capital cost of approximately $0.6 million has been approved,
which will generate a finer grained product from the crushing
circuit and should therefore allow for increased throughput
capacity.
A study is underway into the viability for Sasa producing dry
stack tailings in the future. This is in part related to good
industry practice from a safety and environmental perspective, but
also due to the longer-term downstream constraints on Sasa's
tailings disposal post c.2026.
In H1 2019, Sasa's metallurgical laboratory has been
significantly modernised, enabling opportunities within the
processing plant to be better evaluated. Throughout 2018 and 2019,
Sasa has employed new processing operators and engineers in order
to fulfil operational objectives and also with the aim of further
improving metallurgical recoveries.
Sustainability
Health and safety
The Directors are disappointed to report that there was one lost
time injury at Sasa during H1 2019. This has resulted in a LTIFR at
Sasa for the reported period of 1.42. The lost time injury occurred
in January 2019 and involved an employee sustaining bruising to his
chest due to an incident with an underground machine. He has now
fully recovered and is back at work.
Sasa's TRIFR for H1 2019 was 2.83, representing two incidents.
The other reportable medical treatment incident ('MTI') in addition
to the LTI was a miner with an injured leg. No occupational health
issues were identified during H1 2019.
There have been many positive recent health and safety
initiatives at Sasa during H1 2019. A fully equipped mine rescue
team comprising 29 underground employees has been re-formed and a
rescue centre constructed. During the period, the team has been
trained internally by the Group Health and Safety Manager and, post
H1 2019, nine of the team members have been trained externally by a
mine rescue specialist, with plans in place to train the remaining
members during H2 2019.
New underground self-rescuers have been purchased to replace in
full the old equipment, and employees have been trained to use
them. A review of the emergency underground procedures identified
that the mine required six underground refuge chambers, and to date
two of these have been constructed and are currently being
commissioned.
Environment
During Q1 2019, Sasa had an external audit to check its
adherence to ISO 14001 (an international standard for environmental
management systems) and had an external state inspection. The
results of both were that the site was in full compliance, and only
a small number of recommendations for improvements were made, with
all but one minor suggestion actioned within Q2 2019.
During H1 2019, the Sasa team began to use water from the 830
level adit in the processing facilities, which would otherwise
drain into the rivers downstream of the mine. This has meant that a
reduced volume of water is extracted from the rivers and streams in
the catchment area.
In June 2019, Sasa planted 30 trees at the Sasa site to
celebrate World Environment Day, with employees and pupils from the
local senior school also participating.
Social development
The Sasa team started the New Year with a community stakeholder
meeting to ascertain the needs of the community and to receive
requests for funding. Projects are then internally reviewed and the
most appropriate prioritised. One of the key H1 2019 community
projects was to install a modern heating system in the local health
centre which has previously relied upon portable electric
heaters.
During H1 2019, a training centre has been renovated. The
purpose of this building is to train to Sasa standards qualified
electrical and mechanical engineers in a three-month training
programme.
The North Macedonian state will support these adult students
through their programme, while Sasa is responsible for the building
and providing the training team. The mine is then obliged to hire a
minimum of 50% of the trainees.
Kounrad
Operations
CAML is pleased to report a period of strong operational
performance at Kounrad, with copper cathode production of 6,594
tonnes for the first six months of 2019 (H1 2018: 6,747 tonnes).
The Company is on course to achieve its full year 2019 copper
production guidance of between 12,500 tonnes and 13,500 tonnes.
During the period, leaching was undertaken on both the Eastern
Dumps and Western Dumps, with 4,738 tonnes of copper, equating to
approximately 70% of the amount plated, having been leached from
the Western Dumps.
During the period, irrigation rates to the dumps were closely
controlled and kept at optimum rates of below the limit of three
litres per square metre per hour (l/m(2) /hr) as this application
rate has been demonstrated to result in optimum leaching rates of
the dump materials. As the mineralogy of the Western Dumps contains
more sulphide mineralisation (primarily pyrites and chalcopyrite),
there has been an increase in the soluble iron content of the
pregnant leach solution ('PLS') entering the solvent extraction
('SX') plant. However, the quality of cathode produced remains
excellent, at a purity level of 99.998% and continues to meet the
requirements of CAML's customers.
Copper sales during H1 2019 were 6,461 tonnes (H1 2018: 6,044
tonnes) and 160 tonnes (H1 2018: 763 tonnes) were in stock as at 30
June 2018. The cathode was sold predominantly to CAML's offtake
partner, Traxys.
During Q1 2019, both of the electrowinning ('EW') tank houses
were cleaned of accumulated sludge, which is now an annual standard
procedure which has been shown to maintain plant efficiency and the
quality of the cathodes. Taking into account a 12-hour planned
maintenance shutdown to prepare for the summer production ramp-up,
utilisation during H1 2019 was excellent at 99.6%.
During H1 2019, capital projects, which were on schedule and
within budget, were mainly related to only modest maintenance of
existing facilities. The two main activities were renewal of floor
protection in the EW sections and a 1.2 kilometre extension of the
interceptor trench around Dump 21 at the Western Dumps area.
During the period, a decision was taken to modify the diameter
of a two kilometre section of the pipeline running between the
Western Dumps and the processing facility, which should result in
an increased flow rate capacity from 750 cubic metres per hour
('m(3) /hr') to 1,000m(3) /hr. This work should be completed during
2020. This is being undertaken to off-set the expected reduction in
PLS grades in the medium term.
Sustainability
Health and safety
CAML is pleased to report zero lost time injuries at Kounrad
during H1 2019. This compares to two LTIs which occurred during H1
2018. Kounrad's H1 2019 LTIRF is therefore zero, and its TRIFR is
also zero. There have now been 409 days since Kounrad's last LTI.
No occupational health issues were identified during H1 2019.
Environment
During the reported period, there were no environmental
inspections. Environmental activities undertaken were routine, and
the monitoring network of boreholes was extended further around the
initial leaching area ('ILA'), moving north around the Western
Dumps as leaching activities progress.
Social development
Since setting up the Kounrad Foundation, which became
operational in early 2018, CAML has continued to support the many
worthy causes in the local village, Kounrad, and local town,
Balkhash, through this charity structure. CAML funds the foundation
with 0.25% of its Kounrad revenue annually, which equates to
approximately $0.2 million. During H1 2019, $0.1 million was spent
by the foundation.
The largest donation that the Kounrad Foundation has made to
date is that of the purchase and refurbishment of a building used
to house the Kind Heart Centre for disabled children in Balkhash.
The opening ceremony was on 3 April 2019 and was attended by the
senior Kounrad team and by CAML CEO, Nigel Robinson. H1 2019 spend
on the Kind Heart Centre was $0.1 million. The Kounrad Foundation
has also committed to develop a garden and outdoor play area for
this centre, which has been completed post the period end in H2
2019.
During H1 2019, the Kounrad Foundation has also supported the
local 'Crisis Centre', which provides refuge for women and children
that are in need of a temporary home, and is currently evaluating
the possibility of increasing support for this worthy cause in the
future.
In May 2019, Kounrad hosted a site visit for children attending
the local Kounrad schools, where they learned how copper is
produced from CAML's facilities. Educational items such as
whiteboards and project equipment were purchased for the Balkhash
boarding school.
