NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2016

 

1. General information

Centamin plc (the "Company") is a listed public company, incorporated in Jersey and operating through subsidiaries and jointly controlled entities operating in Egypt, Burkina Faso, Côte d'Ivoire, United Kingdom and Australia. It is the parent company of the group, comprising the Company and its subsidiaries and joint arrangements.

 

Registered office and principal place of business:

 

Centamin plc

2 Mulcaster Street

St Helier, Jersey JE2 3NJ

 

The nature of the group's operations and its principal activities are set out in the directors' report and the strategic report of the annual report.

 

2. Adoption of new and revised accounting standards

Standards not affecting the reported results nor the financial position

In the current year, the new and revised Standards and Interpretations that have been adopted have not had a significant impact on the amounts reported in these financial statements.

 

New standards, amendments and interpretations not yet adopted

Standards and interpretations issued but not yet effective up to the date of issuance of the financial statements are listed below. This listing of standards and interpretations issued are those that the group reasonably expects to have an impact on disclosures, financial position or performance when applied at a future date.

 

IFRS 15 'Revenue from contracts with customers'. The new standard replaces IAS 18 'Revenue' and IAS 11 'Construction contracts' and provides a five step framework for application to customer contracts: identification of customer contract, identification of the contract performance obligations, determination of the contract price, allocation of the contract price to the contract performance obligations, and revenue recognition as performance obligations are satisfied. A new requirement where revenue is variable stipulates that revenue may only be recognised to the extent that it is highly probable that significant reversal of revenue will not occur. The group is currently assessing the impact of IFRS 15 but as the majority of gold sales are not subject to pricing adjustments, a significant impact is not anticipated. The new standard will be effective for annual periods beginning on or after 1 January 2018.

 

IFRS 9 'Financial instruments'. IFRS 9 addresses the financial reporting of financial assets and financial liabilities. This standard replaces IAS 39 'Financial instruments: recognition and measurement'. IFRS 9 requires financial assets to be classified into two measurement categories: those measured at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity's business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than in net earnings, unless this creates an accounting mismatch. The impairment model and hedging rules have also been amended under IFRS 9 but the derecognition rules remain the same. The group does not expect a significant impact from IFRS 9 at the moment as it does not enter into formal hedge accounting arrangements, has no long-term trade or other receivables and does not hold financial liabilities at fair value. However, the group will need to consider the accounting for assets currently held as available-for-sale. The new standard will be effective for annual periods beginning on or after 1 January 2018.

 

IFRS 16 'Leases'. The new standard will replace IAS 17 'Leases' and eliminates the classification of leases as either operating or finance leases by the lessee. Classification of leases by the lessor under IFRS 16 continues as either an operating or a finance lease, as was the treatment under IAS 17 'Leases'. The treatment of leases by the lessee will require capitalisation of all leases resulting in accounting treatment similar to finance leases under IAS 17 'Leases'. Exemptions for leases of very low value or short-term leases will be applicable. The new standard will result in an increase in lease assets and liabilities for the lessee. Under the new standard the treatment of all lease expense is aligned in the statement of earnings with depreciation, and an interest expense component recognised for each lease, in line with finance lease accounting under IAS 17 'Leases'. The group's office building leases will come on balance sheet on adoption of IFRS 16 but this is not expected to have a significant impact on either the balance sheet or KPI reporting. IFRS 16 will be applied prospectively for annual periods beginning on or after 1 January 2019.

 

 

3. Summary of significant accounting policies

Basis of preparation

These financial statements are denominated in US dollars ("US$"), which is the presentational currency of Centamin plc. All companies in the group use the US$ as their functional currency except for the UK subsidiaries which are denominated in Great British pounds ("GBP") and the Australian subsidiaries which are denominated in Australian dollars ("A$"). All financial information presented in United States dollars has been rounded to the nearest thousand dollars, unless otherwise stated.

 

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and adopted for use by the European Union and interpretations issued from time to time by the IFRS Interpretations Committee ("IFRS IC") both as adopted by the European Union (EU) and which are mandatory for EU reporting as at 31 December 2016, the Companies (Jersey) Law 1991, and IFRS as issued by the IASB and interpretations issued from time to time by the IFRS IC which are mandatory as at 31 December 2016, therefore the group financial statements comply with Article 4 of the EU IAS Regulation. The group has not early adopted any other amendments, standards or interpretations that have been issued but are not yet mandatory.

 

The consolidated financial statements have been prepared on a going concern basis and under the historical cost convention, as modified by available-for-sale financial assets, and financial assets and financial liabilities (including derivative) instruments at fair value through profit and loss.

 

Comparative figures
Certain comparative figures have been reclassified to conform with the financial statement presentation adopted for the current year. These are categorisation changes for comparison purposes only and have no effect on results as previously reported.

 

Principles of consolidation

The consolidated financial statements are prepared by combining the financial statements of all the entities that comprise the consolidated entity, being the Company (the parent entity) and its subsidiaries. Subsidiaries are all entities (including structured entities) over which the group has control, as defined in IFRS 10 'Consolidated financial statements'. Consistent accounting policies are employed in the preparation and presentation of the consolidated financial statements.

 

The consolidated financial statements include the information and results of each subsidiary from the date on which the Company obtains control and until such time as the Company ceases to control such entity. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

 

In preparing the consolidated financial statements, all intercompany balances and transactions, and unrealised profits arising within the consolidated entity are eliminated in full.

 

Sukari Gold Mines ("SGM") is jointly owned by PGM and EMRA on a 50% basis. For accounting purposes, SGM is wholly consolidated within the Centamin group of companies reflecting the substance and economic reality of the Concession Agreement (see note 22) and will therefore recognise a non-controlling interest ("NCI") for EMRA's participation. Furthermore based on the requirements of the Concession Agreement, payments to NCI meet the definition of a liability and will be recorded in the income statement and statement of financial position (below profit after tax), as the EMRA profit share, on the date that a net production surplus becomes available. Payment made to EMRA pursuant to the provisions of the Concession Agreement is based on the net production surplus available as at 30 June, being SGM's financial year end. Pursuant to the Concession Agreement, the provisions of which are described more fully below, whilst PGM is responsible for funding SGM's activities, PGM is also entitled to recover the following costs and expenses payable from sales revenue (excluding the royalty payable to the Arab Republic of Egypt ("ARE")): (a) all current operating expenses incurred and paid after the initial commercial production; (b) exploration costs, including those accumulated to the commencement of commercial production (at the rate of 33.3% of total accumulated cost per annum); and (c) exploitation capital costs, including those accumulated prior to the commencement of commercial production (at the rate of 33.3% of total accumulated cost per annum).

 

EMRA is entitled to a share of 50% of SGM's net production surplus which is defined as 'revenue less payment of the fixed royalty to Arab Republic of Egypt ("ARE") and recoverable costs'. However, in accordance with the terms of the Concession Agreement, in the first and second years in which there is a Profit Share, PGM will be entitled to an additional 10% of net production surplus and an additional 5% in the third and fourth years. Any payment made to EMRA pursuant to these provisions of the Concession Agreement will be recognised as a variable charge in the income statement (below profit after tax) of Centamin, which will lead to a reduction in the earnings per share.

 

 

Going concern

These financial statements for the year ended 31 December 2016 have been prepared on a going concern basis, which contemplate the realisation of assets and liquidation of liabilities during the normal course of operations.

 

The group meets its day-to-day working capital requirements through existing cash resources. As discussed in Note 21, the operation of the mine has been affected by two legal actions. The first of these followed from a decision taken by Egyptian General Petroleum Corporation ("EGPC") to charge international, not local (subsidised) prices for the supply of DFO, and the second arose as a result of a judgment of the Administrative Court of first instance in relation to, amongst other matters, the Company's 160km² exploitation lease. In relation to the first decision, the Company remains confident that in the event that it is required to continue to pay international prices, the mine at Sukari will remain commercially viable. Similarly, the Company remains confident that the appeal it has lodged in relation to the decision of the Administrative Court will ultimately be successful, although final resolution of it may take some time. On 20 March 2013 the Supreme Administrative Court upheld the Company's application to suspend the decision until the merits of the Company's appeal were considered and ruled on, thus providing assurance that normal operations will be able to continue during this process.

 

In the unlikely event that the Group is unsuccessful in either or both of its legal actions, and that the operating activities are restricted to a reduced area, it is the director's belief that the Group will be able to continue as going concern.

 

Having assessed the principal risks and the other matters discussed in connection with the long term viability statement (refer to the risk management report included within the annual report), the directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements.

 

Accounting policies

Accounting policies are selected and applied in a manner which ensures that the resulting financial statements satisfy the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported. These policies have been consistently applied to all the years presented, unless otherwise stated.

 

The following significant policies have been adopted in the preparation and presentation of these financial statements:

 

Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly-liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

 

Financial instruments

Financial assets and financial liabilities are recognised in the group's balance sheet when the group becomes a party to the contractual provisions of the instrument.

 

Financial liabilities and equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

 

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the group are recognised at the proceeds received, net of direct issue costs.

 

Financial liabilities

Financial liabilities are classified as either financial liabilities at fair value through profit or loss ("FVTPL") or other financial liabilities.

 

Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL.

A financial liability is classified as held for trading if:

 

·          it has been incurred principally for the purpose of repurchasing it in the near term; or

·          on initial recognition it is part of a portfolio of identified financial instruments that the group manages together and has a recent actual pattern of short-term profit taking; or

·          it is a derivative that is not designated and effective as a hedging instrument.

 

 

 

 

A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:

 

·          such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

·          the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

·          it forms part of a contract containing one or more embedded derivatives, and IAS 39 'Financial instruments: recognition and measurement' permits the entire combined contract (asset or liability) to be designated as at FVTPL.

 

Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability and is included in the 'other gains and losses' line item in the income statement.

 

Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

 

Derecognition of financial liabilities

The group derecognises financial liabilities when, and only when, the group's obligations are discharged, cancelled or they expire.

 

Financial assets

Financial assets are recognised and derecognised on trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through the profit or loss which are initially measured at fair value.

 

Subsequent to initial recognition, investments in subsidiaries are measured at cost in the Company financial statements. Other financial assets are loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

 

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

 

Available-for-sale financial assets ("AFS")

Listed shares and listed redeemable notes held by the group that are traded in an active market are classified as being AFS and are stated at fair value. Fair value is determined in the manner described in note 27. Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated profits with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, which are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investments revaluation reserve is reclassified to profit or loss.

 

Dividends on AFS equity instruments are recognised in profit or loss when the group's right to receive the dividends is established.

The fair value of AFS monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the balance sheet date. The foreign exchange gains and losses that are recognised in profit or loss are determined based on the amortised cost of the monetary asset. Other foreign exchange gains and losses are recognised in other comprehensive income.

 

Loans and receivables

Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest rate method less impairment. Interest is recognised by applying the effective interest rate except for short-term receivables when the recognition of interest would be immaterial.

