Central Asia Metals Regulatory News (CAML)

29 March 2022

CENTRAL ASIA METALS PLC

('CAML' or the 'Company')

2021 Full Year Results

Central Asia Metals plc (AIM: CAML) today announces its full year results for the 12 months ended 31 December 2021.

Financial highlights

Increased dividend

· 2021 final dividend of 12 pence per share (2020: 8 pence)

o 2021 full year dividend of 20 pence per share (2020: 14 pence)

o Represents 45% of 2021 free cash flow1 ('FCF'), in line with stated dividend policy

o Payable on 30 May 2022 to shareholders registered on 6 May 2022

Record financial results

· Group gross revenue[1] of $235.2 million (2020: $170.3 million)

o Group net revenue of $223.4 million (2020: $160.1 million)

· Group EBITDA1 of $141.5 million (2020: $95.7 million)

· EBITDA margin1 of 60% (2020: 56%)

· Group profit before tax of $109.3 million (2020: $59.8 million)

· EPS from continuing operations of 47.69 cents (2020: 24.78 cents)

Strong balance sheet

· Group FCF1 of $103.8 million (2020: $58.9 million)

· Group net cash1 as at 31 December 2021 of $22.7 million (2020: net debt of $36.2 million)

o Cash in the bank as at 31 December 2021 of $59.2 million2 (2020: $47.9 million)

o 2021 gross debt repayments of $48.4 million (2020: $38.4 million)

Sustainability and operational overview

· Zero lost time injuries at Kounrad during 2021 (2020: zero)

· Four lost time injuries at Sasa during 2021 (2020: zero)

· Target of 50% reduction in Scope 1 and Scope 2 greenhouse gas ('GHG') emissions by 2030 versus 2020 and to achieve net zero emissions by 2050

· Copper production of 14,041 tonnes (2020: 13,855 tonnes)

· Zinc in concentrate production of 22,167 tonnes (2020: 23,815 tonnes)

· Lead in concentrate production of 27,202 tonnes (2020: 29,742 tonnes)

2022 outlook

· Kounrad copper production guidance, between 12,500 and 13,500 tonnes

· Sasa production guidance, zinc in concentrate, between 20,000 and 22,000 tonnes and lead in concentrate, between 27,000 and 29,000 tonnes

[1] See Financial Review section for definition of non-IFRS alternative performance measures

[2] The cash balance figure disclosed includes restricted cash balance 

Nigel Robinson, Chief Executive Officer, commented:

"I am pleased to report a strong set of financial results for 2021, which represents our most profitable year to date with Group EBITDA of $141.5 million at a margin of 60%. We ended 2021 with a strong balance sheet, having made an additional $10 million early repayment on our corporate debt facility, which brings total 2021 debt repayments to $48.4 million. As of 31 December 2021, we were in a net cash position of $22.7 million, with cash in the bank (including restricted cash) of $59.2 million.

"Following this strong performance, we are delighted to propose a 12 pence per share final dividend, resulting in a full year dividend of 20 pence per share. Once the final dividend is paid, the Company will have returned $256.9 million to its shareholders in the last 10 years. The full year dividend represents 45% of our 2021 FCF and is therefore within our stated policy of 30% to 50% of FCF.

"We have continued to focus our efforts on the most important sustainability aspects of our business and have in particular worked on our climate change strategy during 2021. We ended the year having firmed up a strategy, and are confident in our ability to commit to a 50% reduction in our Group Scope 1 and Scope 2 emissions by 2030, and are committing to a net zero target by 2050. Our forthcoming 2021 annual and sustainability reports contain more information on our efforts in this regard, and our initial reporting towards Taskforce for Climate-Related Financial Disclosures ('TCFD').

"We look forward to another positive year for CAML in 2022 and, in particular, progressing the Cut and Fill Project at Sasa. We now expect this project, which will ensure maximum extraction of Sasa's resources, in the safest way, with minimal water usage and improved tailings management, to be completed in 2023. Our business development efforts continue into 2022. We also look forward to celebrating 10 years of copper production from Kounrad on 30 April 2022.

"It is clearly too soon to ascertain how the events in Ukraine will affect the wider world and global economy, but in the meantime our thoughts are with all of those directly affected.

"On a final note, I am delighted that Louise Wrathall, our Director of Corporate Relations, will join the CAML Board as an additional Executive Director at the conclusion of our forthcoming AGM."

Analyst conference call and webcast

A live conference call and webcast hosted by Nigel Robinson (Chief Executive Officer) and Gavin Ferrar (Chief Financial Officer) will take place at 09:30 (BST) today. The conference call can be accessed by dialling +44 (0)330 336 9601 and quoting the confirmation code '1668061', and the webcast can be accessed using the link:

https://webcasting.brrmedia.co.uk/broadcast/6214e5f7599ba174a3a33776

The presentation will be available on the Company's website and there will be a replay of the call available following the presentation at https://www.centralasiametals.com.

Presentation via Investor Meet Company

The Company will also hold a live presentation relating to the 2021 Full Year Results via the Investor Meet Company platform today at 15:00 (BST). The presentation is open to all existing and potential shareholders. Questions can be submitted at any time during the live presentation. Investors can sign up to Investor Meet Company for free and add to meet Central Asia Metals Plc via: 

https://www.investormeetcompany.com/central-asia-metals-plc/register-investor

For further information contact:

Note to editors:

Central Asia Metals, an AIM-listed UK company based in London, owns 100% of the Kounrad SX-EW copper project in central Kazakhstan and 100% of the Sasa zinc-lead mine in North Macedonia.

For further information, please visit www.centralasiametals.com and follow CAML on Twitter at @CamlMetals and on LinkedIn at Central Asia Metals Plc

Chairman's statement

2021 brought a very different metal price environment to the previous year and I am delighted that we have reported for the year record revenue, profits, free cash flow and of course returns to our shareholders. We have also advanced many other aspects of our business which are equally as important to our other stakeholders, and I am pleased that our team has wholeheartedly embraced the sustainability aspects on which we place such importance.

OUR PURPOSE

Our purpose is to produce base metals, which are essential for modern living, profitably in a safe and sustainable environment for all our stakeholders and we have fulfilled this purpose during 2021.

Coupled with strong commodity prices, our Kounrad and Sasa base metal production generated EBITDA of $141.5 million and free cash flow of $103.8 million. This has enabled us to continue deleveraging, and we ended the year in our first period-end net cash position since we acquired Sasa in 2017. The remainder of our corporate debt facility will be repaid in 2022.