Financial Review
Overview
CAML is pleased to report a strong set of financial results,
which demonstrate consistent operational performance and effective
cost control. However, the results also reflect a period of
relatively weak commodity prices, with gross revenue and EBITDA
lower than the previous corresponding period.
The Group generated H1 2019 EBITDA of $56.7 million (H1 2018:
$64.6 million), representing a decrease of 12% from the prior
corresponding period due to the decline in commodity prices. The
EBITDA margin however remained stable at 63% (H1 2018: 63%), which
reflects the Group's ability to maintain low costs across the
operations as well as a reduction in corporate administrative
expenses. Sasa EBITDA was $31.7 million (H1 2018: $41.7 million),
with a margin of 63% (H1 2018: 67%) and Kounrad EBITDA was $28.7
million (H1 2018: $29.2 million), with a margin of 72% (H1 2018:
72%).
Income statement
Group profit before tax from continuing operations decreased by
8% to $35.5 million (H1 2018: $38.4 million). This was primarily as
a result of decreased revenue due to falling commodity prices as
low costs of production were maintained. Earnings per share from
continuing operations decreased by 6% to 15.42 cents (H1 2018:
16.37 cents).
Revenue
CAML generated H1 2019 gross revenue of $89.9 million (H1 2018:
$102.4 million), which is reported after deduction of treatment
charges, but before deductions of off-taker's fees, smelter
adjustments, silver purchases for the silver stream and
freight.
Net revenue after these deductions was $84.7 million (H1 2018:
$96.6 million). During H1 2019, the off-taker's fee for Kounrad was
$1.1 million (H1 2018: $1.1 million) and for Sasa the fee was $0.6
million (H1 2018: $0.7 million).
Sasa
Sasa typically receives from smelters approximately 84% of the
value of its zinc in concentrate and approximately 95% of the value
of its lead in concentrate. Operationally, Sasa performed strongly
with a total of 9,708 tonnes (H1 2018: 9,256 tonnes) of payable
zinc in concentrate and 13,731 tonnes (H1 2018: 13,701 tonnes) of
payable lead in concentrate sold during H1 2019.
The zinc price achieved declined by 18% to an average of $2,676
per tonne (H1 2018: $3,256 per tonne) and, for lead, the price
declined by 22% to an average of $1,930 per tonne (H1 2018: $2,478
per tonne), leading to a reduction in gross revenue generated from
the mine. Revenue also declined due to higher treatment charges
during the period of $6.2 million (H1 2018: $4.7 million), which
reflects the change in market conditions for zinc concentrates in
particular. Sasa generated H1 2019 gross revenue of $49.9 million
(H1 2018: $61.9 million).
Zinc and lead concentrate sales agreements have been arranged
with Traxys through to 31 December 2022 for 100% of Sasa
production. Sasa has an existing silver streaming agreement with
Osisko Gold Royalties whereby Sasa receives approximately $5 per
ounce from its silver production for the life of the mine.
Kounrad
A total of 6,125 tonnes (H1 2018: 5,972 tonnes) of copper
cathode from Kounrad were sold to metals trader, Traxys, for which
the sales agreement has been fixed through to October 2022. The
commitment is for a minimum of 95% of Kounrad's annual production.
A further 336 tonnes (H1 2018: 72 tonnes) were sold locally. Total
Kounrad copper sales were 6,461 tonnes (H1 2018: 6,044 tonnes),
representing a 7% increase in sales volumes. This was due to
logistical issues during H1 2018 resulting in 763 tonnes being held
in inventory, whereas stocks at the end of H1 2019 were 160
tonnes.
While copper cathode sales volumes increased when compared to H1
2018, revenue declined due to a 7% decrease in the average copper
price received, which was $6,191 per tonne in H1 2019 (H1 2018:
$6,672 per tonne). This generated gross revenue for Kounrad of
$39.9 million (H1 2018: $40.5 million).
Cost of sales
Group cost of sales for the period was $36.0 million (H1 2018:
$38.0 million), which has decreased primarily due to a lower
depreciation and amortisation charge for the Group totalling $15.3
million (H1 2018: $17.3 million). This has reduced as a result of
certain assets being fully depreciated at the end of last year.
Sasa
Sasa's cost of sales for the period was lower than the previous
corresponding period at $25.4 million (H1 2018: $27.0 million).
These costs reflect a lower depreciation and amortisation charge as
explained above of $12.3 million (H1 2018: $13.2 million), and
lower concession fees amounting to $1.3 million (H1 2018: $1.5
million). This tax is calculated at the rate of 2% on the value of
metal recovered during the period.
Certain production related costs have increased compared to H1
2018, such as an increase in payroll costs of $0.5 million due to
an agreed average 5% pay-rise for employees.
Kounrad
Kounrad's H1 2019 cost of sales was $10.6 million (H1 2018:
$11.0 million) which is lower than H1 2018. This decrease was
primarily due to a weaker Kazakhstan Tenge, which averaged 379
KZT/USD during H1 2019 (H1 2018: 326 KZT/USD). Tenge denominated
costs such as payroll and electricity reduced by around $0.6
million, while additional costs were incurred for increased
reagents such as Escaid, and increased coal consumption due to a
colder than usual Q2. Kounrad also agreed an average pay rise of 6%
for its employees, which equated to an increase of $0.4 million
versus the previous corresponding period.
C1 cash cost of production
C1 cash cost of production is a standard metric used in the
mining industry to allow comparison across the sector. In line with
the Wood Mackenzie approach, CAML calculates C1 cash cost by
including all direct costs of production at Kounrad and Sasa
(reagents, power, production labour and materials, as well as
realisation charges such as freight and treatment charges) in
addition to local administrative expenses. Royalties, depreciation
and amortisation charges are excluded from C1 cash cost.
H1 2019 H1 2018
Sasa zinc equivalent C1 cash cost
($/lb) 0.47 0.44
-------- --------
Kounrad copper C1 cash cost ($/lb) 0.51 0.53
-------- --------
Cu equivalent production (t) 15,072 16,041
-------- --------
Group Cu equivalent C1 cost ($/lb) 0.90 0.79
-------- --------
Fully inclusive Cu equivalent cost
of production ($/lb) 1.44 1.51
-------- --------
Sasa
Sasa's C1 zinc equivalent cash cost of production for H1 2019
was $0.47 per pound (H1 2018: $0.44 per pound), which is at the
lower end of the second quartile of the zinc industry cost curve.
The reason for the $0.03 per pound increase was primarily due to
the increased zinc treatment charges for H1 2019 otherwise the C1
cash costs have remained static which reflects the Company's
ability to control costs in production. This is reflected in
on-site costs that amount to $35.4 per tonne (H1 2018: $35.2 per
tonne)
Kounrad
Kounrad's C1 cash cost of production remains firmly in the
lowest quartile of the copper industry cost curve at $0.51 per
pound (H1 2018: $0.53 per pound) and is lower than the previous
corresponding period. The decrease in C1 cash cost is largely due
to tight cost control and as a result of the devaluation of the
Kazakhstan Tenge.