 

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each reporting date. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after the initial recognition of the financial asset the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

 

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

 

With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

 

In respect of available-for-sale equity instruments, any subsequent increase in fair value after an impairment loss is recognised in other comprehensive income.

 

Derecognition of financial assets

The group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the group retains substantially all the risks and rewards of ownership of a transferred financial asset, the group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

 

Employee benefits

A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave and sick leave when it is probable that settlement will be required and they are capable of being measured reliably.

 

Liabilities recognised in respect of employee benefits expected to be settled within twelve months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of employee benefits which are not expected to be settled within twelve months are measured as the present value of the estimated future cash flows to be made by the consolidated entity in respect of services provided by employees up to reporting date.

 

Superannuation

The Company contributes to, but does not participate in, compulsory superannuation funds (defined contribution schemes) on behalf of the employees and directors in respect of salaries and directors' fees paid. Contributions are charged against income as they are made.

 

Exploration, evaluation and development expenditure

Exploration and evaluation expenditures in relation to each separate area of interest are recognised as an exploration and evaluation asset in the year in which they are incurred where the following conditions are satisfied:

 

1)   the rights to tenure of the area of interest are current; and

2)   at least one of the following conditions is also met:

i.      the exploration and evaluation expenditures are expected to be recouped through successful development and exploration of the area of interest, or alternatively, by its sale; or

ii.      exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing.

 

Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies, exploration drilling, trenching and sampling and associated activities. General and administrative costs are only included in the measurement of exploration and evaluation costs where they are related directly to operational activities in a particular area of interest.

 

Exploration and evaluation assets are assessed for impairment when facts and circumstances (as defined in IFRS 6 'Exploration for and evaluation of mineral resources') suggest that the carrying amount of exploration and evaluation assets may exceed its recoverable amount. The recoverable amount of the exploration and evaluation assets (or the cash generating unit(s) to which it has been allocated, being no larger than the relevant area of interest) is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years.

 

Where a decision is made to proceed with development in respect of a particular area of interest, the relevant exploration and evaluation asset is tested for impairment, reclassified to mine development properties, and then amortised over the life of the reserves associated with the area of interest once mining operations have commenced.

 

Mine development expenditure is recognised at cost less accumulated amortisation and any impairment losses. When commercial production in an area of interest has commenced, the associated costs are amortised over the estimated economic life of the mine on a units of production basis.

 

Changes in factors such as estimates of proved and probable reserves that affect unit of production calculations are dealt with on a prospective basis.

 

Foreign currencies

The individual financial statements of each group entity are presented in its functional currency being the currency of the primary economic environment in which the entity operates. For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in United States dollars, which is the functional currency of the group and the presentation currency for the consolidated financial statements except for the UK subsidiaries which are denominated in Great British pounds and the Australian subsidiaries which are denominated in Australian dollars.

 

In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined.

Non‑monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognised in profit or loss in the period in which they arise.

 

Inventories

Inventories are valued at the lower of cost and net realisable value. Costs including an appropriate portion of fixed and variable overhead expenses are assigned to inventory on hand by the method appropriate to each particular class of inventory, with the majority being valued on a weighted average cost basis. Net realisable value represents the estimated selling price less all estimated costs of completion and costs necessary to make the sale.

 

Ore stockpiles, gold in circuit and finished goods are valued applying absorption costing.

 

Interests in joint arrangements

The group applies IFRS 11 'Joint arrangements'. Under IFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor. Joint ventures are accounted for using the equity method. In relation to its interests in joint operations, the group recognises its share of assets and liabilities; revenue from the sale of its share of the output; and its share of expenses.

 

SGM is wholly consolidated within the Centamin group of companies, reflecting the substance and economic reality of the Concession Agreement (see note 22).

 

Leased assets

Leased assets are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the leased asset to the lessee. All other leases are classified as operating leases.

 

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where other systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

 

 

Property, plant and equipment ("PPE")

PPE is stated at cost less accumulated depreciation and impairment. PPE will include capitalised development expenditure. Cost includes expenditure that is directly attributable to the acquisition of the item as well as the estimated cost of abandonment. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. The cost of PPE includes the estimated restoration costs associated with the asset.

 

Depreciation is provided on PPE. Depreciation is calculated on a straight-line basis so as to write off the net cost or other revalued amount of each asset over its expected useful life to its estimated residual value.

 

The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual financial period, with the effect of any changes recognised on a prospective basis.

 

Freehold land is not depreciated.

 

The following estimated useful lives are used in the calculation of depreciation:

 

Plant and equipment      2 - 20 years

Office equipment           3 - 7 years

Mining equipment           2 - 13 years

Buildings                        4 - 20 years

 

The gain or loss arising on the disposal or scrappage of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in income.

 

Mine development properties

Where mining of a mineral resource has commenced, the accumulated costs are transferred from exploration and evaluation assets to mine development properties.

 

Amortisation is first charged to new mine development ventures from the date of first commercial production. Amortisation of mine properties is on a unit of production basis resulting in an amortisation charge proportional to the depletion of the proved and probable ore reserves. The unit of production can be on a tonnes or an ounce depleted basis.

 

Capitalised underground development costs incurred to enable access to specific ore blocks or areas of the underground mine, and which only provide an economic benefit over the period of mining that ore block or area, are depreciated on a units of production basis, whereby the denominator is estimated ounces of gold in Proven and probable reserves within that ore block or area where it is considered probable that those resources will be extracted economically.

 

Stripping activity assets

The group defers stripping costs incurred (removal of mine waste materials which provide improved access to further quantities of material that will be mined in future periods). This waste removal activity is known as "stripping". There can be two benefits accruing to the entity from the stripping activity:

 

·          usable ore that can be used to produce inventory; and

·          improved access to further quantities of material that will be mined in future periods.

 

The costs of stripping activity to be accounted for in accordance with the principles of IAS 2 'Inventories' to the extent that the benefit from the stripping activity is realised in the form of inventory produced. The costs of stripping activity which provides a benefit in the form of improved access to ore is recognised as a non‑current "stripping activity asset" where the following criteria are met:

 

a)     it is probable that the future economic benefit (improved access to the ore body) associated with the stripping activity will flow to the entity;

b)     the entity can identify the component of the ore body for which access has been improved; and

c)     the costs relating to the stripping activity associated with that component can be measured reliably.

 

 

When the costs of the stripping activity asset and the inventory produced are not separately identifiable, production stripping costs are allocated between the inventory produced and the stripping activity asset by using an allocation basis that is based on a relevant production measure. A stripping activity asset is accounted for as an addition to, or as an enhancement of, an existing asset and classified as tangible or intangible according to the nature of the existing asset of which it forms part. A stripping activity asset is initially measured at cost and subsequently carried at cost or its revalued amount less depreciation or amortisation and impairment losses. A stripping activity asset is depreciated or amortised on a systematic basis, over the expected useful life of the identified component of the ore body that becomes more accessible as a result of the stripping activity. The stripping activity asset is depreciated using a units of production method based on the total ounces to be produced over the life of the component of the ore body.

 

Deferred stripping costs are included in "stripping assets", within tangible assets. These form part of the total investment in the relevant cash‑generating unit, which is reviewed for impairment if events or a change in circumstances indicate that the carrying value may not be recoverable. Amortisation of deferred stripping costs is included in operating costs.

 

Impairment of assets (other than exploration and evaluation and financial assets)

At each reporting date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash generating units).

 

Recoverable amount is the higher of fair value loss costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre‑tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset for which the estimates of future flows have not been adjusted.

 

If the recoverable amount of a cash generating unit is estimated to be less than its carrying amount, the carrying amount of the cash generating unit is reduced to its recoverable amount. Where an impairment loss subsequently reverses, the carrying amount of the cash generating unit is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the cash generating unit in prior years.

 

A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of an impairment loss is treated as a revaluation increase.

 

Revenue

Revenue is measured at the fair value of the consideration received or receivable for goods and services in the normal course of business, net of discounts, VAT and other sales related taxes.

 

Sale of goods

Revenue from the sale of mineral production is recognised when the group has passed the significant risks and rewards of ownership of the mineral production to the buyer, it is probable that economic benefits associated with the transaction will flow to the group, the sales price can be measured reliably, and the group has no significant continuing involvement and the costs incurred or to be incurred in respect of the transaction can be measured reliably. This is when insurance risk has passed to the buyer and the goods have been collected at the agreed location.

 

Where the terms of the executed sales agreement allow for an adjustment to the sales price based on a survey of the mineral production by the buyer (for instance an assay for gold content), recognition of the revenue from the sale of mineral production is based on the most recently determined estimate of product specifications.

 

Pre‑production revenues

Income derived by the entity prior to the date of commercial production is offset against the expenditure capitalised and carried in the consolidated statement of financial position. All revenues recognised after commencement of commercial production are recognised in accordance with the revenue policy stated above. The commencement date of commercial production is determined when stable and sustained production capacity has been achieved.

 

Production royalty

The Arab Republic of Egypt ("ARE") is entitled to a royalty of 3% of net sales revenue (revenue net of freight and refining costs) as defined from the sale of gold and associated minerals from the Sukari Gold Mine. This royalty is calculated and recognised on receipt of the final certificate of analysis document received from the refinery. Due to its nature, this royalty is not recognised in cost of sales but rather in other operating costs.

 

Other income

Interest income

Interest income is recognised when it is probable that the economic benefits will flow to the group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

 

Business combinations

Acquisitions of businesses as defined by IFRS 3 are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the group in exchange for control of the acquiree. Acquisition related costs are recognised in profit or loss as incurred.

 

Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with IFRS 3 either in profit or loss or as a change to other comprehensive income. Changes in the fair value of contingent consideration classified as equity are not remeasured, and its subsequent settlement is accounted for within equity.

 

Where a business combination is achieved in stages, the group's previously‑held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of.

 

The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 (2008) are recognised at their fair value at the acquisition date, except that:

 

·          deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 'Income taxes' and IAS 19 'Employee benefits' respectively;

·          liabilities or equity instruments related to the replacement by the group of an acquiree's share‑based payment awards are measured in accordance with IFRS 2 'Share‑based payment'; and

·          assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 'Non‑current assets held for sale'.

 

Assets held for sale and discontinued operations are measured in accordance with that standard. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.

 

The measurement period is the period from the date of acquisition to the date the group obtains complete information about facts and circumstances that existed as of the acquisition date, and is subject to a maximum of one year.

 

Investments in associates

An associate is an entity over which the group has significant influence and that is neither a subsidiary nor a joint arrangement. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

 

The results, assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 'Non‑current assets held for sale and discontinued operations'.

 

Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post‑acquisition changes in the group's share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the group's interest in that associate (which includes any long‑term interests that, in substance, form part of the group's net investment in the associate) are recognised only to the extent that the group has incurred legal or constructive obligations or made payments on behalf of the associate.

 

Any excess of the cost of acquisition over the group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment.

 

Any excess of the group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

 

Where a group entity transacts with an associate of the group, profits and losses are eliminated to the extent of the group's interest in the relevant associate.

 

The group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to share of profit and loss of associates in the income statement.