SUSTAINABILITY

We have continued to devote much of our time and energy to advancing our sustainability efforts during 2021. In Q2 2021 we published our second standalone Sustainability Report. This was the Company's first report drafted in accordance with the Global Reporting Initiative ('GRI') Standards 'Core option'. Forming the foundation for the 2020 Sustainability Report, CAML engaged external consultants, ERM, to conduct an independent stakeholder engagement exercise to verify and assess the relative importance of material sustainability topics for the Company and its stakeholders. The report also identified four of the UN Sustainable Development Goals ('SDGs') to which the Company has the capacity to best contribute. CAML's third Sustainability Report will be published shortly and will detail our activities during 2021 corporately and at the Kounrad and Sasa operations.

While we have advanced many areas of sustainability during 2021, we have in particular focused on climate change and have developed a Climate Change Strategy which sees us commit to a 50% reduction in our greenhouse gas ('GHG') emissions versus 2020 by 2030. We were pleased to have secured effectively 100% renewable power for our Sasa operation in July 2021, which will result in a reduction in our Group emissions on an annualised basis by approximately 35%. Our 2021 annual report contains our first commentary towards the Taskforce for Climate-Related Financial Disclosures ('TCFD') reporting and demonstrates our efforts in this regard to date and our plans going forward.

During H1 2021, we completed the River Remediation Project, which was undertaken as a result of the September 2020 tailings storage facility 4 ('TSF4') incident. We have removed as much as possible of the tailings from the riverbed, and have planted trees, shrubs and grasses along the banks of the river. While monitoring of water quality and biodiversity will of course be ongoing, I am pleased that we have now drawn a line under the incident to the satisfaction of our stakeholders.

GOVERNANCE

On 31 July 2021, Nigel Hurst-Brown retired from the CAML Board. Nigel was our first Chairman, guiding CAML through its listing on the AIM Market of the London Stock Exchange in 2010, until my transition to Chairman in 2016. He was a diligent member of the Board for 15 years and I thank him for his commitment to our business and his wise counsel during his tenure with us.

On 31 March 2021, Mike Prentis joined the CAML Board, as well as the Audit, Sustainability, Remuneration and Nomination Committees. His input has already been invaluable as he brings important capital markets experience and investor insights, as well as a rigorous approach to his non-executive role.

Robert Cathery has informed me of his plans to retire from the CAML Board at the conclusion of our 2022 Annual General Meeting ('AGM'). Our Nomination Committee has been busy appraising candidates for roles that will help to ensure the company continues to embrace its forward-looking aspirations in line with our stated purpose, as well as ensuring the highest standards of corporate and business governance.

To that end, in January 2022, CAML announced the appointment of Dr Mike Armitage to the Board as an Independent Non-Executive Director. Mike brings a wealth of international technical experience and will support management and be invaluable to the Board, both in terms of our current operations and with our business development activities. Mike's long career with SRK in particular has seen him review, assist with due diligence, and help to develop numerous mineral properties globally, therefore he has the technical calibre that the CAML Nomination Committee believes is crucial in overseeing a successful mining business for the long term.

I am pleased to advise that Louise Wrathall, our Director of Corporate Relations, has agreed to join the Board as an additional Executive Director, responsible for corporate development, at the conclusion of the forthcoming AGM on 26 May 2022. Louise has been a key member of the senior management team since she joined CAML in 2015 and further enhances the skills of the Board, emphasising the importance we place on investor relations, business development and environmental, social and governance ('ESG').

Our Sustainability Committee has put much focus on advancing our sustainability and climate change strategies this year and I am grateful to Dr Gillian Davidson, who chairs that committee, advising the senior management team ahead of presenting these crucial aspects to the wider Board.

During the year, we hired a dedicated Group Internal Controls and Risk Manager, who has brought a logical, practical and rigorous approach to risk. Without effective risk management, we would be unable to meet our strategic objectives and create value for our stakeholders, and I am grateful to the Audit Committee for taking overall responsibility for this crucial aspect of our business, which affects each and every one of us on a daily basis.

ACKNOWLEDGEMENTS

I would like to thank the Board of Directors, our senior management team and all of our employees for their dedication to our business during 2021. Your efforts do not go unnoticed and we very much appreciate your hard work. I would like to extend my thanks to our stakeholders for their support as well.

CEO's statement

2021 FINANCIAL OVERVIEW

Sasa produced 22,167 tonnes of zinc in concentrate and 27,202 tonnes of lead in concentrate at a C1 zinc equivalent cash cost of production of $0.63 per pound.

Our Kounrad operations continued to perform well, delivering copper cathode output above production guidance at 14,041 tonnes. Kounrad's 2021 C1 copper cash cost of production remained low by global standards at $0.57 per pound.

Despite the persistent global challenges of COVID-19, commodity prices performed well during 2021 and demand for copper, zinc and lead improved materially versus 2020. This, combined with CAML's base metal production, has led to us reporting record gross revenue of $235.2 million and record EBITDA of $141.5 million at an EBITDA margin of 60% for 2021.

We have continued to deleverage during 2021, with a $10 million early debt repayment in addition to our regular monthly payments. CAML ended 2021 in a net cash position of $22.7 million with cash in the bank of $59.2 million (including restricted cash).

The Group generated 2021 free cash flow of $103.8 million, enabling us to recommend a 12 pence per share final dividend. This equates to a full-year dividend of 20 pence per share, which represents 45% of 2021 free cash flow.

MARKET PERFORMANCE

During 2021, the CAML share price traded within a range of £2.19 to £2.93, ending the year at £2.59, which represents an 8% increase on the 31 December 2020 price of £2.40. CAML outperformed the FTSE AIM All Share/ Basic Resources Index, which lost approximately 17% during 2021. Since the Company's IPO in September 2010, CAML's share price has significantly outperformed the FTSE AIM All Share/ Basic Resources Index, primarily due to CAML's strong operational performance, low production costs and attractive high dividend yield.

SUSTAINABILITY

We remain focused on safety and were therefore disappointed to report four LTIs at Sasa during the year. We recorded zero LTIs at Kounrad though, and therefore our 2021 total as a Group was four, with a LTIFR of 1.69, a worsening of our performance since 2020 and one which is reflected in Executive Director and senior management compensation. Lessons have been learnt from the Sasa incidents and, as ever, effective safety training and supervision for our employees is a priority and is crucial to achieving an improving safety record.

The strong financial performance we have reported underpins our business and we place significant emphasis on ensuring that we are sustainable for all stakeholders. To demonstrate our efforts and achievements in this area, we will soon be publishing our third Sustainability Report, our second to GRI standards ('core option').