Group
CAML reports its C1 cash cost on a copper equivalent basis,
incorporating the production costs at Sasa. The H1 2019 C1 copper
equivalent cash cost was $0.90 per pound (H1 2018: $0.79 per
pound). This is a significant increase against the comparative
period with an additional $0.07 per pound from the decrease in zinc
and lead commodity prices reducing the copper equivalent tonnes in
the calculation and $0.03 per pound due to the increased treatment
charges of zinc. This number is calculated based on Sasa's H1 2019
zinc and lead payable production, which equates to 8,478 copper
equivalent tonnes (H1 2018: 9,294 copper equivalent tonnes) added
to Kounrad's H1 2019 copper production of 6,594 tonnes (H1 2018:
6,747 tonnes).
In addition to the C1 cash cost of copper equivalent production,
CAML also reports a fully inclusive cost that includes capital
expenditure, local taxes including Mineral Extraction Tax ('MET')
and concession fees, interest on loans and corporate overheads
associated with the Kounrad and Sasa projects. The Group's fully
inclusive copper equivalent unit cost for the period reduced to
$1.44 per pound (H1 2018: $1.51 per pound), due primarily to lower
capital expenditure of $5.2 million (H1 2018: $8.2 million).
Administrative expenses
During the period, administrative expenses were significantly
lower at $7.3 million (H1 2018: $11.2 million), largely due to a
reduced share-based payment charge of only $0.5 million (H1 2018:
$3.1 million). Terms and conditions have been amended in relation
to the Company's Share Option Schemes, resulting in a change in the
vesting date, plus there was a one-off issue awarded upon the
successful acquisition of Sasa, which vested on issue amounting to
$1.9 million in the previous corresponding period.
Balance sheet
During the period, there were additions to property, plant and
equipment of $5.2 million (H1 2018: $8.2 million). The additions
were a combination of $0.6 million (H1 2018: $1.0 million) Kounrad
sustaining capital expenditure, $2.7 million (H1 2018: $3.3
million) Sasa sustaining capital expenditure and costs associated
with the construction of TSF4, amounting to $1.1 million (H1 2018:
$3.9 million). Due to a change in accounting policy following the
adoption of IFRS 16 Leases, a further $0.8 million has been
capitalised in respect of finance leases. See note 3 for
details.
As at 30 June 2019, current trade and other receivables were
$8.2 million (31 December 2018: $10.1 million), which includes the
off-take sales receivable. Non-current trade and other receivables
relating to VAT recoverable in Kazakhstan were $2.7 million (31
December 2018: $2.1 million). Current trade and other payables were
$10.9 million (31 December 2018: $20.9 million). This significant
decrease primarily reflects the fact that the comparative period
included a $6.5 million payable in relation to the Sasa acquisition
(the 'deferred consideration') which has now been settled.
As at 30 June 2019, non-current and current borrowings were
$88.0 million (31 December 2018: $106.5 million) and $38.4 million
(31 December 2018: $38.4 million) respectively. The borrowings were
consolidated into one loan facility with Traxys in December 2018
and require monthly principal repayments of $3.2 million. During
the period, debt repayments of $19.2 million were made, plus
interest paid totalling $5.2 million (H1 2018: $6.1 million). More
details are included in the notes to the condensed consolidated
financial information.
Cash flows
The strong operational performance of both Kounrad and Sasa
resulted in robust cash flows for the Group during the period, with
net cash generated from operating activities of $40.0 million (H1
2018: $40.8 million).
Taking into account capital expenditure, CAML's free cash flow
for H1 2019 was $35.5 million. (H1 2018: $32.4 million)
During the period, $18.2 million (H1 2018: $24.7 million) was
returned to shareholders as the final 2018 dividend.
Sasa
$4.1 million (H1 2018: $6.3 million) of North Macedonia
corporate income tax was paid during the period. Payments made
during H1 2019 included $2.1 million (H1 2018: $1.8 million)
towards the 2019 corporate income tax liability and $2.0 million
(H1 2018: $4.5 million) of 2018 corporate income tax paid in April
2019.
Kounrad
$6.8 million (H1 2018: $7.4 million) of Kazakhstan corporate
income tax was paid during the period. Payments made during H1 2019
include $5.8 million (H1 2018: $6.1 million) towards the 2019
corporate income tax liability and $1.0 million (H1 2018: $1.3
million) of 2018 corporate income tax paid in April 2019.
Debt
During the period $19.2 million (H1 2018: $18.2 million) of
Group debt was repaid. The debt is subject to financial covenants
which include the monitoring of gearing and leverage ratios which
have been complied with.
Dividend
The Company's dividend policy is to return to shareholders a
target range of between 30% and 50% of free cash flow, defined as
net cash generated from operating activities less capital
expenditure. The dividends will only be paid provided there is
sufficient cash remaining in the Group to meet the ongoing
contractual debt repayments and that banking covenants are not
breached.
The final dividend for the year ended 31 December 2018 of 8
pence per ordinary share was paid to shareholders on 20 May 2019
amounting to $18.2 million (H1 2018: $24.7 million).
In conjunction with CAML's H1 2019 results, the CAML Board has
declared an interim dividend for the period of 6.5 pence per
ordinary share (H1 2018: 6.5 pence) in line with this policy. This
will be paid on 25 October 2019 to shareholders registered on 4
October 2019. This latest dividend will increase the amount
returned to shareholders in dividends and share buy-backs since the
2010 IPO to $176.4 million.
Tax settlement
In April 2019, a settlement agreement with the previous owners
of CMK Resources Limited was finalised in respect of the $5.9
million withholding tax liability in North Macedonia paid in the
prior year. The liability related to activities of CMK Europe prior
to CAML's ownership. The settlement amounted to $5.5 million and
accordingly, during H1 2019, CAML paid the balancing $6.5 million
due in respect of the $12.0 million deferred consideration owed to
the previous owners.
Non-IFRS financial measures
The following non-IFRS alternative performance financial
measures are used in this report:
EBITDA
EBITDA is a valuable indicator of the Group's ability to
generate liquidity and is frequently used by investors and analysts
for valuation purposes. It is also a non-IFRS financial measure
which is reconciled as follows:
Six months ended
30-Jun-19 30-Jun-18
$'000 $'000
--------------------------------------------- --------- ---------
Profit for the period 27,558 28,406
--------------------------------------------- --------- ---------
Plus/(less):
Income tax expense 8,202 9,609
Depreciation and amortisation 15,320 17,257
Foreign exchange loss 12 2,948
Other income (151) (109)
Finance income (159) (114)
Finance costs 6,208 6,259
(Profit) / loss from discontinued operations (272) 392
EBITDA 56,718 64,648
--------------------------------------------- --------- ---------
Gross revenue
Gross revenue is presented as the total revenue received from
sales of all commodities after deducting the directly attributable
treatment charges associated for the sale of zinc, lead and silver.
This figure is presented as it reflects the total revenue we have
received in respect of the zinc and lead concentrate.