 

Dilution gains and losses arising in investments in associates are recognised in the income statement.

 

Share‑based payments

Equity settled share‑based payments with employees and others providing similar services are measured at the fair value of the equity instrument at grant date. Fair value is measured by the use of the Black‑Scholes model. Where share‑based payments are subject to market conditions, fair value was measured by the use of a Monte‑Carlo simulation. The fair value determined at the grant date of the equity settled share‑based payments is expensed over the vesting period, based on the consolidated entity's estimate of shares that will eventually vest.

 

Equity settled share‑based transactions with other parties are measured at the fair value of the goods or services received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted:

 

·        including any market performance conditions (for example, an entity's share price);

·        excluding the impact of any service and non‑market performance vesting conditions (for example, profitability and remaining an     employee of the entity over a specified time period); and

·        including the impact of any non‑vesting conditions (for example, the requirement for employees to save or holding shares for a     specific period of time).

 

When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.

The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non‑transferability, exercise restrictions, and behavioural considerations. Further details on how the fair value of equity settled share‑based transactions has been determined can be found in note 28. At each reporting date, the group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss over the remaining vesting period, with corresponding adjustment to the equity settled employee benefits reserve.

 

Issued capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

 

Where the Company or other members of the consolidated group purchases the Company's equity share capital, the consideration paid is deducted from the total shareholders' equity of the group and/or of the Company as treasury shares until they are cancelled. Where such shares are subsequently sold or reissued, any consideration received is included in shareholders' equity of the group and/or the Company.

 

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

 

 

 

Current tax

The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the consolidated statement of comprehensive income because of items of income or expense that are taxable or deductible in other periods and items that are never taxable or deductible. The group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

 

Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

 

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

 

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the group intends to settle its current tax assets and liabilities on a net basis.

 

Restoration and rehabilitation

A provision for restoration and rehabilitation is recognised when there is a present legal or constructive obligation as a result of exploration, development and production activities undertaken, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the provision can be measured reliably. The estimated future obligations include the costs of dismantling and removal of facilities, restoration and monitoring of the affected areas. The provision for future restoration costs is the best estimate of the present value of the expenditure required to settle the restoration obligation at the reporting date. Future restoration costs are reviewed annually and any changes in the estimate are reflected in the present value of the restoration provision at each reporting date.

 

The initial estimate of the restoration and rehabilitation provision relating to exploration, development and mining production activities is capitalised into the cost of the related asset and amortised on the same basis as the related asset, unless the present obligation arises from the production of the inventory in the period, in which case the amount is included in the cost of production for the period. Changes in the estimate of the provision of restoration and rehabilitation are treated in the same manner, except that the unwinding of the effect of discounting on the provision is recognised as a finance cost within other operating costs rather than being capitalised into the cost of the related asset.

 

4. Critical accounting judgments

Critical judgments in applying the entity's accounting policies

The following are the critical judgments that management has made in the process of applying the group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements:

 

Management has discussed its critical accounting judgments and associated disclosures with the Company's audit and risk committee.

 

Impairment of assets (other than exploration and evaluation and financial assets)

IFRS requires management to test for impairment if events or changes in circumstances indicate that the carrying amount of a finite lived asset may not be recoverable. Management has concluded that there is no indication that an impairment exists, nor have any indicators arisen after the reporting period and are therefore not required to perform a full impairment review under IAS 36.

 

In making its assessment as to the possibility of whether impairments losses having arisen, management considered the following indications:

·          internal sources of information;

·          external sources of information;

·          litigation;

 

The key assumptions previously applied in impairment reviews are:

·          forecast gold prices;

·          discount rate;

·          production volumes;

·          reserves and resources report; and

·          costs and recovery rates.

 

Litigation

The group exercises judgment in measuring and recognising provisions and the exposures to contingent liabilities related to pending litigation, as well as other contingent liabilities (see note 21 to the financial statements). Judgment is necessary in assessing the likelihood that a pending claim will succeed, or a liability will arise, and to quantify the possible range of the financial settlement.

The group is currently a party to two legal actions both of which could affect its ability to operate the mine at Sukari in the manner in which it is currently operated and adversely affect its profitability. The details of this litigation, which relate to the loss of the Egyptian national subsidy for diesel fuel oil and the ability of the group to operate outside the area of 3km² determined by the Administrative Court of first instance to be the area of the Sukari exploitation lease, are given in note 21 to the financial statements and in the most recently filed Annual Information Form ("AIF") which is available on SEDAR at www.sedar.com. Although it is possible to quantify the effects of the loss the national fuel subsidy, it is not currently possible to quantify with sufficient precision the effect of restricting operations to an area of 3km².

 

Every action is being taken to contest these decisions, including the making of formal legal appeals and, although their resolution may still take some time, management remain confident that a satisfactory outcome will ultimately be achieved. In the meantime, however, the group is continuing to pay international prices for diesel fuel oil. With respect to the Administrative Court ruling, on 20 March 2013 the Supreme Administrative Court upheld the Company's application to suspend this decision until the merits of the Company's appeal are considered and ruled on, thus providing assurance that normal operations will be able to continue during this process.

 

In the unlikely event that the group is unsuccessful in either or both of its legal actions, and that the operating activities are restricted to a reduced area, it is management's belief that the group will be able to continue as going concern.

 

Recovery of capitalised exploration evaluation and development expenditure

The group's accounting policy for exploration and evaluation expenditure results in exploration and evaluation expenditure being capitalised for those projects where such expenditure is considered likely to be recoverable through future extraction activity or sale or where the exploration activities have not reached a stage which permits a reasonable assessment of the existence of reserves.

 

This policy requires management to make certain estimates and assumptions as to future events and circumstances, in particular whether the group will proceed with development based on existence of reserves or whether an economically viable extraction operation can be established. Such estimates and assumptions may change from period to period as new information becomes available. If, subsequent to the exploration and evaluation expenditure being capitalised, a judgment is made that recovery of the expenditure is unlikely or the project is to be abandoned, the relevant capitalised amount will be written off to the income statement.

 

Going concern

Under guidelines set out by the UK Financial Reporting Council ("FRC") the directors of UK listed companies are required to consider whether the going concern basis is the appropriate basis of preparation of financial statements.

 

Based on a detailed cash flow forecast prepared by management, in which it included any reasonably possible change in the key assumptions on which cash flow forecast is based, the directors have a reasonable expectation that the group will have adequate resources to continue in operational existence for the foreseeable future. Key assumptions underpinning this forecast include:

 

·          litigation as discussed in note 21 to the financial statements;

·          forecast gold price;

·          production volumes; and

·          costs and recovery rates.

 

These financial statements for the year ended 31 December 2016 have therefore been prepared on a going concern basis, which contemplate the realisation of assets and liquidation of liabilities during the normal course of operations, in preparing the financial statements.

 

Accounting treatment of Sukari Gold Mines ("SGM")

SGM is consolidated within the Centamin group of companies, reflecting the substance and economic reality of the Concession Agreement (see note 22 to the financial statements).

Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:

 

Provision for restoration and rehabilitation costs

The group is required to decommission, rehabilitate and restore mines and processing sites at the end of their producing lives to a condition acceptable to the relevant authorities. The provision has been calculated taking into account the estimated future obligations including the costs of dismantling and removal of facilities, restoration and monitoring of the affected areas. The provision for future restoration costs is the best estimate of the present value of the expenditure required to settle the restoration obligation at the reporting date.

 

Ore reserve estimates

Estimates of recoverable quantities of reserves include assumptions on commodity prices, exchange rates, discount rates and production costs for future cash flows. It also involves assessment and judgment of complex geological models. The economic, geological and technical factors used to estimate ore reserves may change from period to period. Changes in ore reserves affect the carrying values of mine properties, property, plant and equipment, provision for rehabilitation assets and deferred taxes. Ore reserves are integral to the amount of depreciation and amortisation charged to the consolidated statement of comprehensive income and the calculation in the valuation of inventory.

 

Production forecasts from the underground mine at Sukari are partly based on estimates regarding future resource and reserve growth. It should be specifically noted that the potential quantity and grade from the Sukari underground mine is conceptual in nature, that there has been insufficient exploration to define a mineral resource and that it is uncertain if further exploration will result in the target being delineated as a mineral resource.

 

Depreciation of capitalised underground mine development costs

Depreciation of capitalised underground mine development costs at the Sukari mine is based on reserve estimates. Management and directors believe that these estimates are both realistic and conservative, based on current information.

 

EMRA profit share

Payments made to EMRA pursuant to the provisions of the Concession Agreement are recognised as a variable charge in the income statement (below profit after tax) of Centamin, which leads to a reduction in the earnings per share. The profit share payments during the year will be reconciled against SGM's audited June 2017 financial statements.  Any variation between payments made during the year (which are based on the Company's estimates) and the audited financial statements, may result in a balance due and payable to EMRA or advances to be offset against future distributions.

 

Egyptian Pound

The group operates predominantly in Egypt. The group receives its income from gold sales in US dollars, however, it is off-set by the fact that in November 2016, the Egyptian government floated the Egyptian pound in an attempt to stabilize its economy. This has led to a significant devaluation of the currency which has led to an increase in inflation. This is a potential risk for the group as it has led to increases in the prices of fuel, raw materials and other goods as well as pressure to increase staff wages.

 

5. Revenue

An analysis of the group's revenue for the year, from continuing operations, is as follows:

 

	31 December	31 December
	2016	2015
	US$'000	US$'000
Gold sales	686,306	506,963
Silver sales	1,081	1,433
	687,387	508,396

All gold and silver sales during the year were made to a single customer in North America.

 

 

6. Profit before tax

Profit for the year has been arrived at after crediting/(charging) the following gains/(losses) and expenses:

					31 December 2016	31 December 2015
					Total	Total
					US$'000	US$'000
Cost of sales
Mine production costs					(288,317)	(314,827)
Movement in inventory					5,926	(7,476)
Depreciation and amortisation					(106,885)	(93,939)
					(389,276)	(416,242)

 

	31 December	31 December
	2016	2015
	US$'000	US$'000
Finance income
Interest received	917	269
Other operating costs
Corporate compliance	(1,746)	(1,556)
Office related depreciation	(87)	(111)
Auditing fees	(641)	(573)
Corporate consultants	(370)	(751)
Communications and IT	(169)	(206)
Salary and wages	(5,353)	(6,929)
Travel, accommodation and entertainment	(859)	(1,212)
Office rents and lease payment	(156)	(185)
Other administration expenses	(207)	(140)
Impairment reversal	484	526
Insurances	(225)	(120)
Other taxes	(1,400)	(516)
Stock obsolescence	(2,500)	-
Employee equity settled share‑based payments	(2,478)	(2,350)
Fixed royalty - attributable to the Egyptian government	(20,575)	(15,198)
Foreign exchange gain/(loss), net	5,025	2,141
Finance charges	(239)	(180)
Provision for restoration and rehabilitation - unwinding of discount	(581)	(362)
	(32,077)	(27,722)

                                     

 

	31 December	31 December
	2016	2015
	US$'000	US$'000
Impairment of exploration and evaluation assets(1)	(122)	(6,294)

1)      Refer to note 14 for further details.