During 2021, we have developed a CAML Climate Change Strategy, which focuses on five key objectives:

- Produce the metals which contribute positively to the energy transition

- Work towards decarbonisation

- Ensure we are operationally resilient

- Focus on our strategic and business resilience

- Deliver clear and transparent climate-related disclosures

Also during the year, we undertook risk analysis work focusing on our physical risks at both of our operations, as well as any likely transition risks which could affect our business, and we have adjusted our internal financial modelling so that we can now apply a shadow carbon price. We were pleased to be able to report at the time of our interim results in September 2021 our agreement with EVN to purchase solely renewable power for our Sasa operations, thereby enabling us to commit to a Group GHG emission reduction from this activity alone of approximately 35%. In December 2021, our Board agreed to the construction of a solar power plant at Kounrad. These two key developments, in combination with some additional smaller initiatives, have led us to commit to a Group Scope 1 and Scope 2 GHG emission reduction target of 50% versus 2020 by 2030. We will also aim to be net-zero by 2050. Having also firmed up our governance of climate change, we are pleased to be able to begin reporting towards TCFD within our 2021 Annual Report and Sustainability Report.

In terms of our longstanding focus on the communities around our operations, we have completed during H1 2021 to the satisfaction of our local and national stakeholders the River Remediation Project and we were delighted to be able to develop for the local community the Youth Park along the banks of the affected river in our local town, Makedonska Kamenica.

This outdoor area comprises trails and walkways along the river with trees, flower beds and a gazebo, as well as children's play areas, and we have been pleased to see this area being enjoyed by so many in the community close to Sasa. During 2021, we spent a total of $0.5 million at Sasa and Kounrad, supporting the local communities and our host countries nationally as we played our part in helping to mitigate the negative health impacts of the COVID-19 pandemic as well as other sustainable development projects that have been identified.

Supporting our local communities in general is a vital aspect of what we do in the areas close to the operations and, as a result, we enjoy good relations with our neighbours and we believe we have brought some real, positive change. We established the Kounrad Foundation for charitable donations in 2018 and, in 2021, we established a similar foundation for Sasa.

SASA

We encountered some difficult ground conditions at Sasa during 2021 and this, coupled with our enhanced approach to underground safety risks, resulted in our zinc and lead production being marginally below production guidance for 2021. However, we are confident that our transition to the cut and fill mining method is the optimal choice that will largely alleviate these issues for the long term. We have made solid progress in this regard during 2021 as we began to construct the new Central Decline and have developed over 500 metres from both surface and underground during the year. We have also procured various key pieces of equipment for the paste backfill plant and we have advanced our design work for the dry stack tailings plant and landform.

KOUNRAD

During the year at Kounrad, leaching operations performed well, as did the SX-EW processing facilities which achieved availability of over 99%. We continued to develop more of the Western Dumps for future leaching operations, while focusing on maximising copper extraction in the Eastern Dumps. While capital expenditure remained low at $2.8 million, it was $1.0 million higher than that spent in 2020 because the team invested in the intermediate leach solution ('ILS') infrastructure that should ensure maximum copper recoveries for the medium term.

OUTLOOK

The CAML Board and management team are closely monitoring the political situation in Kazakhstan, following the unrest in January 2022, as well as the situation in Ukraine. Our operations have remained unaffected and, most importantly, our employees are safe and well.

Notwithstanding this uncertainty, the outlook for 2022 is positive, with a strong base metal price environment, improving zinc treatment charges and solid demand for the metals we produce.

Our production guidance for Sasa is 790,000 to 810,000 tonnes of ore, which should lead to between 20,000 and 22,000 tonnes of zinc in concentrate and between 27,000 and 29,000 tonnes of lead in concentrate. At Kounrad, we expect to produce between 12,500 and 13,500 tonnes of copper.

Our focus at Sasa during 2022 will be progressing the Cut and Fill Project, which will see us extract the maximum resources in a safer, more sustainable and efficient manner. The project comprises the development of the new Central Decline, as well as construction of a paste backfill plant and associated reticulation pipework, and a dry stack tailings plant and associated landform. From a permitting perspective, the paste backfill and dry stack tailings aspects of the Cut and Fill Project are effectively viewed in North Macedonia as an overarching yet much improved tailings storage solution for the long term.

While the overall approach is welcome in-country, CAML is the first company in North Macedonia to propose the use of paste backfill and dry stack tailings technology. Consequently, there is no precedent in the country regarding best practice, which has resulted in the Ministry of the Environment and Physical Planning ('MoEPP') requesting additional information to support our future tailings disposal plans. This has led to a short-term delay in the permitting process and we now expect the paste backfill plant to be constructed and commissioned during H1 2023, and the dry stack tailings component to be completed during H2 2023. CAML expects that this timing adjustment will have minimal impact on 2023 production levels.

We expect 2022 capital expenditure of between $28 million and $30 million, of which between $11 million and $13 million is expected to be committed to sustaining capex. CAML expects additional Cut and Fill Project capital expenditure in the order of $10 million in 2023. This will be largely related to construction of the dry stack tailings landform as well as capitalised decline development, plus costs associated with increasing the processing plant throughput capacity to 900,000 tonnes per year. 

By September 2022, we expect to have repaid our corporate debt facility, and therefore all of the debt associated with our $402.5 million Sasa acquisition in late 2017. Sasa has already generated EBITDA of $245.1 million under our ownership and we look forward to a long mine life continuing to generate significant value from this asset until at least 2037. We are in a strong position from which to grow again through acquisition and our business development activities continue in this regard.

While COVID-19 continues to be a feature of our lives, we have gained confidence over the last two years in the measures we have put in place to try to manage, as best we can, infection rates on our sites and we continue to hope for an improving global situation as vaccination rates continue to grow. CAML has not accessed any financial support throughout the pandemic from any government and has not furloughed any employees.

Sustainability review

OVERVIEW

At CAML, sustainability means protecting the longevity of our operations and working towards an enduring net positive outcome after the end of life of our assets by upholding strong ethical practices throughout the Company and our supply chain, prioritising the safety, health and development of our people, conducting business in an environmentally responsible manner and positively contributing to our communities and countries of operation.

To achieve this, a focus on safety and sustainability is one of our three strategic pillars, incorporated into our day-to-day operations, led from the top by CAML's Board and a priority in everything that we do. We have specific, robust and effective risk management systems, with sustainability related risks and opportunities fully integrated, to enable the Company to meet its strategic objectives.

In our second year of reporting in line with GRI, we have worked to improve disclosure and provide a comprehensive overview of our sustainability approach in our Sustainability Report. By aligning our business activities to the Sustainable Development Goals ('SDGs'), we aim to make a meaningful contribution to global challenges. We have included SDG 7 and 13 in our target goals in 2021, as a result of our new Climate Change Strategy.