Net debt
Net debt is calculated as the total of the borrowings held with
Traxys Europe S.A. less the cash and cash equivalents held at the
end of the period. This balance does not include the restricted
cash balance held:
30-Jun- 31-Dec-18
19
$'000 $'000
-------------------------- -------- ---------
Borrowings 126,360 144,949
Cash and cash equivalents (25,998) (34,649)
Net debt 100,362 110,300
-------------------------- -------- ---------
Free cash flow
Free cash flow is a non-IFRS financial measure of the cash from
operations less the capital expenditure and is presented as it is a
key figure for the dividend policy of the Group and is calculated
as follows:
Six months ended
30-Jun-19 30-Jun-18
$'000 $'000
------------------------------------------------ --------- ---------
Net cash generated from operations 39,955 40,833
Less: Purchase of property, plant and equipment (4,437) (8,234)
Less: Purchase of intangible assets (18) (202)
Free cash flow 35,500 32,397
------------------------------------------------ --------- ---------
Directors' Responsibility Statement
The Directors confirm that, to the best of their knowledge, the
interim financial information has been prepared in accordance with
IAS 34 "Interim Financial Reporting" as adopted by the European
Union and the AIM Rules for Companies, and that the interim results
include a fair review of the information required.
On behalf of the Board
Gavin Ferrar
Chief Financial Officer
17 September 2019
Independent review report to Central Asia Metals plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Central Asia Metals plc's condensed
consolidated interim financial statements (the "interim financial
statements") in the Interim Results of Central Asia Metals plc for
the 6 month period ended 30 June 2019 (the 'Interim Results').
Based on our review, nothing has come to our attention that causes
us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the AIM Rules for
Companies.
What we have reviewed
The interim financial statements comprise:
-- the condensed consolidated interim balance sheet as at 30 June 2019;
-- the condensed consolidated interim income statement and
condensed consolidated interim statement of comprehensive income
for the period then ended;
-- the condensed consolidated interim statement of cash flows for the period then ended;
-- the condensed consolidated interim statement of changes in
equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim Results
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the AIM Rules for Companies.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Interim Results, including the interim financial statements,
are the responsibility of, and have been approved by, the
directors. The directors are responsible for preparing the Interim
Results in accordance with the AIM Rules for Companies which
require that the financial information must be presented and
prepared in a form consistent with that which will be adopted in
the company's annual financial statements.
Our responsibility is to express a conclusion on the interim
financial statements in the Interim Results based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the AIM
Rules for Companies and for no other purpose. We do not, in giving
this conclusion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior
consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Interim
Results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
17 September 2019
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT (unaudited)
for the six months period ended 30 June 2019
Six months ended
30-Jun-19 30-Jun-18
Note $'000 $'000
------------------------------------------------- ---- ------------ ------------
Continuing operations
Revenue 84,682 96,598
------------------------------------------------- ---- ------------ ------------
Presented as:
Gross revenue 89,881 102,412
Less: Off-take buyer's fees (1,685) (1,826)
Distribution and selling costs (882) (929)
Silver stream purchases (2,632) (3,059)
------------------------------------------------- ---- ------------ ------------
Revenue 84,682 96,598
------------------------------------------------- ---- ------------ ------------
Cost of sales (36,028) (38,039)
------------------------------------------------- ---- ------------ ------------
Gross profit 48,654 58,559
------------------------------------------------- ---- ------------ ------------
Administrative expenses (7,256) (11,168)
Other income 151 109
Foreign exchange loss (12) (2,948)
Operating profit 41,537 44,552
------------------------------------------------- ---- ------------ ------------
Finance income 159 114
Finance costs (6,208) (6,259)
Profit before income tax 35,488 38,407
Income tax 6 (8,202) (9,609)
------------------------------------------------- ---- ------------ ------------
Profit for the period from continuing operations 27,286 28,798
------------------------------------------------- ---- ------------ ------------
Discontinued operations
Profit/(loss) for the period from discontinued
operations 272 (392)
------------------------------------------------- ---- ------------ ------------
Profit for the period 27,558 28,406
------------------------------------------------- ---- ------------ ------------
Profit attributable to:
* Non-controlling interests 66 (98)
* Owners of the parent 27,492 28,504
------------------------------------------------- ---- ------------ ------------
5 27,558 28,406
------------------------------------------------- ---- ------------ ------------
Earnings/(loss) per share from continuing and $ $
discontinued operations attributable to owners cents cents
of the parent during the period (expressed in
cents per share)
------------------------------------------------- ---- ------------ ------------
Basic earnings/(loss) per share
From continuing operations 7 15.42 16.37
From discontinued operations 0.15 (0.22)
------------------------------------------------- ---- ------------ ------------
From profit for the period 15.57 16.15
------------------------------------------------- ---- ------------ ------------
Diluted earnings/(loss) per share
From continuing operations 7 15.00 16.02
From discontinued operations 0.15 (0.22)
------------------------------------------------- ---- ------------ ------------
From profit for the period 15.15 15.80
------------------------------------------------- ---- ------------ ------------
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
for the six months period ended 30 June 2019
Six months ended
------------------------------------------------------ --------------------
30-Jun-19 30-Jun-18
$'000 $'000
------------------------------------------------------ --------- ---------
Profit for the period 27,558 28,406
Other comprehensive (expense)/income:
Items that may be reclassified subsequently to profit
or loss:
Currency translation differences (2,903) (11,005)
Other comprehensive (expense)/income for the period,
net of tax (2,903) (11,005)
------------------------------------------------------ --------- ---------
Total comprehensive income for the period 24,655 17,401
------------------------------------------------------ --------- ---------
Attributable to:
* Non-controlling interests 66 (98)
* Owners of the parents 24,589 17,499
------------------------------------------------------ --------- ---------
Total comprehensive income for the period 24,655 17,401
------------------------------------------------------ --------- ---------
Total comprehensive income/(expense) attributable to equity
shareholders arises from:
- Continuing operations 24,383 17,784
- Discontinued operations 272 (383)
----------------------------- ------ ------
24,655 17,401
----------------------------- ------ ------
CONDENSED CONSOLIDATED INTERIM BALANCE SHEET (unaudited)
as at 30 June 2019
Unaudited Audited
------------ ------------
30-Jun-19 31-Dec-18
Note $'000 $'000
-------------------------------------------- ------ ------------ ------------
Assets
Non-current assets
Property, plant and equipment 8 418,316 429,601
Intangible assets 9 60,257 61,311
Deferred tax asset 413 -
Other non-current receivables 11 2,723 2,120
-------------------------------------------- ------ ------------ ------------
481,709 493,032
-------------------------------------------- ------ ------------ ------------
Current assets
Inventories 10 6,819 7,529
Trade and other receivables 11 8,177 10,078
Restricted cash 4,206 4,376
Cash and cash equivalents 25,998 34,649
-------------------------------------------- ------ ------------ ------------
45,200 56,632
-------------------------------------------- ------ ------------ ------------
Assets of the disposal group classified
as held for sale 77 61