 

 

7. EMRA profit share

EMRA is entitled to a share of 50% of SGM's net production surplus which can be defined as 'revenue less payment of the fixed royalty to Arab Republic of Egypt ("ARE") and recoverable costs'. However, in accordance with the terms of the Concession Agreement, in the first and second years in which there is a Profit Share, PGM will be entitled to an additional 10% of net production surplus and an additional 5% in the third and fourth years.

 

	31 December	31 December
	2016	2015
	US$'000	US$'000
Income statement
EMRA profit share	(51,253)	-
Balance sheet
EMRA advance profit share prepayment	-	28,750
EMRA profit share accrual	4,000	-

Entitlements to EMRA pursuant to the provisions of the Concession Agreement are recognised as a variable charge in the income statement (below profit after tax) of Centamin, which leads to a reduction in the earnings per share. The profit share payments during the year will be reconciled against SGM's audited June 2017 financial statements. 

 

Any variation between payments made during the year (which are based on the Company's estimates) and the audited financial statements, may result in a balance due and payable to EMRA or advances to be offset against future distributions. This will be reflected as an accrual or prepayment in each reporting period.

 

Centamin elected to make advance payments against future profit share from 2013 onwards and the value of these payments amounted to US$28.75 million.  These payments were recovered by PGM during the year by way of net off against EMRA's entitlement to profit share during the period.

	31 December	31 December
	2016	2015
	US$'000	US$'000
Cash flows
EMRA profit share entitlement	51,253	-
EMRA prepayment	-	5,000
EMRA recovery of prepayment	(28,750)	-
EMRA accrual	(4,000)	-
EMRA cash payments during the period	18,503	5,000

 

EMRA and PGM benefit from advance distributions of profit share which are made on a weekly/fortnightly basis and proportionately in accordance with the terms of the Concession Agreement. Future distributions will take into account ongoing cash flows, historic costs that are still to be recovered and any future capital expenditure. The profit share payments during the year will be reconciled against SGM's audited June 2017 financial statements. 

 

Subsequent to year end further profit share advance distributions totalling US$7m has been made to EMRA.

 

8. Tax

The group operates in several countries and, accordingly, it is subject to, the various tax regimes in the countries in which it operates. From time to time the group is subject to a review of its related tax filings and in connection with such reviews, disputes can arise with the taxing authorities over the interpretation or application of certain rules to the group's business conducted within the country involved. If the group is unable to resolve any of these matters favourably, there may be an adverse impact on the group's financial performance, cash flows or results of operations. In the event that management's estimate of the future resolution of these matters changes, the group will recognise the effects of the changes in its consolidated financial statements in the period that such changes occur.

 

In Australia, Centamin Egypt Limited and Pharaoh Gold Mines NL have elected to form a tax-consolidated group and therefore are treated as a single entity for Australian income tax purposes. Pharaoh Gold Mines NL benefits from the "Branch Profits Exemption" whereby foreign branch income will generally not be subject to Australian income tax. In Egypt, Centamin has entered into a concession agreement that provides that the income generated by Sukari Gold Mining Company's activities is granted a long‑term tax exemption from all taxes imposed in Egypt.

 

Tax recognised in profit is summarised as follows:

 

Tax expense

	31 December	31 December
	2016	2015
	US$'000	US$'000
Current tax
Current tax expense in respect of the current year	(821)	(6,837)
Deferred tax	-	-
Total tax expense	(821)	(6,837)

 

The tax expense for the year can be reconciled to the profit per the consolidated statement of comprehensive income as follows:

 

 

	31 December	31 December
	2016	2015
	US$'000	US$'000
Profit before income tax	266,829	58,407
Tax expense calculated at 0% (2015: 0%)(1) of profit before tax	-	-
Tax effect of amounts which are not deductible/taxable in calculating taxable income:
Effect of tax different tax rates of subsidiaries operating in other jurisdictions	(821)	(6,837)
Tax expense for the year	(821)	(6,837)

1)    The tax rate used in the above reconciliation is the corporate tax rate of 0% payable by Jersey corporate entities under the Jersey tax law (2015: 0%). There has been no change in the underlying corporate tax rates when compared to the previous financial period.

 

Tax recognised in the balance sheet is summarised as follows:

	31 December	31 December
	2016	2015
	US$'000	US$'000
Current tax liabilities	-	(6,837)
Current tax payable	-	-

 

Tax consolidation

Relevance of tax consolidation to the consolidated entity

Companies within the group's wholly owned Australian resident entities formed a tax‑consolidated group with effect from 1 July 2003. The head entity within the tax‑consolidated group is Centamin Egypt Limited. The members of the tax‑consolidated group are Pharaoh Gold Mines NL, Viking Resources NL and North African Resources NL.

 

Nature of tax funding arrangements and tax sharing agreements

Entities within the tax‑consolidated group have entered into a tax funding arrangement and a tax‑sharing agreement with the head entity. Under the terms of the tax‑funding agreement, Centamin Egypt Limited and each of the entities in the tax‑consolidated group has agreed to pay a tax‑equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable from or payable to other entities in the tax‑consolidated group.

 

The tax‑sharing agreement entered into between members of the tax‑consolidated group provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement as payment of any amounts under the tax‑sharing agreement is considered remote.

 

 

9. Segment reporting

The group is engaged in the business of exploration and mining of precious metals only, which represents a single operating segment. The board is the group's chief operating decision maker within the meaning of IFRS 8.

 

Non-current assets other than financial instruments by country:

	31 December	31 December
	2016	2015
	US$'000	US$'000
Egypt	899,852	970,376
Ethiopia	-	336
Burkina Faso	105,432	76,209
Côte d'Ivoire	17,870	5,316
Australia	3	2
Jersey	63	115
	1,023,220	1,052,354

 

10. Trade and other receivables

	31 December	31 December
	2016	2015
	US$'000	US$'000
Non‑current
Other receivables - deposits	81	60
	81	60

 

	31 December	31 December
	2016	2015
	US$'000	US$'000
Current
Gold and silver sales debtors	23,009	20,472
Other receivables	1,861	3,312
	24,870	23,784

Trade and other receivables are classified as loans and receivables and are therefore measured at amortised cost.

 

All gold and silver sales during the year were made to a single customer in North America and are neither past due or impaired.

 

The average age of the receivables is 9 days (2015: 14 days). No interest is charged on the receivables. There are no trade receivables past due and impaired at the reporting date, and thus no allowance for doubtful debts has been recognised. Of the trade receivables balance, the gold sales debtor is all a receivable from Asahi Refining of Canada. The amount due has been received in full subsequent to year end.  Other receivables represent GST and VAT amounts owing from the various jurisdictions that the group operates in and inventory returns to vendors where refunds are expected to occur.

 

The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.

 

11. Inventories

	31 December	31 December
	2016	2015
	US$'000	US$'000
Mining stockpiles and ore in circuit	34,217	28,291
Stores inventory	102,345	106,484
	136,562	134,775

 

 

12. Prepayments

                  

	31 December	31 December
	2016	2015
	US$'000	US$'000
Current
Prepayments	1,151	1,161
Fuel prepayments	877	3,169
	2,028	4,330
	31 December	31 December
	2016	2015
	US$'000	US$'000
Non-current
EMRA	-	28,750
Others	295	-
	295	28,750
Movement in fuel prepayments
	31 December	31 December
	2016	2015
	US$'000	US$'000
Balance at the beginning of the year	3,169	-
Fuel prepayment recognised	23,014	42,472
Less: provision charged to:(1)
Mine production costs	(22,844)	(43,808)
Property, plant and equipment	(2,269)	-
Inventories	(193)	1,336
Fuel advance down payment	-	3,169
Balance at the end of the year	877	3,169

1)      The cumulative fuel prepayment recognised and provision charged as at 31 December 2016 is as follows:

                   Fuel prepayment recognised (US$'000)                   231,218

                   Provision charged to:

                   Mine production costs (US$'000)                            (218,000)

                   Property, plant and equipment (US$'000)        (14,120)

                   Inventories (US$'000)                                                  (1,390)

Fuel advance down payment (US$'000)             3,169

 

Diesel Fuel Dispute

As more fully described in note 21 below, the group is currently involved in court action concerning the price at which it is supplied with DFO.   Since January 2012, the group has had to pay for DFO at the international price rather than the subsidised price which it believes it is entitled to.  It is seeking recovery of the funds advanced since 2012 though the court action.  However, management recognises the practical difficulties associated with reclaiming funds from the government and for this reason has, fully provided against the prepayment of US$231.2 million to 31 December 2016 of which US$24.6 million was provided for during 2016.

 

In order to allow a better understanding of the financial information presented within the consolidated financial statements, and specifically the group's underlying business performance, the effect of the Diesel Fuel Dispute is shown below.

 

This has resulted in a net charge of US$24.6 million in the profit and loss.

 

 

	31 December 2016			31 December 2015
	Before			Before
	adjustment	Adjustment	Total	adjustment	Adjustment	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Cost of sales
Mine production costs	(265,473)	(22,844)	(288,317)	(271,019)	(43,808)	(314,827)
Movement in inventory	7,710	(1,784)	5,926	(4,545)	(2,931)	(7,476)
Depreciation and amortisation	(106,885)	-	(106,885)	(93,939)	-	(93,939)
	(364,648)	(24,628)	(389,276)	(369,503)	(46,739)	(416,242)

 

 

12. Prepayments (continued)

The effect on earnings per share is shown below.

		31 December 2016			31 December 2015
		Before		Total	Before
		Adjustment	Adjustment		adjustment	Adjustment	Total
		US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Earnings per share before profit share:
Basic (cents per share)		25.183	(2.134)	23.049	8.590	(4.084)	4.506
Diluted (cents per share)		25.058	(2.123)	22.935	8.467	(4.025)	4.441
Earnings per share after profit share:
Basic (cents per share)		20.742	(2.134)	18.608	8.590	(4.084)	4.506
Diluted (cents per share)		20.639	(2.123)	18.516	8.467	(4.025)	4.441

 

13. Property, plant and equipment

					Mine	Capital
	Office		Plant and	Mining	development	work in
	equipment	Buildings	equipment	equipment	properties	progress	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Cost
Balance at 31 December 2015	5,535	1,194	582,854	241,316	316,304	32,469	1,179,672
Additions	547	825	1,474	8,733	2,075	43,306	56,960
Disposals	(30)	-	(215)	(558)	-	-	(803)
Transfers	-	-	-	-	47,523	-	47,523
Balance at 31 December 2016	6,052	2,019	584,113	249,491	365,902	75,775	1,283,352
Accumulated depreciation
Balance at 31 December 2015	(4,867)	(293)	(98,504)	(100,826)	(103,715)	-	(308,205)
Depreciation and amortisation	(558)	(119)	(29,496)	(29,424)	(47,376)	-	(106,973)
Disposals	25	-	87	640	-	-	752
Balance at 31 December 2016	(5,400)	(412)	(127,913)	(129,610)	(151,091)	-	(414,426)
Cost
Balance at 31 December 2014	5,401	1,186	565,836	221,178	232,921	116,772	1,143,294
Additions	103	8	147	3,779	-	28,781	32,818
Increase in rehabilitation asset	-	-	-	-	3,762	-	3,762
Disposals	-	-	-	(202)	-	-	(202)
Transfers	31	-	16,871	16,561	79,621	(113,084)	-
Balance at 31 December 2015	5,535	1,194	582,854	241,316	316,304	32,469	1,179,672
Accumulated depreciation
Balance at 31 December 2014	(4,280)	(234)	(67,980)	(72,339)	(69,497)	-	(214,330)
Depreciation and amortisation	(587)	(59)	(30,524)	(28,663)	(34,218)	-	(94,051)
Disposals	-	-	-	176	-	-	176
Balance at 31 December 2015	(4,867)	(293)	(98,504)	100,826	(103,715)	-	308,205
Net book value
As at 31 December 2015	668	901	484,350	140,490	212,589	32,469	871,467
As at 31 December 2016	652	1,607	456,200	119,882	214,811	75,775	868,926

No impairment review was performed in 2015 or 2016 as no indicators of impairment were identified.