DELIVERING VALUE THROUGH STEWARDSHIP

CAML has a strong framework to promote ethical behaviour and good corporate governance within our business and supply chain and sets high standards that are crucial for the effective running and sustainability of our operations.

We believe that a robust approach to human rights is vital to fulfilling our corporate responsibilities, not only in respect of our employees but for the workers along our supply chains and within our communities. This is underpinned by our formal Human Rights Policy, which covers internationally recognised rights.

Our procurement strategies at both sites aim to provide a level playing field for suppliers, insisting on good governance, compliance with local laws, respect for human rights, safety and due care for the environment. We aim to work closely with our suppliers to ensure we are part of a responsible value chain and developed a social assessment process in 2021.

MAINTAINING HEALTH AND SAFETY

Safety is our most material issue and is at the heart of everything we do. Our goal of achieving zero harm in the workplace is laid out in the Company's Sustainability Policy and we have a clear safety improvement target of achieving a 15% decrease in the LTIFR over a five-year period. We recently hired a Group Health and Safety Manager to further develop and implement a fully integrated sustainable safety culture and train our local health and safety teams to the highest standards.

Wherever possible, we look to eliminate occupational health risks brought about by our operations. The challenges encountered as a result of COVID-19 have served to highlight the importance of maintaining a robust strategy to protect the health and contribute towards the wellbeing of all our employees. We acted quickly at the start of the pandemic to implement health protection measures and 48% of our workforce at Sasa and 99% at Kounrad have received one or more COVID-19 vaccinations. Whilst vaccine hesitancy is an issue in North Macedonia, we have initiatives aimed at addressing this.

FOCUSING ON OUR PEOPLE

A motivated, dedicated and skilled workforce, underpinned by our strong workplace culture and values, is a key enabler of our success, and we are committed to attracting and retaining the best people. We aim to ensure we have the succession plans and training programmes in place to develop our leaders of tomorrow. In 2021, our 1,052 employees received an average 36 hours of training.

CAML recognises the importance of diversity, specifically when considering the breadth of thought, approach and opinion fostered by a diverse group. We also have several initiatives to ensure that CAML's workplaces are attractive and suitable for all.

We prioritise local hiring as one of the primary ways of contributing to the economic security of our communities and want to ensure that our workers are well remunerated. All Kounrad employees are covered by a collective bargaining agreement. Negotiations regarding a three-year agreement at Sasa commenced in Q4 2021, with the intention to implement during 2022. 100% of our Kounrad employees are Kazakh, and only 1% of our employees at Sasa are expatriates.

CARING FOR THE ENVIRONMENT

We take our environmental responsibilities seriously and ensure that we comply with the laws and regulations of the countries of operation. We recognise the growing importance of understanding the impact of climate change on the environment in which we operate and its potential impact on the business. In 2021, we developed a Climate Change Strategy, with a goal of achieving a 50% reduction in Group GHG emissions by 2030 and net zero by 2050 and we are beginning to report towards TCFD, with information detailed in the 2021 Sustainability Report. We have implemented or are planning several decarbonisation initiatives, which include a renewable power purchase agreement at Sasa and the construction of a solar power plant at Kounrad.

We are mindful of our duty to ensure responsible waste management and minimisation. We believe that our activities in Kazakhstan have generally had a positive impact on the environment by eliminating historical pollution from copper-rich solutions leaching prior to the Company's ownership of Kounrad. We are firmly committed to the environmental and socially responsible disposal of tailings at Sasa. Our Cut and Fill Project that is currently in the implementation phase will involve the more environmentally friendly management of our tailings, incorporating storage as paste in our underground voids as well as dry stack tailings. The water we are able to remove from the dry stack tailings process should ensure a 75% reduction in Sasa's surface water abstraction from 2026 onwards.

UNLOCKING VALUE FOR OUR COMMUNITIES

We aim to provide real benefits to our local communities and host countries by delivering philanthropic support, fostering sustainable development, facilitating socio-economic progress and helping the youth and most vulnerable members of the community in line with our human rights commitments.

Both operations have community development programmes in place, with foundation charities used as vehicles for targeted social donations. At least 0.25% of the respective site's revenue is committed for social development projects. Given the specialised nature of our work, we are focused on providing the next generation of experts in our local communities with the required skills, aided by our Sasa training centre in North Macedonia.

Operations review

Sasa

SASA PRODUCTION AND SALES

In 2021, Sasa mined 818,609 tonnes of ore and processed 830,709 tonnes of ore. The average head grades for the year were 3.14% zinc and 3.52% lead and the average 2021 metallurgical recoveries were 84.9% for zinc and 93.1% for lead.

Sasa produces a zinc concentrate and a separate lead concentrate. Total production for 2021 was 44,383 tonnes of zinc concentrate at an average grade of 49.9% and 37,893 tonnes of lead concentrate at an average grade of 71.8%.

Sasa typically receives from smelters approximately 84% of the value of its zinc in concentrate and approximately 95% of the value of its lead in concentrate. Accordingly, total 2021 payable production was 18,616 tonnes of zinc and 25,842 tonnes of lead.

Payable base metal in concentrate sales from Sasa in 2021 were 18,586 tonnes of zinc and 25,245 tonnes of lead. CAML's 2021 Operations Update, released on 11 January 2022, stated 2021 lead sales of 25,877 tonnes. The restated figure reflects the final lead concentrate shipment of the year that was delayed until January 2022, and therefore revenue from those metal sales will instead be reflected in the 2022 financial year. During 2021, Sasa sold 323,849 ounces of payable silver to Osisko Gold Royalties, in accordance with its streaming agreement.

HEALTH AND SAFETY

During 2021, there were four LTIs at Sasa and no MTIs, therefore a total of four TRIs for the operation. COVID-19 remains a risk to the welfare of CAML employees and contractors and there have been cases of the virus at Sasa during the year. Despite this, and despite a relatively low vaccination take-up rate, the Company is confident that its COVID-19 procedures at both operations will be sufficient to protect the welfare of its employees, meet respective government guidance and maintain production going forwards.

MINING

A total of 818,609 tonnes of ore were mined using the sublevel caving method during the year from the 990m and 910m working areas. This was 1% lower than 2020 predominantly due to 385 metres of unplanned rehabilitation works and localised poor ground conditions. The ore from the underground operations is hoisted via the Golema Reka shaft to surface (c.70%) and the remainder is trucked to surface via the existing XIVb decline using a fleet of 20 tonne Epiroc trucks.

The average combined grade of the ore mined was 6.66% zinc and lead, approximately 5% below the planned grade due to challenging ground conditions coupled with an enhanced approach to underground safety risk. This resulted in short term reductions in flexibility of working areas and increased dilution, which led to reduced zinc and lead head grades versus expected metal content.