-------------------------------------------- ------ ------------ ------------
45,277 56,693
-------------------------------------------- ------ ------------ ------------
Total assets 526,986 549,725
-------------------------------------------- ------ ------------ ------------
Equity attributable to owners of the
parent
Ordinary shares 1,765 1,765
Share premium 191,184 191,184
Treasury shares (6,526) (6,526)
Currency translation reserve (92,357) (89,454)
Retained earnings:
At 1 January 230,281 231,241
Profit for the period attributable to
the owners 27,492 48,024
Dividends and other changes in retained
earnings (18,171) (48,984)
-------------------------------------------- ------ ------------ ------------
239,602 230,281
-------------------------------------------- ------ ------------ ------------
333,668 327,250
-------------------------------------------- ------ ------------ ------------
Non-controlling interests (1,318) (1,384)
-------------------------------------------- ------ ------------ ------------
Total equity 332,350 325,866
-------------------------------------------- ------ ------------ ------------
Liabilities
Non-current liabilities
Borrowings 14 87,960 106,549
Silver streaming commitment 21,660 22,905
Deferred income tax liability 13 27,300 27,670
Lease liability 598 -
Provision for other liabilities and charges 5,380 5,069
-------------------------------------------- ------ ------------ ------------
142,898 162,193
-------------------------------------------- ------ ------------ ------------
Current liabilities
Borrowings 14 38,400 38,400
Silver streaming commitment 2,382 2,263
Trade and other payables 12 10,898 20,916
Provisions for other liabilities and
charges 25 47
-------------------------------------------- ------ ------------ ------------
51,705 61,626
Liabilities of disposal group classified
as held for sale 33 40
-------------------------------------------- ------ ------------ ------------
51,738 61,666
-------------------------------------------- ------ ------------ ------------
Total liabilities 194,636 223,859
-------------------------------------------- ------ ------------ ------------
Total equity and liabilities 526,986 549,725
-------------------------------------------- ------ ------------ ------------
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES OF EQUITY
(unaudited)
for the six months period ended 30 June 2019
Currency Non-controlling
Ordinary Share Treasury translation Retained interest
shares premium shares reserve earnings Total Total
--------------- ------------ ----------- ------------ -------------- ------------ -------- --------------- --------
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
--------------- ------------ ----------- ------------ -------------- ------------ -------- --------------- --------
Balance as at
1 January 2019 1,765 191,184 (6,526) (89,454) 230,281 327,250 (1,384) 325,866
---------------- ------------ ----------- ------------ -------------- ------------ -------- --------------- --------
Profit for the
period - - - - 27,492 27,492 66 27,558
Other
comprehensive
income -
currency
translation
differences - - - (2,903) - (2,903) - (2,903)
Total
comprehensive
income - - - (2,903) 27,492 24,589 66 24,655
---------------- ------------ ----------- ------------ -------------- ------------ -------- --------------- --------
Transactions
with owners
Share based
payments - - - - 529 529 - 529
Exercise of
options - - - - (536) (536) - (536)
Dividends - - - - (18,164) (18,164) - (18,164)
Total
transactions
with owners,
recognised
directly
in equity - - - - (18,171) (18,171) - (18,171)
---------------- ------------ ----------- ------------ -------------- ------------ -------- --------------- --------
Balance as at
30 June 2019 1,765 191,184 (6,526) (92,357) 239,602 333,668 (1,318) 332,350
---------------- ------------ ----------- ------------ -------------- ------------ -------- --------------- --------
Currency Non-controlling
Ordinary Share Treasury translation Retained interest
shares premium shares reserve earnings Total Total
--------------- ------------ ----------- ------------ -------------- ------------ ---------- --------------- ----------
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
--------------- ------------ ----------- ------------ -------------- ------------ ---------- --------------- ----------
Balance as at
1 January 2018
(restated*) 1,765 191,184 (7,780) (79,166) 231,241 337,244 55 337,299
---------------- ------------ ----------- ------------ -------------- ------------ ---------- --------------- ----------
Profit/(loss)
for the period - - - - 28,504 28,504 (98) 28,406
Other
comprehensive
income -
currency
translation
differences - - - (11,005) - (11,005) - (11,005)
Total
comprehensive
income - - - (11,005) 28,504 17,499 (98) 17,401
---------------- ------------ ----------- ------------ -------------- ------------ ---------- --------------- ----------
Transactions
with owners
Share based
payments - - - - 3,059 3,059 - 3,059
Disposal of
Zuunmod UUL
LLC - - - - (73) (73) - (73)
Exercise of
options - - 1,070 - (1,053) 17 - 17
Dividends - - - - (24,698) (24,698) - (24,698)
Total
transactions
with owners,
recognised
directly
in equity - - 1,070 - (22,765) (21,695) - (21,695)
---------------- ------------ ----------- ------------ -------------- ------------ ---------- --------------- ----------
Balance as at
30 June 2018
(restated*) 1,765 191,184 (6,710) (90,171) 236,980 333,048 (43) 333,005
---------------- ------------ ----------- ------------ -------------- ------------ ---------- --------------- ----------
* The comparative balances brought forward as at 1 January 2018
have been restated to reflect the finalisation of the acquisition
accounting of CMK Resources Limited under IFRS 3. This exercise was
completed during the second half of 2018 and disclosed in the
Group's audited financial statements for the year ended 31 December
2018.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
(unaudited)
for the six months period ended 30 June 2019
Six months ended
30-Jun-19 30-Jun-18
Note $'000 $'000
--------------------------------------------- ------- --------- ---------
Cash flows from operating activities
Cash generated from operations 15 56,095 60,712
Corporate income tax paid (10,897) (13,693)
Interest paid (5,243) (6,186)
---------------------------------------------- ------- --------- ---------
Net cash generated from operating activities 39,955 40,833
---------------------------------------------- ------- --------- ---------
Cash flows from investing activities
Purchases of property, plant and equipment 8 (4,437) (8,234)
Purchase of intangible assets 9 (18) (202)
Proceeds from sale of property, plant
and equipment 1 -
Balancing receipt from acquisition - 3,300
Deferred consideration paid 15 (6,500) -
Interest received 159 114
Decrease in restricted cash 170 43
---------------------------------------------- ------- --------- ---------
Net cash used in investing activities (10,625) (4,979)
---------------------------------------------- ------- --------- ---------
Cash flows from financing activities
Dividend paid to owners of the parent (18,164) (24,698)
Proceeds from borrowings - 1,745
Repayment of borrowings (19,200) (18,224)
(Settlement)/receipt on exercise of
share options (536) 17
Net cash used in financing activity (37,900) (41,160)
---------------------------------------------- ------- --------- ---------
Effect of foreign exchange losses on
cash and cash equivalents (68) (103)
---------------------------------------------- ------- --------- ---------
Net decrease in cash and cash equivalents (8,638) (5,409)
---------------------------------------------- ------- --------- ---------
Cash and cash equivalents at 1 January 34,707 43,173
---------------------------------------------- ------- --------- ---------
Cash and cash equivalents at 30 June 26,069 37,764
---------------------------------------------- ------- --------- ---------
Cash and cash equivalents at 30 June 2019 includes cash at bank
on hand included in assets held for sale of $71,000 (30 June 2018:
$90,000). The consolidated statement of cash flows does not include
the restricted cash balance of $4,206,000 (30 June 2018:
$2,769,000).
Note 15 includes disclosures of major non-cash flows during the
period relating to investing activities.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION
For the six months period ended 30 June 2019
1. General information
Central Asia Metals plc ('CAML' or the 'Company') and its
subsidiaries (the 'Group') are a mining and exploration
organisation with operations primarily in Kazakhstan and North
Macedonia and a parent holding company based in England in the
United Kingdom ('UK').