 

14. Exploration and evaluation asset

	31 December	31 December
	2016	2015
	US$'000	US$'000
Balance at the beginning of the period	152,077	123,999
Expenditure for the period	49,487	34,372
Transfer to property plant and equipment	(47,524)	-
Impairment of exploration and evaluation asset	(122)	(6,294)
Balance at the end of the period	153,918	152,077

The exploration and evaluation asset relates to the drilling, geological exploration and sampling of potential ore reserves and can be attributed to Egypt (US$30.5m) Burkina Faso (US$105.6m) and Côte d'Ivoire (US$17.8m).

 

15. Available-for-sale financial assets

	31 December	31 December
	2016	2015
	US$'000	US$'000
Balance at the beginning of the period	163	409
Gain/(loss) on foreign exchange movement	(78)	(560)
Loss on fair value of investment - other comprehensive income	45	(212)
Impairment reversal/(loss)	-	526
Balance at the end of the period	130	163

The available-for-sale financial asset at period end relates to a 5.33% (2015: 6.66% equity interest in Nyota Minerals Limited ("Nyota"), a listed public company and a 0.43% interest in Kefi Minerals plc an AIM listed company.

Management made the decision to sell its interest in Nyota and the financial asset is classed as a current asset.

 

16. Trade and other payables

	31 December	31 December
	2016	2015
	US$'000	US$'000
Trade payables	23,734	28,630
Other creditors and accruals	24,257	18,508
	47,991	47,138

Trade payables principally comprise the amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 22 days (2015: 22 days). Trade payables are interest free for periods ranging from 30 to 180 days. Thereafter interest is charged at commercial rates. The group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. The directors consider that the carrying amount of trade payables approximate their fair value.

 

17. Provisions

	31 December	31 December
	2016	2015
	US$'000	US$'000
Current
Employee benefits(1)	367	456
Withholding tax	3,609	120
Stock obsolescence	2,500	-
	6,476	576
Non-current
Restoration and rehabilitation(2)	7,697	7,139
	7,697	7,139
Movement in restoration and rehabilitation provision
Balance at beginning of the year	7,139	3,015
Additional provision recognised/(provision derecognised)	(23)	3,762
Interest expense - unwinding of discount	581	362
Balance at end of the year	7,697	7,139

1)      Employee benefits relate to annual, sick and long service leave entitlements.

2)      The provision for restoration and rehabilitation represents the present value of the directors' best estimate of the future outflow of economic benefits that will be required to remove the facilities and restore the affected areas at the group's sites discounted by 8.17% (2015: 8.17%). This restoration and rehabilitation estimate, which is reviewed on annual basis, has been made on the basis of benchmark assessments of restoration works required following mine closure and after taking into account the projected area to be disturbed over the life of the mine, being 20 years. The annual review undertaken as at 31 December 2016 has resulted in no change to the provision.

 

 

18. Issued capital

	31 December 2016		31 December 2015
	Number	US$'000	Number	US$'000
Fully paid ordinary shares
Balance at beginning of the period	1,152,107,984	665,590	1,152,107,984	661,573
Issue/(Cancelled) of shares	-	(17)	-	38
Transfer from share option reserve	-	1,899	-	3,979
Balance at end of the period	1,152,107,984	667,472	1,152,107,984	665,590

 

The authorised share capital is an unlimited number of no par value shares.

 

At 31 December 2016 the Company held 2,109,710 ordinary shares in treasury (2015: 5,659,709 ordinary shares). These shares are held by the trustee pursuant to the deferred bonus share plan.  Fully paid ordinary shares carry one vote per share and carry the right to dividends. See note 29 for more details of the share options.

 

19. Share option reserve

	31 December	31 December
	2016	2015
	US$'000	US$'000
Share option reserve	3,048	2,469

     

	31 December	31 December
	2016	2015
	US$'000	US$'000
Share option reserve
Balance at beginning of the period	2,469	4,098
Share‑based payments expense	2,937	2,456
Transfer to accumulated profits	(459)	(106)
Transfer to issued capital	(1,899)	(3,979)
Balance at the end of the period	3,048	2,469

The share option reserve arises on the grant of share options to employees under the employee share option plan. Amounts are transferred out of the reserve and into issued capital when the options and warrants are exercised/vested. Amounts are transferred out of the reserve into accumulated profits when the options and warrants are forfeited.

 

20. Commitments for expenditure

(a) Capital expenditure commitments

	31 December	31 December
	2016	2015
	US$'000	US$'000
Plant and equipment(1)
No longer than one year	-	-
Longer than one year and not longer than five years	-	-
Longer than five years	-	-
	-	-

¹⁾              As a result of the completion of Stage 4, the group had no commitments for capital expenditure as at 31 December 2016.

 

(b) Operating lease commitments

The future aggregate minimum lease payments under non‑cancellable operating leases are as follows:

	31 December	31 December
	2016	2015
	US$'000	US$'000
Office premises
No longer than one year	56	68
Longer than one year and not longer than five years	47	119
	103	187

Operating lease commitments are limited to office premises in Jersey.

 

 

21. Contingent liabilities and contingent assets

Contingent liabilities

Fuel supply

In January 2012, the group received a letter from Chevron (its then fuel supplier) to the effect that Chevron would not be able to continue supplying Diesel Fuel Oil ("DFO") to the mine at Sukari at local subsidised prices. It is understood that the reason that this letter was issued was that Chevron had received a letter instructing it to do so from the Egyptian General Petroleum Corporation ("EGPC"). It is understood that EGPC itself took the decision to issue this instruction because it had received legal advice from the Legal Advice Department of the Council of State (an internal government advisory department) that the companies operating in the gold mining sector in Egypt were not entitled to such subsidies. In addition, during 2012, the Company received a demand from Chevron for the repayment of fuel subsidies received in the period from late 2009 through to January 2012, for EGP403 million (approximately US$21.8 million at current exchange rates).

 

The group has taken detailed legal advice on this matter (and, in particular, on the opinion given by Legal Advice Department of the Council of State) and in consequence in June 2012 lodged an appeal against EGPC's decision in the Administrative Courts. Again, the group believes that its grounds for appeal are strong and that there is every prospect of success. However, as a practical matter, and in order to ensure the continuation of supply, the group has since January 2012 advanced funds to its fuel supplier, Chevron, based on the international price for diesel. As at the date of the financial statements, no final decision had been taken by the courts regarding this matter.

 

In September 2016, the State Commissioner's Office produced a report containing non-binding recommendations for the Administrative Court in which the case is proceeding.  The report's findings were unfavourable to the group.  The group's legal advisers do not believe the report properly addresses the substantive merits of the group's case and, as such, the Company continues vigorously to pursue its claim.  The Company has prepared a response to the report which it will submit at the next hearing in the case. The group remains of the view that an instant move to international fuel prices is not a reasonable outcome and will look to recover funds advanced thus far should the court proceeding be successfully concluded. However, management recognises the practical difficulties associated with reclaiming funds from the government and for this reason has fully provided against the prepayment of US$231.2 million. Refer to note 12 of the accompanying financial statements for further details on the impact of this provision on the group's results for 2016.

 

No provision has been made in respect of the historic subsidies prior to January 2012 as, based on legal advice, the Company believes that the prospects of a court finding in its favour in relation to this matter remain very strong.

 

Concession Agreement court case

On 30 October 2012, the Administrative Court in Egypt handed down a judgment in relation to a claim brought by, amongst others, an independent member of a previous parliament, in which he argued for the nullification of the agreement that confers on the group rights to operate in Egypt. This agreement, the Concession Agreement, was entered into between the Arab Republic of Egypt, the Egyptian Mineral Resources Authority ("EMRA") and Centamin's wholly owned subsidiary Pharaoh Gold Mines ("PGM"), and was approved by the People's Assembly as Law no. 222 of 1994.

 

In summary that judgment states that, although the Concession Agreement itself remains valid and in force, insufficient evidence had been submitted to court in order to demonstrate that the 160km² "exploitation lease" between PGM and EMRA had received approval from the relevant minister as required by the terms of the Concession Agreement. Accordingly, the court found that the exploitation lease in respect of the area of 160km² was not valid although it stated that there was in existence such a lease in respect of an area of 3km². Centamin, however, is in possession of the executed original lease documentation which clearly shows that the 160km² exploitation lease was approved by the Minister of Petroleum and Mineral Resources. It appears that an executed original document was not supplied to the court.

 

Upon notification of the judgment the group took various steps to protect its ability to continue to operate the mine at Sukari. These included lodging a formal appeal before the Supreme Administrative Court on 26 November 2012. In addition, in conjunction with the formal appeal the group applied to the Supreme Administrative Court to suspend the initial decision until such time as the court was able to consider and rule on the merits of the appeal. On 20 March 2013 the court upheld this application thus suspending the initial decision and providing assurance that normal operations would be able to continue whilst the appeal process is underway.

EMRA has lodged its own appeal in relation to this matter which is supportive of the Company's position in this matter.

 

Furthermore, in late December 2012, the Minister of Petroleum lodged a supporting appeal and shortly thereafter publicly indicated that, in his view, the terms of the Concession Agreement were fair and that the "exploitation" lease was valid. The Minister of Petroleum also expressed support for the investment and expertise that Centamin brings to the country. The Company believes this demonstrates the government's commitment to its investment at Sukari and the desire to stimulate further investment in the Egyptian mining industry.