Total ore development in the two working areas totalled 2,683 metres, which was 8% above budget and involved accessing additional sub levels below the 910m level during Q4 2021. Waste development for the year totalled 2,165 metres for approximately 74,000 tonnes of waste, generated from internal ramp access and crosscuts to the ore body, raise development and the development of the Central Decline. During the year five new Epiroc units were purchased (one twin boom jumbo drilling machine for the Central Decline development, one 20 tonne truck, two seven tonne loaders and a new Daimec diamond drilling machine) reducing the average age of the Epiroc underground fleet of equipment from seven years to just over five years. In addition to the Epiroc equipment, a Putzmiester shotcrete unit and mixer were purchased to enable fully mechanised placement of shotcrete, replacing the handheld units previously used underground.

Preparation underground for the transition to cut and fill mining began during the year with the relocation of existing services in the existing XIVb decline (c.1.2 kilometres) to accommodate the new paste fill services.

PROCESSING

Sasa processed 830,709 tonnes of ore during the year, an increase of 1.2% versus 2020, and the plant had an overall availability of 93%. Major maintenance works were completed during the year, including replacement and rebuilding of the primary crusher and improvements made to both ball and rod mills as well as the SMD zinc regrind mill. Works were also undertaken on one of the spiral classifiers and the filter presses. In addition, the Sasa analytical laboratory was totally refurbished during the year, both externally and internally.

TSF4 ran smoothly during the year, and the team was reinforced with an additional two engineers and a dedicated TSF Manager. 24 hour per day surveillance of the facility was maintained throughout the year and an independent audit of the facilities was completed by Knight Piesold. An additional one kilometre tailings pulp line from TSF3.1 to TSF4 was installed during the year.

DRILLING

A total of 4,818 metres of exploitation drilling was completed during the year on the two working levels 910m and 990m to provide additional information on the grade/thickness of the three orebodies on the sub levels.

A total of 4,883 metres of exploration drilling was completed below the 830m level to improve the confidence levels of the mineralisation at depth with the objective of converting inferred mineral resources to indicated resources. There was no exploration drilling completed at Kozja Reka or Golema Reka during the year.

The exploration programme during the year was adversely affected by COVID-19 due to restrictions on external contractors on site. The drill rig was instead used to provide data for hydrogeological studies that were completed by consultants, SRK Consulting (UK) Ltd, as part of Sasa's Environmental and Social Impact Assessment ('ESIA') work that was undertaken during 2021.

A comprehensive dewatering programme was also completed during the year with over 500 metres of drainage holes drilled.

2022 PRODUCTION GUIDANCE

Prior to the transition to cut and fill mining at Sasa, which will create a safer and sustainable underground mining operation for the long term, CAML cautiously allows for continued ground support challenges in its 2022 guidance and will maintain its enhanced approach to underground safety risks. The Company therefore targets ore mined of between 790,000 and 810,000 tonnes.

This should result in zinc in concentrate production of between 20,000 and 22,000 tonnes and lead in concentrate production of between 27,000 and 29,000 tonnes. The Sasa team is also working on the development of an increased number of sub-levels to enhance flexibility. This will enable a greater number of potential working faces in the event of further support being required in some areas.

CUT AND FILL PROJECT

In 2020, the Board agreed to transition the Svinja Reka operations at Sasa from the current sub-level caving mining method to cut and fill stoping. The cut and fill mining method involves filling mined voids with a backfill paste material containing tailings to provide support, rather than allowing the roof to cave as is the case with the current sub-level caving method. To achieve this, a backfill plant will be constructed, along with associated reticulation pipework to transport this material underground.

Given that a major component of the backfill material will be tailings generated from the Sasa processing plant, it is estimated that approximately 70% of Sasa's life of mine tailings will be stored either underground in the form of paste, or in a dry stack tailings facility that will be developed as part of the project.

The Cut and Fill Project also includes development of a new decline to facilitate swifter access to the orebody. In 2021, a dedicated capital projects team was formed consisting of four engineers and two administrative employees who are led by CAML's Group Metallurgist. The team is further supported by Sasa's civil engineering, permitting and administrative teams together with external local and international designers and consultants.

In H1 2022, Sasa plans to recruit an additional four engineers to join the capital projects team, which will include a construction and health and safety manager representing the construction management contractor. Progress has been made in all aspects of the Cut and Fill Project with $8.3 million expenditure incurred on the project during 2021. Of this amount $5.9 million has been capitalised and $2.4 million recognised in non-current receivables (note 23). Permitting processes for the various work streams are also underway.

Central Decline

Construction of the Central Decline is underway. This decline will be larger than the existing decline access to the mine and will provide increased ventilation, easier access for reticulation infrastructure and the potential to increase ore mined in the medium term. The profile of the decline has been increased to facilitate the potential future use of the slightly larger underground electric vehicles, and an analysis of diesel versus electric vehicles is currently underway.

Development of the portal on surface began in August 2021 and, by the end of the year, 71 metres had been developed from surface and a total of 432 metres were developed from underground on the 910m level. The total length of this decline will be approximately four kilometres and construction will be undertaken in three stages during the next four years.

Paste Backfill Plant

The site location for the paste backfill plant has been confirmed, the equipment lay down area established, and the new site offices have arrived at Sasa. Process engineering design has been completed and all major components for the plant have been ordered, including the civils and structural steels, thickener and flocculant plant, the continuous mixer, various pumps including the paste pump and in excess of eight kilometres of pipes for the underground reticulation. In Q4 2021, the Metso-Outotec flocculent and thickener plant was delivered to site.

A further milestone was the completion of the civil and structural design of the paste backfill plant building with a local company being awarded the construction contract. Detailed design of the electrical and process control systems (supported by Paterson and Cooke and Rockwell Automation) is ongoing and associated orders are scheduled to begin in Q1 2022.

Construction and commissioning of the paste backfill plant is expected to be undertaken during H1 2023.

Dry Stack Tailings

The dry stack tailings project comprises two separate aspects - design and construction of the landform on which to stack the dry tailings, and design and construction of the dry stack tailings filter plant.

The design of the dry stack tailings filter plant is scheduled to be completed in Q1 2022. The key component of the plant is the press filter, and this has been procured from Metso-Outotec alongside peripheral items such as pumps and holding tanks. Construction of the filter plant will start immediately following completion of the paste backfill plant and will take approximately four months to complete. The design of the dry stack storage landform by consultants, Knight Piésold, is on target to be completed in Q1 2022. Ground works will then be undertaken in preparation of receiving dry, filtered tailings in H2 2023.