The Group's principal business activities are the production of
copper cathode at its Kounrad operations in Kazakhstan and the
production of lead, zinc and silver at its Sasa operations in North
Macedonia. CAML owns 100% of the Kounrad SX-EW copper project in
Kazakhstan and 100% of the Sasa zinc-lead mine in North Macedonia.
The Company also owns two further operations which are currently
held for sale and this includes 80% of the Shuak copper exploration
property in northern Kazakhstan and a 75% equity interest in Copper
Bay Limited, which is a private company that has conducted a
definitive feasibility study at its copper project in Chañaral Bay,
Chile.
CAML is a public limited company, which is listed on the AIM
Market of the London Stock Exchange 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.
The condensed consolidated interim financial information
incorporates the results of Central Asia Metals plc and its
subsidiary undertakings as at 30 June 2019 and was approved by the
Directors for issue on 17 September 2019. These condensed interim
financial statements do not comprise statutory accounts within the
meaning of section 434 of the Companies Act 2006. Statutory
accounts for the year ended 31 December 2018 were approved by the
board of directors on 10 April 2019 and delivered to the Registrar
of Companies. The report of the auditors on those accounts was
unqualified, did not contain an emphasis of matter paragraph and
did not contain any statement under section 498 of the Companies
Act 2006.
This condensed consolidated interim financial information has
been reviewed, not audited.
2. Basis of preparation
The condensed consolidated interim financial information for the
six months ended 30 June 2019 has been prepared in accordance with
IAS 34, 'Interim financial reporting' as adopted by the European
Union. The condensed interim financial information should be read
in conjunction with the annual financial statements for the year
ended 31 December 2018, which have been prepared in accordance with
International Financial Report Standards ('IFRS') as adopted by the
European Union.
Principal risks and uncertainties
In preparing the condensed consolidated interim financial
information management is required to consider the principal risks
and uncertainties facing the Group. In management's opinion the
principal risks and uncertainties facing the Group are unchanged
since the preparation of the consolidated financial statements for
the year ended 31 December 2018. Those risks and uncertainties,
together with management's response to them are described in the
Principal Risks and Uncertainties section of the 2018 Annual Report
and Accounts.
3. Accounting policies
The accounting policies, methods of computation and presentation
used in the preparation of the condensed consolidated interim
financial information are the same as those used in the Group's
audited financial statements for the year ended 31 December
2018.
Going concern
After review of the Group's operations, financial position and
forecasts, the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence
for the foreseeable future. Accordingly, the Directors continue to
adopt the going concern basis in preparing the unaudited condensed
consolidated interim financial information. The Group is currently
in a current liability position however the Group currently has
sufficient cash resources to facilitate the debt and a material
income stream from the Kounrad and Sasa projects.
Taxation
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected total annual profit or
loss.
Changes in accounting policies
IFRS 16 Leases has been applied from 1 January 2019. IFRS 16
requires a lessee to recognise assets and liabilities for all
leases with a term of more than 12 months, unless the underlying
asset is of low value. A lessee is required to recognise a
right-of-use asset representing its right to use the underlying
leased asset and a lease liability representing its obligation to
make lease payments.
The Group has reviewed all the leasing arrangements and
contracts in light of the new standard to determine whether the
arrangements fall under the definition of a lease per IFRS 16. The
Group has applied the modified retrospective transition approach
and has not restated comparative amounts for prior periods. The
right-of-use assets for property leases have been measured on
transition as if the new rules had always been applied and are
capitalised amounting to $0.8 million, see note 8. All other
right-of-use assets will continue to be measured at the amount of
the lease liability on adoption.
4. Estimates
The preparation of condensed consolidated interim financial
information requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and expense.
Actual results may differ from these estimates.
In preparing this condensed consolidated interim financial
information, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements for the year ended 31 December
2018 which can be obtained from www.centralasiametals.com
5. Segmental information
The Board is the Group's chief operating decision-maker.
Management have 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 mining project perspective.
The Group has business segments consisting of an SX-EW copper
plant at Kounrad in Kazakhstan and the zinc-lead mine in North
Macedonia. The Group's operations are controlled from a head office
in London, UK but this does not represent a separate business
segment.
The Board assesses the performance of the projects based on a
number of key operational and financial measures which relate to
copper and zinc-lead production output, revenues from the sales of
copper and zinc-lead and the overall costs of producing the copper
and zinc-lead.
The segment results for the six months ended 30 June 2019 are as
follows:
Unaudited
------------------------------------- ------- -------- ----------- --------
Kounrad Sasa Unallocated Total
------------------------------------- ------- -------- ----------- --------
$'000 $'000 $'000 $'000
------- -------- ----------- --------
Gross revenue 39,949 49,932 - 89,881
Silver purchases for silver stream - (2,632) - (2,632)
Distribution and selling costs (81) (801) - (882)
Off-take buyers' fees (1,133) (552) - (1,685)
------------------------------------- ------- -------- ----------- --------
Revenue 38,735 45,947 - 84,682
------------------------------------- ------- -------- ----------- --------
EBITDA 28,745 31,656 (3,683) 56,718
Depreciation and amortisation* (2,718) (12,482) (120) (15,320)
Foreign exchange rate (loss)/gain (89) 63 14 (12)
Other income 65 32 54 151
Finance income 5 1 153 159
Finance costs (54) (320) (5,834) (6,208)
------------------------------------- ------- -------- ----------- --------
Profit before income tax 25,954 18,950 (9,416) 35,488
------------------------------------- ------- -------- ----------- --------
Income tax (8,202)
------------------------------------- ------- -------- ----------- --------
Profit for the period after taxation
from continuing operations 27,286
------------------------------------- ------- -------- ----------- --------
Loss from discontinued operations 272
------------------------------------- ------- -------- ----------- --------
Profit for the period 27,558
------------------------------------- ------- -------- ----------- --------
* Depreciation and amortisation includes amortisation on the
fair value uplift on acquisition of Sasa and Kounrad of $6.3
million.
The segment results for the six months ended 30 June 2018 are as
follows:
Unaudited
------------------------------------- ------- -------- ----- ----------- ---------
Kounrad Sasa Shuak Unallocated Total
------------------------------------- ------- -------- ----- ----------- ---------
$'000 $'000 $'000 $'000 $'000
------- -------- ----- ----------- ---------
Gross revenue 40,512 61,900 - - 102,412
Silver purchases for silver stream - (3,059) - - (3,059)
Freight cost (105) (824) - - (929)
Off-take buyers' fees (1,105) (721) - - (1,826)
------------------------------------- ------- -------- ----- ----------- ---------
Revenue 39,302 57,296 - - 96,598
------------------------------------- ------- -------- ----- ----------- ---------
EBITDA 29,190 41,691 - (6,233) 64,648
Depreciation and amortisation* (3,258) (13,972) - (27) (17,257)
Foreign exchange rate (loss)/gain (88) (2,838) (51) 29 (2,948)
Other income 95 14 - - 109
Finance income 6 1 - 107 114
Finance costs (74) (2,319) (2) (3,864) (6,259)
------------------------------------- ------- -------- ----- ----------- ---------
Profit before income tax 38,407
------------------------------------- ------- -------- ----- ----------- ---------
Income tax (9,609)
------------------------------------- ------- -------- ----- ----------- ---------
Profit for the period after taxation
from continuing operations 28,798
------------------------------------- ------- -------- ----- ----------- ---------
Loss from discontinued operations (392)
------------------------------------- ------- -------- ----- ----------- ---------
Profit for the period 28,406
------------------------------------- ------- -------- ----- ----------- ---------
* Depreciation and amortisation includes amortisation on the
fair value uplift on acquisition of Sasa and Kounrad of $6.6
million.