 

 

21. Contingent liabilities and contingent assets (continued)

The Company has taken extensive legal advice on the merits of its appeal from a number of leading Egyptian law firms who have confirmed that the proper steps were followed with regard to the grant of the 160km² lease. In addition, the Company has been advised that it should benefit from Law no. 32 of 2014, which came into force in April 2014 and which restricts the capacity for third parties to challenge any contractual agreement between the Egyptian government and an investor. This law, whilst in force and ratified by the new parliament, is currently under review by the Supreme Constitutional Court of Egypt. It therefore remains of the view that the appeal is based on strong legal grounds and will ultimately be successful. The appeal was stayed by the Supreme Administrative Court in June 2016 until the Supreme Constitutional Court rules on the validity of Law no. 32 of 2014.  If the Supreme Constitutional Court upholds Law 32, the group is advised that it will benefit from its provisions. In the event that the Supreme Constitutional Court rules that Law no. 32 is invalid, the group remains confident that its appeal will be successful on the merits.

 

In the event that the appellate court fails to be persuaded of the merits of the case put forward by the group, the operations at Sukari may be adversely effected to the extent that the group's operation exceeds the exploitation lease area of 3km² referred to in the original court decision.

 

The Company remains confident that normal operations at Sukari will be maintained whilst the appeal process is underway. Centamin does not currently see the need to take the matter to a court outside of Egypt as Centamin remains of the belief that the Egyptian Court will rule in Centamin's favour.

 

Contingent assets

There were no contingent assets at year-end (31 December 2015: nil).

 

22. Subsidiaries

The parent entity of the group is Centamin plc, incorporated in Jersey, and the details of its subsidiaries are as follows:

 

		Ownership interest
		31 December	31 December
	Country of	2016	2015
	incorporation	%	%
Centamin Egypt Limited	Australia	100	100
Pharaoh Gold Mines NL (holder of an Egyptian branch)	Australia	100	100
Sukari Gold Mining Co	Egypt	50	50
Viking Resources Limited (in liquidation)	Australia	100	100
North African Resources NL (in liquidation)	Australia	100	100
Centamin West Africa Holdings Limited	UK	100	100
Sheba Exploration Limited (holder of an Ethiopia branch)	UK	100	100
Sheba Exploration Holdings Limited(1)	UK	100	100
Centamin Group Services Limited	Jersey	100	100
Centamin Holdings Limited	Jersey	100	100
Centamin Limited	Bermuda	100	100
Ampella Mining Limited	Australia	100	100
Ampella Share Plan Ltd	Australia	100	100
Ampella Mining Gold Pty Ltd	Australia	100	100
West African Gold Reserve Pty Ltd	Australia	100	100
Ampella Mining Gold SARL	Burkina Faso	100	100
Ampella Mining SARL	Burkina Faso	100	100
Ampella Mining Côte d'Ivoire	Côte d'Ivoire	100	100
Centamin Côte d'Ivoire	Côte d'Ivoire	100	100
Ampella Mining Exploration CDI	Côte d'Ivoire	100	100
Centamin Exploration CI	Côte d'Ivoire	100	100
Ampella Resources Burkina Faso	Burkina Faso	100	100
Konkera SA	Burkina Faso	90	90

1)      Previously Sheba Exploration (UK) Plc.

 

Through its wholly owned subsidiary, PGM, the Company entered into the Concession Agreement with EMRA and the Arab Republic of Egypt granting PGM and EMRA the right to explore, develop, mine and sell gold and associated minerals in specific concession areas located in the Eastern Desert of Egypt. The Concession Agreement came into effect under Egyptian law on 13 June 1995.

 

In 2005 PGM, together with EMRA, were granted an exploitation lease over 160km² surrounding the Sukari Project site. The exploitation lease was signed by PGM, EMRA and the Egyptian Minister of Petroleum and gives tenure for a period of 30 years, commencing 24 May 2005 and extendable by PGM for an additional 30 years upon PGM providing reasonable commercial justification.

In 2006 SGM was incorporated under the laws of Egypt. SGM was formed to conduct exploration, development, exploitation and marketing operations in accordance with the Concession Agreement. Responsibility for the day‑to‑day management of the project rests with the general manager, who is appointed by PGM.

 

The fiscal terms of the Concession Agreement require that PGM solely funds SGM. PGM is however entitled to recover from sales revenue recoverable costs, as defined in the Concession Agreement. EMRA is entitled to a share of SGM's net production surplus or profit share (defined as revenue less payment of the fixed royalty to ARE and recoverable costs). As at 31 December 2015, PGM had not recovered its cost and accordingly, no EMRA entitlement had been recognised at that date. During 2016 payments to EMRA commenced as advance profit share distributions. Any payment made to EMRA pursuant to these provisions of the Concession Agreement will be recognised as a variable charge in the income statement. The Concession Agreement grants certain tax exemptions, including the following:

 

·        from 1 April 2010, being the date of commercial production, the Sukari Project is entitled to a 15‑year exemption from any taxes imposed by the Egyptian government on the revenues generated from the Sukari Project. PGM and EMRA intend that SGM will in due course file an application to extend the tax free period for a further 15 years. The extension of the tax free period requires that there has been no tax problems or disputes in the initial period and that certain activities in new remote areas have been planned and agreed by all parties;

·        PGM and SGM are exempt from custom taxes and duties with respect to the importation of machinery, equipment and consumable items required for the purpose of exploration and mining activities at the Sukari Gold Mine. The exemption shall only apply if there is no local substitution with the same or similar quality to the imported machinery, equipment or consumables. Such exemption will also be granted if the local substitution is more than 10% more expensive than the imported machinery, equipment or consumables after the additional of the insurance and transportation costs;

·        PGM, EMRA and SGM and their respective buyers will be exempt from any duties or taxes on the export of gold and associated minerals produced from the Sukari Gold Mine;

·        PGM at all times is free to transfer in US$ or other freely convertible foreign currency any cash of PGM representing its share of net proceeds and recovery of costs, without any Egyptian government limitation, tax or duty;

·        PGM's contractors and sub‑contractors are entitled to import machinery. Equipment and consumable items under the "Temporary Release System" which provided exemption from Egyptian customs duty; and

·        legal title of all operating assets of PGM will pass to EMRA when cost recovery is completed. The right of use of all fixed and movable assets remains with PGM and SGM.

 

23. Auditors' remuneration

The analysis of the auditors' remuneration is as follows:

	31 December	31 December
	2016	2015
	US$'000	US$'000
Fees payable to the Company's auditor and its associates for the audit of the Company's annual financial statements	386	375
Additional fees relating to the prior year	10	-
Fees payable to the Company's auditors' and its associates for other services to the group
- the audit of the Company's subsidiaries	94	150
Total audit fees	490	525
Non‑audit fees:
Audit related assurance services - interim review	109	104
Other assurance services	15	22
Tax compliance services	-	-
Tax advisory services	-	-
Other expenses	27	14
Total non‑audit fees	151	140

The audit and risk committee and the external auditor have safeguards in place to avoid the possibility that the auditor's objectivity and independence could be compromised. These safeguards include the implementation of a policy on the use of the external auditors for non‑audit related services. Where it is deemed that the work to be undertaken is of a nature that is generally considered reasonable to be completed by the auditor of the Company for sound commercial and practical reasons, the conduct of such work will be permissible provided that it has been pre‑approved. All these services are also subject to a predefined fee limit. Any work performed in excess of this limit must be approved by the audit and risk committee.

 

24. Joint arrangements

The consolidated entity has an interest in the following joint arrangement:

	Percentage interest
	31 December	31 December
	2016	2015
Name of joint operation	%	%
Egyptian Pharaoh Investments(1)	50	50

1)      Dormant company.

The group has a US$1 (cash) interest in the above joint operation. The amount is included in the consolidated financial statements of the group. There are no capital commitments arising from the group's interests in the joint operation as disclosed in note 21.

 

25. Earnings per share

	31 December	31 December
	2016	2015
	Cents per share	Cents per share
Basic earnings per share (1)	23.049	4.506
Diluted earnings per share (1)	22.935	4.441
Basic earnings per share (2)	18.608	4.506
Diluted earnings per share (2)	18.516	4.441

⁽¹⁾ Before profit share

⁽²⁾ After profit share

 

Basic earnings per share

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:

 

	31 December	31 December
	2016	2015
	US$'000	US$'000
Earnings used in the calculation of basic EPS(1)	266,008	51,570
Earnings used in the calculation of basic EPS(2)	214,755	51,570

⁽¹⁾ Before profit share
⁽²⁾ After profit share

	31 December	31 December
	2016	2015
	Number	Number
Weighted average number of ordinary shares for the purpose of basic EPS	1,154,085,388	1,144,499,697

 

Diluted earnings per share

The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows:

	31 December	31 December
	2016	2015
	US$'000	US$'000
Earnings used in the calculation of diluted EPS(1)	266,008	51,570
Earnings used in the calculation of diluted EPS(2)	214,755	51,570

⁽¹⁾ Before profit share
⁽²⁾ After profit share

 

	31 December	31 December
	2016	2015
	Number	Number
Weighted average number of ordinary shares for the purpose of basic EPS	1,154,085,388	1,144,499,697
Shares deemed to be issued for no consideration in respect of employee options	5,755,404	16,649,502
Weighted average number of ordinary shares used in the calculation of diluted EPS	1,159,840,792	1,161,149,199

 

No potential ordinary shares were excluded from the calculation of weighted average number of ordinary shares for the purpose of diluted earnings per share.

26. Notes to the statements of cash flows

(a) Reconciliation of cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents includes cash on hand and at bank and deposits.

	31 December	31 December
	2016	2015
	US$'000	US$'000
Cash and cash equivalents	399,873	199,616

 

(b) Reconciliation of profit for the year to cash flows from operating activities

	31 December	31 December
	2016	2015
	US$'000	US$'000
Profit for the year	266,008	51,570
Add/(less) non‑cash items:
Depreciation/amortisation of property, plant and equipment	106,973	94,051
Increase/(decrease) in provisions	6,458	11,231
Foreign exchange rate (gain)/loss	(4,312)	(3,471)
Impairment (reversal of)/loss on available‑for‑sale financial assets	45	(526)
Impairment of exploration and evaluation assets	122	6,294
Share‑based payments expense	2,478	2,350
Changes in working capital during the period:
(Increase)/decrease in trade and other receivables	(1,085)	1,188
(Increase)/decrease in inventories	(1,787)	5,853
Decrease in prepayments	2,302	549
Decrease/(increase) in trade, tax and other payables	(2,391)	16,722
Cash flows generated from operating activities	374,811	185,811

 

(c) Non-cash financing and investing activities

During the year there have been no non‑cash financing and investing activities.

 

27. Financial instruments

(a) Group risk management

The group manages its capital to ensure that entities within the group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the cash and equity balance. The group's overall strategy remains unchanged from the previous financial period.

 

The group has no debt and thus not geared at year end or in the prior year. The capital structure consists of cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital and reserves as disclosed in notes 18 and 19. The group operates in Australia, Jersey, Egypt, Burkina Faso and Côte d'Ivoire. None of the group's entities are subject to externally imposed capital requirements.

 

The group utilises inflows of funds toward the ongoing exploration and development of the Sukari Gold Mine in Egypt, and the exploration projects in Burkina Faso and Côte d'Ivoire.