Kounrad

2021 CATHODE PRODUCTION

During the year, the SX-EW plant produced 14,041 tonnes of copper cathode, a slight increase from the previous year of 13,855 tonnes. Total Kounrad copper production since operations commenced in April 2012 is now 124,141 tonnes, averaging over 1,070 tonnes per month since start-up.

During 2021, copper was leached from the Eastern and Western Dumps, with both areas performing well. Winter leaching of the Eastern Dumps was suspended in early December 2020 and was restarted in April 2021 and, over the winter period, copper production was generated solely from the Western Dumps. This trial resulted in an increase in solution viscosity, which had a negative impact on organic reagent consumption. Additional tracking measures have since been implemented whilst operating two leaching blocks on the Eastern Dumps during the winter period of 2021/2022, and all operational parameters are being closely monitored.

HEALTH AND SAFETY

There were no LTIs, or MTIs at Kounrad during 2021, meaning that there were no TRIs. There have now been 1,324 days since the last LTI at Kounrad. COVID-19 remains a risk to the welfare of CAML employees and contractors and there have been cases of the virus at Kounrad during 2021, despite a 99% vaccination rate. That said, the Company is confident that its COVID-19 procedures at both operations will be sufficient to protect the welfare of its employees, meet respective government guidance and maintain production.

LEACHING OPERATIONS

Both the Eastern and Western Dumps were simultaneously leached during 2021, with the production split being 15% and 85% respectively.

In the Eastern Dumps, the team focused on irrigating previously leached blocks in order to maximise the recovery of copper. This technique was implemented on various blocks that had been allowed to rest for periods of, in some cases, almost two years. During this rest period, bacterial and chemical activity continued to solubilise copper mineralisation. In addition, with the purchase of a new bulldozer, the summer period was spent pushing and levelling side walls along Dump 7. This new area of exposed material will be leached during 2022. Adopting these approaches resulted in the typical pregnant leach solution ('PLS') grade pick-up averaging about 0.7 grammes per litre ('gpl'). This was better than anticipated and resulted in extracted copper of 2,116 tonnes from this area during eight months of leaching. This takes the total quantity of copper recovered from this resource area, since operations commenced, to 79,847 tonnes or c.99.8% of that initially forecast at the time of the CAML Initial Public Offering ('IPO') in 2010. The daily average area under irrigation at the Eastern Dumps during the year was 27.7 hectares.

This approach of leaching and rotating around all the old, rested blocks will be undertaken during 2022 for the full year, with anticipated pick-up grades being in the region of 0.6-0.7gpl.

At the end of December 2021, an earth moving contract was awarded to relocate approximately 180,000 cubic metres of material, containing approximately 2,000 tonnes of copper, which was effectively sterilised as it was located too close to the Kazakhmys railway line. A cut-back leaving a 30 metre distance to the railway line from the dump toe will be developed, through which a lined trench extension of 950 metres will be installed. The excavated material, which is currently unleached, will be placed on top of Block 2 of Dump 9-10 and this work will allow access to previously unreachable materials in Block 12 of Dump 5 and also Dump 3. All relocation and installation works should be completed before the end of 2022, at a total cost of around $0.5 million, and leaching of this material is scheduled for 2023.

At the Western Dumps, the focus of irrigation remained on parts of Dumps 16, 22 and 1A, with two cells accessed at Dump 21 from June. During 2021, 11,924 tonnes of copper were recovered from these areas, contributing approximately 85% of the total Kounrad copper production. This Western Dump tonnage was the highest achieved since leaching commenced in 2017 and was positively impacted by higher than forecast PLS grades returning from the area of Dump 21. The average daily area under irrigation on the Western Dumps increased to 37.5 hectares (33 hectares in 2020) of both new and previously leached material. The volume of raffinate pumped around the site averaged 1,211 cubic metres per hour ('m3/hr'). This was lower than the 1,338 m3/hr pumped in 2020 due to the Eastern Dumps not being leached in winter. During the summer period, a proportion of the off-flow solutions from the Eastern Dumps were recycled across to the Western Dumps with the aim of maintaining broadly stable PLS grades to the solvent extraction ('SX') plant. This technique operated successfully and will be continued in 2022, as and when appropriate.

Given the planned switch to almost all leaching from the Western Dumps by 2024-2025, engineering studies have been finalised to implement a split irrigation and solution collection system to allow the operation of an Intermediate Leach System ('ILS'), which should result in an increase in the copper grade of the PLS generated at the Western Dumps. During 2021 as part of Phase 1 of the project, a 14 kilometre water delivery pipeline was fully installed, together with the east to west transfer pumps and, during late Autumn, was wet commissioned to confirm the design flow-rate of 180-200 cubic metres per hour ('m3/hr'). During 2022, the second phase will be completed in readiness for operations from Spring 2023 onwards, as and when required. This involves the construction of various collection ponds and the installation of the top of dump distribution and irrigation system.

Application rates of solution to the dumps were maintained at a slightly reduced level of 2.12 litres per square metre per hour ('l/m2/hr') throughout the year. Direct field experience has confirmed that materials in Dump 1A require a lower application rate of approximately 1.5l/m2/hr to achieve optimum solution penetration.

Utilising a second dedicated bulldozer for the Western Dumps, significant levelling and shaping earthworks were undertaken during 2021 preparing future blocks for irrigation. Additionally, certain changes were made to the irrigation systems used on winter blocks in order to better maintain operational availability. These include the replacement of all line control valves in October 2021, solution temperature monitoring probes and also the installation of duplicate, unconnected, dripper lines beneath the HDPE covers which can be quickly connected to the header pipes in the event of unexpected freezing.

SX-EW PLANT

The SX-EW plant continued to operate efficiently during 2021 and the overall operational availability throughout the year was 99.4%. This was 0.1% below that of 2020, due to a number of storm events negatively affecting the regional incoming power supplies.

With the average Western Dumps copper grade of around 0.1%, the average PLS grade for the year was 2.36gpl, somewhat higher than 2020 and mainly due to the positive returns from Dump 21. Solution flow rates averaged 988m3/hr, with summer rates increasing to 1,200m3/hr. During the year each of the four Extract settler units was taken off-line to facilitate inspection and any necessary repairs and, after 10 years of operations, their condition was found to be excellent.

While the increased levels of iron in the Western Dumps generally has a positive impact on leaching, this also typically results in a reduction in the current efficiency of the plating process. The average for 2022 was 11gpl of iron, compared to under 9gpl in 2020, resulting in power consumed per tonne of copper plated increasing by 3% to 4,183 kWh per tonne.