Group segmental assets and liabilities as at the 30 June 2019
are as follows:
Segmental Assets Non Current Asset Segmental Liabilities
additions
---------------------- -------------------- -------------------- -----------------------
30-Jun-19 31-Dec-18 30-Jun-19 30-Jun-18 30-Jun-19 31-Dec-18
$'000 $'000 $'000 $'000 $'000 $'000
---------------------- --------- --------- --------- --------- ----------- ----------
Kounrad 78,926 80,384 642 1,346 (11,831) (11,666)
Sasa 426,853 450,495 3,806 6,902 (54,133) (78,720)
Assets held for sale 249 61 - 179 (96) (40)
Unallocated including
corporate 20,958 18,785 778 9 (128,576) (133,433)
---------------------- --------- --------- --------- --------- ----------- ----------
Total 526,986 549,725 5,226 8,436 (194,636) (223,859)
---------------------- --------- --------- --------- --------- ----------- ----------
6. Income tax
Six months ended
-------------------------------------- -----------------------
30-Jun-19 30-Jun-18
$'000 $'000
Current tax on profits for the period 8,493 10,398
Deferred tax credit (note 13) (291) (789)
---------------------------------------- ---------- -----------
Income tax expense 8,202 9,609
---------------------------------------- ---------- -----------
Corporate income tax is calculated at 19% (H1 2018: 19%) of the
assessable profit for the period for the UK parent company, 20% for
the operating subsidiaries in Kazakhstan (H1 2018: 20%) and 10% (H1
2018: 10%) for the operating subsidiaries in North Macedonia.
Deferred tax assets have not been recognised on tax losses
primarily at the parent company and Copper Bay subsidiaries as it
remains uncertain whether these entities will have sufficient
taxable profits in the future to utilise these losses.
7. Earnings per share
Basic earnings/(loss) per share is calculated by dividing the
profit/(loss) attributable to owners of the Company by the weighted
average number of Ordinary Shares in issue during the period
excluding Ordinary Shares purchased by the Company and held as
treasury shares.
(a) Basic
Six months ended
----------------------------------------------------------- ------------------------
30-Jun-19 30-Jun-18
$'000 $'000
----------------------------------------------------------- ----------- -----------
Profit from continuing operations attributable to
owners of the parent 27,220 28,896
----------------------------------------------------------- ----------- -----------
Profit/(loss) from discontinued operations attributable
to owners of the parent 272 (392)
----------------------------------------------------------- ----------- -----------
Total 27,492 28,504
----------------------------------------------------------- ----------- -----------
Weighted average number of Ordinary Shares in issue 176,498,266 176,498,266
----------------------------------------------------------- ----------- -----------
Earnings/(loss) per share from continuing and discontinued
operations attributable to owners of the parent
during the period (expressed in $ cents per share) $ cents $ cents
From continuing operations 15.42 16.37
From discontinued operations 0.15 (0.22)
----------------------------------------------------------- ----------- -----------
From profit for the period 15.57 16.15
----------------------------------------------------------- ----------- -----------
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.
(b) Diluted
Six months ended
-------------------------------------------------------- ----------------------------
30-Jun-19 30-Jun-18
$'000 $'000
-------------------------------------------------------- ------------- -------------
Profit from continuing operations attributable
to owners of the parent 27,220 28,896
-------------------------------------------------------- ------------- -------------
Profit/(loss) from discontinued operations attributable
to owners of the parent 272 (392)
-------------------------------------------------------- ------------- -------------
Total 27,492 28,504
-------------------------------------------------------- ------------- -------------
Weighted average number of ordinary shares in issue 176,498,266 176,498,266
Adjusted for:
- Share Options 4,943,720 3,832,431
-------------------------------------------------------- ------------- -------------
Weighted average number of ordinary shares for
diluted earnings per share 181,441,986 180,330,697
-------------------------------------------------------- ------------- -------------
Diluted earnings per share $ cents $ cents
From continuing operations 15.00 16.02
From discontinued operations 0.15 (0.22)
-------------------------------------------------------- ------------- -------------
From profit for the period 15.15 15.80
-------------------------------------------------------- ------------- -------------
8. Property, plant and equipment
Motor
vehicles
and
Construction Plant Mining ROU Mineral
in progress and equipment assets assets Land rights Total
------------------------- ------------------ --------------- -------- --------- ------ --------- -------
Group $'000 $'000 $'000 $'000 $'000 $'000 $'000
------------------------- ------------------ --------------- -------- --------- ------ --------- -------
Cost
At 1 January 2019 17,317 113,232 1,415 1,947 634 350,333 484,878
Additions 4,138 211 - 859 - - 5,208
Disposals (103) (69) - (9) - - (181)
Change in estimate
- asset retirement
obligation - (20) - - - - (20)
Transfer from stock 589 32 - - - - 621
Transfers (2,838) 2,831 - 7 - - -
Exchange differences (65) (47) 13 13 (5) (2,381) (2,472)
At 30 June 2019 19,038 116,170 1,428 2,817 629 347,952 488,034
------------------------- ------------------ --------------- -------- --------- ------ --------- -------
Accumulated depreciation
At 1 January 2019 - 32,996 225 852 - 21,204 55,277
Provided during
the period - 5,378 27 197 - 8,739 14,341
Disposals - (44) - (4) - - (48)
Exchange differences - 140 2 6 - - 148
------------------------- ------------------ --------------- -------- --------- ------ --------- -------
At 30 June 2019 - 38,470 254 1,051 - 29,943 69,718
------------------------- ------------------ --------------- -------- --------- ------ --------- -------
Net book value
at 30 June 2019 19,038 77,700 1,174 1,766 629 318,009 418,316
------------------------- ------------------ --------------- -------- --------- ------ --------- -------
The depreciation for the period relating to the historical cost
of the property, plant and equipment with no fair value uplift
amounted to $9.0 million (H1 2018: $9.1 million).
The Group has reviewed all the leasing arrangements and
contracts in light of adopting IFRS 16 - Leases and has capitalised
$0.8 million as right-of-use assets ('ROU') during the period and
is included within additions. All right-of-use assets will continue
to be measured at the amount of the lease liability on
adoption.
As at 30 June 2019 there are no indications of impairment with
the fair value of the assets exceeding the net book value.