 

Categories of financial assets and liabilities:

	31 December	31 December
	2016	2015
	US$'000	US$'000
Financial assets
Available-for‑sale assets	130	163
Cash and cash equivalents	399,873	199,616
Trade and other receivables	24,870	23,784
	424,873	223,563
Financial liabilities
Trade and other payables	47,991	47,138

 

 

 

27. Financial instruments (continued)

(b) Financial risk management and objectives

The group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential risk adverse effects and ensure that net cash flows are sufficient to support the delivery of the group's financial targets whilst protecting future financial security. The group continually monitors and tests its forecast financial position against these objectives.

 

The group's activities expose it to a variety of financial risks: market; commodity; credit; liquidity; foreign exchange; and interest rate. These risks are managed under board approved directives through the audit committee. The group's principal financial instruments comprise interest bearing cash and cash equivalents. Other financial instruments include trade receivables and trade payables, which arise directly from operations.

 

It is, and has been throughout the period under review, group policy that no speculative trading in financial instruments be undertaken.

 

(c) Market risk

The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Australian dollar, Great British pound and Egyptian pound. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities that are denominated in a currency that is not the entity's functional currency. The risk is measured by regularly monitoring, forecasting and performing sensitivity analyses on the group's financial position.

 

Financial instruments denominated in Great British pound, Australian dollar and Egyptian pound are as follows:

	Great British pound		Australian dollar		Egyptian pound
	31 December	31 December	31 December	31 December	31 December	31 December
	2016	2015	2016	2015	2016	2015
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Financial assets
Cash and cash equivalents	1,303	332	4,114	2,800	705	1,411
Available-for‑sale assets	113	146	17	17	-	-
	1,416	478	4,131	2,817	705	1,411
Financial liabilities
Trade and other payables	391	390	628	10,905	7,780	9,402
	391	390	628	10,905	7,780	9,402
Net exposure	1,025	88	3,503	(8,088)	(7,075)	(7,991)

 

The following table summarises the sensitivity of financial instruments held at the reporting date to movements in the exchange rate of the Great British pound, Egyptian pound and Australian dollar to the United States dollar, with all other variables held constant. The sensitivities are based on reasonably possible changes over a financial period, using the observed range of actual historical rates.

 

	Impact on profit		Impact on equity
	31 December	31 December	31 December	31 December
	2016	2015	2016	2015
	US$'000	US$'000	US$'000	US$'000
US$/GB£ increase by 10%	(81)	(35)	(10)	(13)
US$/GB£ decrease by 10%	81	35	10	13
US$/A$ increase by 10%	(314)	737	(2)	(1)
US$/A$ decrease by 10%	314	(737)	2	1
US$/E£ increase by 10%	639	726	-	-
US$/E£ decrease by 10%	(639)	(726)	-	-

 

The group's sensitivity to foreign currency has decreased at the end of the current period mainly due to the decrease in foreign currency cash holdings in Australian dollars and a corresponding increase in US dollar cash holdings.

 

The amounts shown above are the main currencies which the group is exposed to. Centamin also has small deposits in Euro (US$114,553) and West African Franc (US$505,182), and net payables of US$593,457 in Euro and US$1,134,928 in West African Franc. A movement of 10% up or down in these currencies would have a negligible effect on the assets/liabilities.

 

The group has not entered into forward foreign exchange contracts. Natural hedges are utilised wherever possible to offset foreign currency liabilities. The Company maintains a policy of not hedging its currency positions and maintains currency holdings in line with underlying requirements and commitments.

 

27. Financial instruments (continued)

(d) Commodity price risk

The group's future revenue forecasts are exposed to commodity price fluctuations, in particular gold prices. The group has not entered into forward gold hedging contracts.

 

(e) Interest rate risk

The group's main interest rate risk arises from cash and short‑term deposits and is not considered to be a material risk due to the short‑term nature of these financial instruments. Cash deposits are placed on term period of no more than 30 days at a time.

 

The financial instruments exposed to interest rate risk and the group's exposure to interest rate risk as at balance date were as follows:

 

	Weighted
	average		One to	More than
	effective	Less than	twelve	twelve
	interest rate	one month	months	months	Total
	%	US$'000	US$'000	US$'000	US$'000
31 December 2016
Financial assets
Variable interest rate instruments	0.24	200,330	200,223	-	400,553
Non‑interest bearing	-	24,320	-	-	24,320
		224,650	200,223	-	424,873
Financial liabilities
Variable interest rate instruments	-	-	-	-	-
Non‑interest bearing	-	47,991	-	-	47,991
		47,991	-	-	47,991
31 December 2015
Financial assets
Variable interest rate instruments	0.22	53,471	146,093	-	199,564
Non-interest bearing	-	24,059	-	-	24,059
		77,530	146,093	-	223,623
Financial liabilities
Variable interest rate instruments	-	-	-	-	-
Non-interest bearing	-	47,138	-	-	47,138

 

(f) Liquidity risk

The group's liquidity position is managed to ensure that sufficient funds are available to meet its financial commitments in a timely and cost effective manner.

 

Ultimate responsibility or liquidity risk management rests with the board of directors, who has established an appropriate management framework for the management of the group's funding requirements. The group manages liquidity risk by maintaining adequate cash reserves and management monitors rolling forecasts of the group's liquidity on the basis of expected cash flow. The tables above reflect a balanced view of cash inflows and outflows and shows the implied risk based on those values. Trade payables and other financial liabilities originate from the financing of assets used in the group's ongoing operations. These assets are considered in the group's overall liquidity risk. Management continually reviews the group liquidity position including cash flow forecasts to determine the forecast liquidity position and maintain appropriate liquidity levels.

 

 

 

27. Financial instruments (continued)

 

		One to	More than
	Less than	twelve	twelve
	one month	months	months	Total
	US$'000	US$'000	US$'000	US$'000
31 December 2016
Financial assets
Variable interest rate instruments	200,330	200,223	-	400,553
Non-interest bearing	24,320	-	-	24,320
	224,650	200,223	-	424,873
Financial liabilities
Variable interest rate instruments	-	-	-	-
Non-interest bearing	47,991	-	-	47,991
	47,991	-	-	47,991
31 December 2015
Financial assets
Variable interest rate instruments	53,471	146,093	-	199,564
Non-interest bearing	25,531	-	-	25,531
	79,002	146,093	-	225,095
Financial liabilities
Variable interest rate instruments	-	-	-	-
Non-interest bearing	47,138	-	-	47,138
	47,138	-	-	47,138

 

(g) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the group. The group has adopted a policy of only dealing with credit‑worthy counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from defaults. The group measures credit risk on a fair value basis. The group's credit risk is concentrated on one entity, but the group has good credit checks on customers and none of the trade receivables from the customer has been past due. Also, the cash balances held in Australian dollars which are held with a financial institution with a high credit rating.

 

The gross carrying amount of financial assets recorded in the financial statements represents the group's maximum exposure to credit risk without taking account of the value of collateral or other security obtained.

 

(h) Fair value

The carrying amount of financial assets and financial liabilities recorded in the financial statements represents their respective fair values, principally as a consequence of the short term maturity thereof.

 

(i) Fair value measurements recognised in the statement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

 

·        Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

·        Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

·        Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

	2016
	Level 1	Level 2	Level 3	Total
Available‑for‑sale financial assets	130	-	-	130

 

	2015
	Level 1	Level 2	Level 3	Total
Available‑for‑sale financial assets	163	-	-	163

 

There were no financial assets or liabilities subsequently measured at fair value on Level 3 fair value measurement bases.

28. Share‑based payments

Restricted share plan

The Company's shareholder approved restricted share plan (RSP) allows the Company the right to grant Awards (as defined below) to employees of the Group.  Awards may take the form of either conditional share awards, where shares are transferred conditionally upon the satisfaction of performance conditions; or share options, which may take the form of nil cost options or have a nominal exercise price, the exercise of which is again subject to satisfaction of applicable performance conditions. 

 

The awards to be granted in June 2017 will vest in June 2020 (with 50% of the vested shares deferred for a further two years) and will be subject to satisfaction of the performance conditions over the three year financial period ended 31 December 2019.

 

-       TSR: 20% of the award shall be assessed by reference to a target total shareholder return ("TSR"). If the top end of the TSR target is met (if the Company is ranked equal to or better than the upper quarter total shareholder return of selected comparator companies, see below) all 20% of the award tranche shall vest. If the Company is ranked at the median level in a table of comparator companies by reference to TSR, 25% of the award tranche shall vest (i.e. 5% of the award). Proportionate amounts of the award tranche will vest for results in between.

 

The comparator group is as follows: Agnico Eagle Mines Ltd, AngloGold Ashanti, Centerra Gold, Eldorado Gold, Gold Fields Ltd, Kinross Gold Corporation, IAMGOLD Resources Inc, Petropavlovsk, Randgold Resources, Yamana Gold, Inc, Acacia Mining plc, Alacer Gold, B2 Gold Corp and Endeavour Mining.

 

-       Mineral Reserves: 30% of the award shall be assessed by reference to mineral reserve replacement and growth.  Reserve replacement is calculated based on the cumulative reserve estimates (from June 2016 to the most recent reserve estimate prior to vesting) compared with the cumulative reserves mined from 31 December 2016 to 31 December 2019.  All 30% of the award will vest if the ratio is 100%. 25% of the award tranche will vest if the ratio is at least 75% (i.e. 7.5% of the award).

 

-       EBITDA: 20% of the award shall be assessed by reference to compound growth in EBIDTA over the three year period to December 2019. If a compound annual growth rate of 3.5% of EBITDA is achieved by 2019, all 20% of the award tranche shall vest. If EBIDTA in 2019 is maintained at the levels achieved in 2016, 25% of the award tranche shall vest (i.e. 5% of the award). Proportionate amounts of the award tranche will vest for results in between.  The performance criteria will be assessed based on the financial year ended 31 December 2019.

 

-       Gold Production: 30% of the award shall be assessed by reference to compound growth in gold production over the three year period to December 2019. If a compound annual growth rate of 3.5% of gold production is achieved by 2019, all 30% of the award tranche shall vest. If gold production in 2019 is maintained at the levels achieved in 2016, 25% of the award tranche shall vest (i.e. 7.5% of the award). Proportionate amounts of the award tranche will vest for results in between.

 

As Sukari reaches optimum production rates, the relative year-on-year rate of growth slows.  Maintaining production rates at this optimum level still represents an award, with an appropriate incentive to further improve production rates through efficiency and optimization.

 

To date the Company has granted the following conditional awards to employees of the Group.

 

June 2015 Awards

Of the 5,145,000 awards granted on 4 June 2015 under the RSP, 3,845,000 awards remain granted to eligible participants (18 in total) and apply the following performance criteria:

-           20% of the Award shall be assessed by reference to a target total shareholder return.

-           50% of the Award shall be assessed by reference to absolute growth in earnings per share.

-           30% of the Award shall be assessed by reference to compound growth in gold production.

June 2016 Awards

Of the 4,999,000 awards granted on 4 June 2016 under the RSP, 4,704,000 awards remain granted to eligible participants (31 in total) applying the following performance criteria:

-       20% of the award shall be assessed by reference to a target total shareholder return.