At the start of Q2 2021, 616 anodes were renewed in the EW1 building, with a further 400 pieces being renewed in Q3 2021. The installation of these new anodes assisted in minimising the increase in unit plated power consumption. An extra 960 anodes were ordered in Q4 2021 for arrival and installation in EW2 in mid-2022. Following receipt and installation of these anodes, no further anode replacement programmes are expected until 2024.

The focus for the operations team has been on continued safe, efficient plant operations and the tight control of all operating costs. During Q3 2021, certain plant management / supervisory and shift operating regimes were modified to enhance overall control and productivity, which have all been implemented very successfully.

COPPER SALES

Throughout the year, the quality of CAML's copper cathode product has once again been maintained at high levels both chemically and visually and there have been no negative quality claims. Regular in-house and independent metallurgical analyses have consistently reported 2021 copper purity of around 99.998%. The Company continues to sell the majority of copper production through its off-take arrangements with Traxys, the terms of which are fixed until December 2022.

2022 PRODUCTION GUIDANCE

The 2022 guidance for Kounrad's copper cathode production remains between 12,500 and 13,500 tonnes.

Financial review

SUMMARY

2021 was a record year for the Group, with EBITDA of $141.5 million which reflects strong prices of our metals amid accelerating demand and a shortfall in supply. This result was achieved despite global inflationary pressures resulting in some cost increases. CAML is now in a net cash position for the first reporting period since the acquisition of Sasa, and the Group continues to reward shareholders with strong dividends as well as looking after its other stakeholders.

2021 MARKET OVERVIEW

Kazakhstan

According to the National Bank of Kazakhstan, where CAML produces its copper, Kazakhstan's 2021 GDP expanded by 4%, and official inflation was 8.4%.

Copper

2021 was a strong year for copper, despite ongoing concerns about COVID-19, rising inflation, logistic issues and troubles in the Chinese property market. During 2021, refined copper was strongly supported by demand from end-users and restocking has been particularly strong as a result of vaccination rollouts, pent-up consumer demand, fiscal stimulus packages and a general low interest rate environment. During the year the increase in supply of refined copper production of 3.2% has lagged demand increase of 4.4%.

The International Copper Study Group ('ICSG') indicated a 2021 global refined copper deficit of 340,000 tonnes.

North Macedonia

According to the National Bank of North Macedonia, North Macedonia's 2021 GDP is expected to have expanded by 4.0%, with inflation of 3.2%.

Zinc

The zinc market rebounded well in 2021, due to a 0.6% increase in global growth in supply and a 5.8% increase in demand for zinc metal. These figures reflect the global recovery from 2020 which was severely affected by the initial spread of the COVID-19 pandemic.

Mine production recovered sharply by 4.5% after significant interruptions during the previous year and, while zinc concentrate production also increased, freight delays and strong smelter demand resulted in falling treatment charges from $300/dmt to $160/dmt year on year. Demand was also much improved, as evidenced by a rise in the LME metal price from c.$2,700 to c.$3,500 per tonne during the year and a decrease in LME metal stocks.

According to the International Lead and Zinc Study Group ('ILZSG'), there was an overall 2021 deficit of 192,000 tonnes. Two European smelters (Porto Vesme Italy and Auby in Belgium) announced closures towards the end of 2021 which will tighten the metal market in 2022. The market in this current year could also be affected by the significant delays experienced in seaborne deliveries, which represent approximately 50% of all zinc concentrate movements.

Lead

The lead market remains healthy with a modest 2021 surplus of 46,000 tonnes expected by the ILZSG. Demand continues to grow despite the push to reduce dependence on lead-acid batteries. It is deemed unlikely that lead demand will see any dramatic falls in the coming years as EV's will continue to be a strong source of demand.

Consumption of lead metal in 2021 rebounded by 4.3% from 2020 and, as a consequence, the market for lead concentrates remained tight during 2021. Stocks of both lead metal and lead concentrates were relatively low throughout the year despite mine production increasing by 3.8%. Like zinc, supply of seaborne lead concentrates was also affected by the tightness in the freight market. The lead metal prices moved up from c.$2,000 to c.$2,300 per tonne during the year and concentrate treatment charges fell year-on-year.

PERFORMANCE OVERVIEW

CAML's 2021 gross revenue was the highest recorded to date, up significantly by 38% to $235.2 million (2020: $170.3 million). Uncertainty caused by the COVID-19 pandemic was alleviated and market conditions moved favourably during the year and the prices of copper, zinc and lead reflected the increasing global demand for these metals.

The Group also generated record 2021 EBITDA of $141.5 million (2020: $95.7 million), and its EBITDA margin also improved significantly to 60% (2020: 56%) which, despite the global inflationary pressures, reflects the Group's ability to maintain low costs across the operations.

Earnings per share ('EPS') from continuing operations was 47.69 cents (2020: 24.78 cents), 92% higher than the previous year.

Against such a backdrop, CAML generated strong free cash flow of $103.8 million (2020: $58.9 million), allowing the Board to propose a record dividend within policy. The Group has accelerated its deleveraging, having repaid corporate debt of $48.4 million during the year (2020: $38.4 million) which included an additional $10 million early repayment. As at 31 December 2021, drawn overdraft facilities totalled $9.6 million (2020: $9.7 million) resulting in net cash of $22.7 million (2020: net debt of $36.2 million).

Sasa's 2021 EBITDA was $57.5 million (2020: $42.3 million), with a margin of 56% (2020: 51%). Whilst sales volumes for both zinc and lead were lower during 2021 due to reduced head grades, zinc and lead prices increased significantly during the year and treatment charges reduced from April 2021 onwards. Sasa's EBITDA also reflects an unfavourable movement in the North Macedonian Denar exchange rate to the US Dollar of 4%, as well as higher energy prices and salaries. Kounrad's 2021 EBITDA was $106.0 million (2020: $65.5 million), with a margin of 80% (2020: 75%). The EBITDA increased year on year due to the improved average copper price received coupled with consistent copper sales.

Kounrad's EBITDA reflects an increase in costs due to higher usage of reagents, as well as rising electricity prices and salaries.

INCOME STATEMENT

Group profit before tax from continuing operations increased by 83% to $109.3 million (2020: $59.8 million). This was primarily as a result of the aforementioned reasons, with higher revenue due to significantly improved commodity prices. There were also reduced finance costs of $3.9 million (2020: $6.7 million) due to the significant reduction of debt during the year and the reduced LIBOR rates. The 2021 economic recovery has resulted in global inflation that has adversely affected several key costs such as energy and reagents, as well as salaries, which have increased our Group cost base.

Revenue

CAML generated 2021 gross revenue of $235.2 million (2020: $170.3 million), which is reported after deduction of treatment charges, but before deductions of offtake buyer's fees and silver purchases for the silver stream. Net revenue after these deductions was $223.4 million (2020: $160.1 million).