9. Intangible assets
Computer
Mining software
licences and website
Goodwill and permits Total
------------------------------- ---------- ------------- ------------ -------
Group $'000 $'000 $'000 $'000
------------------------------- ---------- ------------- ------------ -------
Cost
At 1 January 2019 31,179 37,634 519 69,332
Additions - 1 17 18
Disposals - - (2) (2)
Exchange differences (58) (5) 6 (57)
At 30 June 2019 31,121 37,630 540 69,291
-------------------------------- ---------- ------------- ------------ -------
Accumulated amortisation
At 1 January 2019 - 7,537 484 8,021
Provided during the period - 947 32 979
Disposals - - (1) (1)
Exchange differences - 39 (4) 35
-------------------------------- ---------- ------------- ------------ -------
At 30 June 2019 - 8,523 511 9,034
-------------------------------- ---------- ------------- ------------ -------
Net book value at 30 June 2019 31,121 29,107 29 60,257
-------------------------------- ---------- ------------- ------------ -------
The Group acknowledge that forecasted commodity prices have
declined since year end and therefore as at 30 June 2019 the Group
reviewed and updated its assumptions within the net present value
models for Sasa and Kounrad. The Group also reviewed for other
indicators of impairment including discount rates, operating and
capital expenditure and mineral reserves and resources estimated.
As a result of the above, no impairment has been identified. The
Group also applied the same sensitivities as disclosed in the 2018
annual report and none of the reasonable possible changes in key
assumptions would result in an impairment.
10. Inventories
30-Jun-19 31-Dec-18
$'000
$'000
--------------- --------- ---------
Raw materials 6,163 6,901
Finished goods 656 628
--------------- --------- ---------
6,819 7,529
--------------- --------- ---------
11. Trade and other receivables
30-Jun-19 31-Dec-18
Current receivables $'000 $'000
------------------------ ---------- ---------
Trade receivables 1,686 3,746
Prepayments 1,544 1,463
VAT receivable 1,320 2,006
Other receivables 3,627 2,863
8,177 10,078
------------------------ ---------- ---------
Non-current receivables
Prepayments 65 71
VAT receivable 2,658 2,049
2,723 2,120
------------------------ ---------- ---------
As at 30 June 2019, the total Group VAT receivable was $4.0
million (31 December 2018: $4.1 million) which included an amount
of $3.1 million (31 December 2018: $2.8 million) of VAT owed to the
Group by the Kazakhstan authorities. The Kazakhstan authorities
refunded $0.3 million after period end in August 2019. The Group is
working closely with its advisors to recover the remaining VAT, a
portion of which will be recovered through local sales of copper
cathode to offset VAT liabilities.
12. Trade and other payables
30-Jun-19 31-Dec-18
Current payables $'000 $'000
------------------------------------------------- ---------- ---------
Trade and other payables including accruals and
lease liability 8,860 11,137
Deferred consideration - 6,500
Corporation tax, social security and other taxes 2,038 3,279
10,898 20,916
------------------------------------------------- ---------- ---------
In April 2019, an agreement with the previous owners of CMK
Resources Limited for receipt of $5.5 million was finalised
relating to the $5.9 million withholding tax liability in North
Macedonia that relates to the activities of CMK Europe prior to
CAML ownership. The Company has now also paid the remaining $6.5
million of deferred consideration.
During the period, a routine tax inspection of CMK Europe, for
all periods until 31 December 2018 was carried out by the Public
Revenue Office ('PRO') in North Macedonia. No issues were raised
and no tax refunds or assessments were made.
13. Deferred income tax liability
The movements in the Group's deferred tax liabilities which are
expected to be recovered or settled more than 12 months after the
reporting period are as follows:
Currency (Debit)/
credit
translation to income
1-Jan-19 differences statement 30-Jun-19
$'000 $'000 $'000 $'000
---------------------------- --------- ------------- -------------------- ------------- -------------------------
Deferred tax liability
Other timing differences (77) - (413) (490)
Deferred tax on FV adjustment
on Kounrad Transaction (6,681) (65) 154 (6,592)
Deferred tax on FV adjustment
on CMK acquisition (20,912) 144 550 (20,218)
Deferred tax liability (27,670) 79 291 (27,300)
--------------------------------------- ------------- -------------------- ------------- -------------------------
Where the realisation of deferred tax assets is dependent on
future profits, the Group recognises losses carried forward and
other deferred tax assets only to the extent that the realisation
of the related tax benefit through future taxable profits is
probable.
14. Borrowings
30-Jun-19 31-Dec-18
$'000 $'000
--------------------- ----------- ---------
Secured: Non-current
Bank loans 87,960 106,549
Secured: Current
Bank loans 38,400 38,400
126,360 144,949
--------------------- ----------- ---------
The movement on the borrowings can be summarised as follows:
$'000
------------------------------------------------------- -------------
Balance at 1 January 2019 144,949
Repayment of borrowings (19,200)
Finance charge interest 5,166
Finance charge unwinding of directly attributable fees 611
Interest paid (5,166)
Balance at 30 June 2019 126,360
-------------------------------------------------------- -------------
During the period, $19.2 million of the principal amount of
Group debt was repaid as well as a further $5.2 million
interest.
Under the secured debt financing agreement with Traxys Europe
S.A. the amount of borrowings is repayable by 4 November 2022.
Interest is payable at LIBOR plus 4.75%. Security is provided over
the shares in CAML Kazakhstan BV, certain bank accounts, the Traxys
Kounrad off-take agreement as well as over the off-take agreement
between CAML MK and Traxys Europe S.A. The fair value of borrowings
has been calculated by discounting the expected future cash flows
at contracted interest rates.
The debt is subject to financial covenants which include the
monitoring of gearing and leverage ratios which have all been
complied with. The refinance completed in 2018 lifted the security
over Bermuda holding companies, enabling the Group to restructure
its CMK Resources owned entities to CAML MK and this process was
completed in Q1 2019.
15. Cash generated from operations
Six months ended
Adjustments for: 30-Jun-19 30-Jun-18
$'000 $'000
-------------------------------------------------- --------- ---------
Profit before income tax including discontinued
operations 35,760 38,015
Adjustments for:
Depreciation and amortisation 15,320 17,257
Silver stream commitment (1,126) (856)
Loss on disposal of property, plant and equipment 132 15
Foreign exchange loss 12 2,948
Share based payments 529 3,059
Finance income (159) (114)
Finance costs 6,208 6,259
Changes in working capital:
Inventories 89 (293)
Trade and other receivables 1,288 597
Trade and other payables (1,912) (5,888)
Provisions for other liabilities and charges (46) (287)
Cash generated from operations 56,095 60,712
-------------------------------------------------- --------- ---------
Non-cash investing activities
In April 2019, a settlement agreement with the previous owners
of CMK Resources Limited was finalised in respect of the $5.9
million withholding tax liability in North Macedonia paid in the
prior year. The liability related to activities of CMK Europe prior
to CAML's ownership. The settlement amounted to $5.5 million and
accordingly, during H1 2019, CAML paid the balancing $6.5 million
due in respect of the $12.0 million deferred consideration owed to
the previous owners.
16. Dividend per share
An interim dividend of 6.5 pence per ordinary share (H1 2018:
6.5 pence per ordinary share) was declared by the CAML Board on 17
September 2019.
17. Related party disclosure
The Kounrad Foundation, a charitable foundation set up in the
prior period, was advanced $184,000 (H1 2018: nil) to formalise
charitable donations to assist local causes. This is a related
party by virtue of common Directors.
18. Subsequent events
No events have occurred subsequent to 30 June 2019 that require
disclosure.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR GGUQGBUPBGQQ
(END) Dow Jones Newswires
September 17, 2019 02:00 ET (06:00 GMT)
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