-       30% of the award shall be assessed by reference to mineral reserve replacement and growth.

-       20% of the award shall be assessed by reference to compound growth in EBIDTA.

-       30% of the award shall be assessed by reference to compound growth in gold production.

Conditional share awards and options together constitute "Awards" under the Plan and those in receipt of Awards are "Award Holders".

 

A detailed summary of the scheme rules is set out in the 2015 AGM proxy materials which are available at www.centamin.com.  In brief, Awards will vest following the passing of three years from the date of the Award and vesting will be subject to satisfaction of Performance Conditions. The above measures are assessed by reference to current market practice and the Remuneration Committee will have regard to market practice when establishing the precise Performance Conditions for future Awards.

 

Where the performance conditions have been met, in the case of Conditional Awards, 50% of the total shares under the Award will be issued or transferred to the Award Holders on or as soon as possible following the specified Vesting Date, with the remaining 50% being issued or transferred on the second anniversary of the Vesting Date.

 

Restricted Share Plan awards granted during the period:

	RSP 2016
Grant date	4 June 2016
Number of instruments	4,999,000
TSR : Fair value at grant date £ (1)	0.6300
TSR : Fair value at grant date US$ (1)	0.9107
Reserve : Fair value at grant date £ (1)	1.0100
Reserve : Fair value at grant date US$ (1)	1.4600
EBITDA : Fair value at grant date £ (1)	1.0100
EBITDA : Fair value at grant date US$ (1)	1.4600
Gold Production : Fair value at grant date £ (1)	1.0100
Gold Production : Fair value at grant date US$ (1)	1.4600
Vesting period (years)	3.0
Expected volatility	42.14%
Expected dividend yield (%)	1.84%

 

⁽¹⁾      The vesting of 20% the awards granted under this plan are dependent on a TSR performance condition. As relative TSR is defined as a market condition under IFRS 2 "Share-based Payment", this requires that the valuation model used takes into account the anticipated performance outcome. We have therefore applied a Monte Carlo simulation model. The simulation model takes into account the probability of performance based on the expected volatility of Centamin and the peer group companies and the expected correlation of returns between the companies in the comparator group.

 

The remaining 80% of the awards are subject to Reserve, EBITDA and gold production performance conditions. As these are classified as non-market conditions under IFRS 2 they do not need to be taken into account when determining the fair value. These grants have been valued using a Black-Scholes model.

 

The fair value calculated was then converted at the closing £:US$ foreign exchange rate on that day.

 

 

28. Share‑based payments (continued)

Deferred bonus share plan ("DBSP")

In 2012, the Company implemented the DBSP which is a long term share incentive arrangement for senior management (but not executive directors) and other employees (participants).

 

On 4 June 2013, the group offered to both the beneficiaries of the shares awarded under the ELFSP and to the majority of the beneficiaries of the options granted under the EOS the choice to replace their awards and options with awards under the DBSP. The group has accounted for this change as modifications to the share‑based payment plans and will be recognising the incremental fair value granted, measured in accordance with IFRS 2, by this replacement over the vesting period of the new DBSP awards.

 

Under this offer, each participant has been granted a number of awards under the DBSP equivalent to the number of shares or options held under the ELFSP and EOS respectively. Such DBSP awards shall be subject to the terms and conditions of the DBSP and shall ordinarily vest in three equal tranches on the anniversary of the grant date, conditional upon the continued employment with the group. All offers made to participants were accepted. The award of the deferred shares will not have any performance criteria attached. They will however be subject to a service period.

 

DBSP awards granted during the period:

	DBSP 2016
Grant date	4 June 2016
Number of instruments	1,200,000
Share price / Fair value at grant date £ (2)	1.0600
Share price / Fair value at grant date US$ (2)	1.5323
Vesting period (years) (3)	1-3
Expected dividend yield (%)	n/a

 

⁽²⁾      The fair value of the shares awarded under the DBSP were calculated by using the closing share price on grant date, converted at the closing £:US$ foreign exchange rate on that day. No other factors were taken into account in determining the fair value of the shares awarded under the DBSP.

⁽³⁾      Variable vesting dependent on one to three years of continuous employment.

 

Historic plans

The historic plans, namely the executive directors loan funded share plan ("EDLFSP") and employee loan funded share plan ("ELFSP") 2011 Employee Option Scheme ("EOS") are no longer in use and all shares awarded have either being forfeited, lapsed or transferred to other schemes. The residual accrual in relation to these schemes has been expensed to the consolidated statement of comprehensive income.

 

 

29. Key management personnel compensation

Key management personnel are persons having authority and responsibility for planning, directing and controlling the activities of the group, directly or indirectly, including any director (executive or otherwise) of the group.

 

The aggregate compensation made to key management personnel of the consolidated entity and the Company is set out below:

 

	31 December	31 December
	2016	2015
	US$	US$
Short‑term employee benefits	8,011,016	6,184,750
Long‑term employee benefits	-	-
Post‑employment benefits	7,764	22,025
Share‑based payments	2,310,743	1,810,805
	10,329,523	8,017,580

 

 

 

30. Related party transactions

(a) Equity interests in related parties

Equity interests in subsidiaries

Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 22.

 

Equity interests in associates and jointly controlled arrangements

Details of interests in joint ventures are disclosed in note 24.

 

(b) Key management personnel compensation

Details of key management personnel compensation are disclosed above in note 29.

 

(c) Key management personnel equity holdings

The details of the movement in key management personnel equity holdings of fully paid ordinary shares in Centamin plc during the financial period ended 31 December 2016 are as follows:

 

	Balance at	Granted as	Granted as		Balance at
	1 January	remuneration	Remuneration	Net other	31 December
31 December 2016	2016	("DBSP")	("RSP")	change(1)	2016
J El-Raghy (2)	71,445,086	-	-	(17,595,714)	53,849,372
T Schultz	30,000	-	-	-	30,000
G Haslam	102,056	-	-	-	102,056
M Arnesen	49,000	-	-	-	49,000
M Bankes	150,000	-	-	-	150,000
A Pardey	2,968,800	-	690,000	(966,199)	2,692,601
R Jerrard	-	-	875,000	-	875,000
Y El-Raghy	780,633	-	140,000	(51,103)	869,530
T Smith	675,000	-	160,000	(175,000)	660,000
A Davidson	620,000	-	210,000	(30,000)	800,000
L Gregory	430,000	-	150,000	(80,000)	500,000
D Le Masurier	500,000	-	160,000	(120,000)	540,000
H Brown	650,000	-	60,000	(250,000)	460,000

1)      "Net other change" relates to the on market acquisition or disposal of fully paid ordinary shares.

2)      Includes the El-Raghy family

 

Since 31 December 2016 to the date of this report there have been no transactions notified to the Company under DTR 3.1.2.R.

 

The details of the movement in key management personnel equity holdings of fully paid ordinary shares in Centamin plc during the financial period ended 31 December 2015 are as follows:

 

	Balance at	Granted as	Granted as		Balance at
	1 January	remuneration	Remuneration	Net other	31 December
31 December 2015	2015	("DBSP")	("RSP")	change(1)	2015
J El-Raghy	71,445,086	-	-	-	71,445,086
T Schultz	30,000	-	-	-	30,000
G Haslam	102,056	-	-	-	102,056
M Arnesen	15,000	-	-	34,000	49,000
M Bankes	150,000	-	-	-	150,000
K Tomlinson	24,400	-	-	-	24,400
A Pardey	2,185,000	-	900.000	(116,200)	2,968,800
Y El-Raghy	637,414	-	200,000	(56,781)	780,633
T Smith	300,000	-	400,000	(25,000)	675,000
A Davidson	450,000	-	200,000	(30,000)	620,000
L Gregory	300,000	-	150,000	(20,000)	430,000
D Le Masurier	300,000	-	200,000	-	500,000
H Brown	550,000	-	100,000	-	650,000

1)         "Net other change" relates to the on market acquisition or disposal of fully paid ordinary shares.

2)         Includes the El-Raghy family

 

(d) Key management personnel share option holdings

There were no options held, granted or exercised during the year by directors or senior management in respect of ordinary shares in Centamin plc.

 

30. Related party transactions (continued)

(e) Other transactions with key management personnel

The related party transaction for the year ended 31 December 2016 is summarised below:

 

Josef El-Raghy is a director and shareholder of El-Raghy Kriewaldt Pty Ltd ("El-Raghy Kriewaldt"). El-Raghy Kriewaldt provides office premises to the Company. All dealings with El-Raghy Kriewaldt are in the ordinary course of business and on normal terms and conditions. Rent and office outgoings paid to El-Raghy Kriewaldt during the period were A$69,600 or US$51,710 (31 December 2015: A$62,595 or US$46,820).

 

(f) Transactions with the government of Egypt

Royalty costs attributable to the government of Egypt of US$20,574,673 (2015: US$15,197,860) were incurred in 2016.

 

Profit share to EMRA of US$51,253,333 was incurred in 2016.

 

(g) Gold Sales Agreement

On 20 December 2016, SGM entered into a contract with the Central Bank of Egypt ("CBE").  The agreement provides that the parties may elect, on a monthly basis, for the CBE to supply SGM with its local Egyptian currency requirements for that month (approximately EGP 50 million).  In return, SGM will provide the equivalent amount in US Dollars to purchase refined gold bullion from SGM's refiner, Asahi Refining, on CBE's behalf.  This transaction has been entered into as SGM requires local currency for its operations in Egypt (it receives its revenue for gold sales in US dollars).  No transactions have been entered into at the date of this report, pursuant to this agreement.

 

(h) Transactions with other related parties

Other related parties include the parent entity, subsidiaries, and other related parties.

 

During the financial period, the Company recognised tax payable in respect of the tax liabilities of its wholly owned subsidiaries.

 

Payments to/from the Company are made in accordance with terms of the tax funding arrangement.

 

During the financial period the Company provided funds to and received funding from subsidiaries.

 

All amounts advanced to related parties are unsecured. No expense has been recognised in the period for bad or doubtful debts in respect of amounts owed by related parties.

 

Transactions and balances between the Company and its subsidiaries were eliminated in the preparation of consolidated financial statements of the group.

 

31. Dividends per share

The dividends paid in 2016 were US$46,072,599 and are reflected in the consolidated statement of the changes in equity for the period (2015: US$33,786,831).

 

A final dividend in respect of the year ended 31 December 2016 of 13.5 US cents per share, totalling US$155,534,578 has been proposed by the board of directors and is subject to shareholder approval at the annual general meeting on 21 March 2017. These financial statements do not reflect this dividend payable.

 

32. Subsequent events

As referred to in note 31 subsequent to the year end, the board of directors announced a final dividend for 2016 of 13.5 US cents per share. Subject to shareholder approval at the annual general meeting on 21 March 2017, the final dividend will be paid on 31 March 2017 to shareholders on the record date of 3 March 2017.

 

There were no other significant events occurring after the reporting date requiring disclosure in the financial statements.