Sasa

Overall, Sasa generated 2021 gross revenue of $103.1 million (2020: $82.7 million). A total of 18,586 tonnes (2020: 19,930 tonnes) of payable zinc in concentrate and 25,245 tonnes (2020: 28,218 tonnes) of payable lead in concentrate were sold during 2021. The payable lead in concentrate sales is lower than that disclosed in the CAML 2021 Operations update as the final lead concentrate shipment of the year was delayed until January 2022 and, under the Free on Board ('FOB') terms, this revenue will be recognised in the 2022 financial year.

The challenging ground conditions at Sasa coupled with an enhanced approach to underground safety risks resulted in short term reductions in flexibility of working areas at the mine, leading to a reduction in ore mined year on year and increased dilution which led to reduced zinc and lead head grades. Lower production led to a reduction in payable concentrate sold at Sasa. The zinc price achieved was 35% higher than that achieved in 2020 and the lead price achieved was 23% higher than that achieved in 2020.

Treatment charges were lower during the year at $18.8 million (2020: $22.2 million) as a result of improved negotiated terms from April 2021 onwards for both zinc and lead and reduced volumes of deliveries. Treatment charges are expected to further reduce from April 2022 onwards as more favourable terms have recently been agreed. During 2021, the offtake buyer's fee for Sasa was $1.2 million (2020: $0.9 million).

Zinc and lead concentrate sales agreements have been extended with Traxys through to 31 March 2023 for 100% of Sasa production to align this with the tenor of the smelter contracts. Three new smelters were identified in 2021 to further diversify CAML's customer base and 3,309 dry tonnes of payable lead and zinc in concentrate were sold to them during 2021. Group selling and distribution costs decreased to $2.1 million (2020: $2.6 million) as the prior period included international shipping costs to Asia.

Sasa has an existing silver streaming agreement with Osisko Gold Royalties whereby Sasa receives approximately $6 per ounce for its silver production for the life of the mine.

Kounrad

A total of 13,983 tonnes (2020: 13,763 tonnes) of copper cathode from Kounrad were sold as part of the Company's offtake arrangement with Traxys which has been extended through to end of December 2022. The commitment is for a minimum of 95% of Kounrad's annual production. A further 68 tonnes (2020: 97 tonnes) were sold locally, a reduction from the prior year due to weaker local demand as a result of COVID-19. Total Kounrad copper sales were 14,051 tonnes (2020: 13,860 tonnes).

Gross revenue increased due to the higher average copper price received, which was $9,384 per tonne in 2021 (2020: $6,267 per tonne), while sales volumes remained consistent. This generated gross revenue for Kounrad of $132.0 million (2020: $87.7 million). During 2021, the offtaker's fee for Kounrad was $2.6 million (2020: $2.5 million).

2021 hedging

Given the increased capital expenditure to deliver the Sasa Cut and Fill Project, the Group entered into commodity price hedge contracts for a portion of its 2021 metal production. These arrangements ensured that CAML retained its exposure to strong copper, zinc and lead prices, while protecting a meaningful proportion of revenues during the higher capex period and continuing to rapidly deleverage. A Zero Cost Collar contract for 30% of copper production, which included a put option of $6,900 per tonne and a call option of $8,380 per tonne, was put in place for Kounrad. Also, two swap contracts were put in place for 30% of Sasa's payable zinc production to be sold at $2,804 per tonne and 30% of its payable lead production to be sold at $2,022 per tonne. As a result of these financial instruments, the Company recognised $6.7 million (2020: nil) of realised losses during the year. These financial instruments have expired at the end of the year and so their year-end fair value was calculated as zero. The Group has not put in place any further hedge contracts for 2022.

Cost of sales

Group cost of sales for the year was $80.5 million (2020: $72.0 million) and this includes depreciation and amortisation charges of $28.9 million (2020: $28.6 million). The year on year increase of 12% includes greater Group royalty costs of $2.6 million linked to the higher realised prices for all commodities. Global macro-economic conditions led to an increase in key production cost components such as reagents, electricity and salaries. The Company continues to focus on factors such as disciplined capital investments, working capital initiatives and other control measures.

Sasa

Sasa's cost of sales for the period was 9% higher than the previous corresponding period at $55.4 million (2020: $51.0 million) as Sasa faced certain global inflationary pressures. However, 27% of this total cost increase ($1.2 million) was currency related as the North Macedonian Denar, which is pegged to the Euro, strengthened to an average of 52.06 against the US Dollar versus a 2020 average of 54.02. Production costs increased due to higher energy costs of $0.7 million as the electricity prices increased by 63% from $6.4/kWh to $10.4/kWh. Other material cost increases included $0.6 million rise in salaries, $0.4 million for maintenance of equipment and $0.3 million higher costs of reagents, explosives and other consumables.

2021 depreciation increased by $0.4 million versus 2020 due primarily to the inclusion of TSF4 depreciation within these calculations for a full period, which commenced in May 2020.

2021 royalties were $0.4 million higher than those of 2020 (2020: $2.4 million). This tax is calculated at the rate of 2% (2020: 2%) on the value of metal recovered during the period and the significant increase in metal prices was only moderately offset by lower production.

Kounrad

Kounrad's 2021 cost of sales was $25.1 million (2020: $21.0 million) and 54% of this accretion was due to higher mineral extraction tax ('MET') paid. MET is a royalty charged by the Kazakhstan authorities at the rate of 5.7% (2020: 5.7%) on the value of metal recovered during the year. MET for the year was $7.3 million (2020: $5.1 million) and an increase resulted from the higher average copper price relating to similar sales volumes versus the previous year.

There was also a 2021 increase in certain reagent costs of $0.9 million to $2.3 million (2020: $1.4 million). This was due to a metallurgical adjustment arising from solely leaching the Western Dumps during the winter period.

2021 Kounrad power costs were $0.5 million higher than 2020, due to a 15% increase in local electricity prices from $0.039/kWh to $0.045/kWh.

During the year, the Kazakhstan Tenge moved favourably for CAML, depreciating against the US Dollar. The average exchange rate for the year was 426 KZT/USD (2020: 413 KZT/ USD), with the Kazakhstan Tenge being worth on average 3% less in US Dollar terms in 2021 compared to 2020. The depreciation and amortisation charges during the year remain consistent at $3.9 million (2020: $3.9 million).

In line with the industry standard, CAML calculates C1 cash cost by including all direct costs of production at Kounrad and Sasa (reagents, power, production labour and materials, as well as realisation charges such as freight and treatment charges) in addition to local administrative expenses. Royalties, depreciation and amortisation charges are excluded from C1 cash cost.

Sasa

Sasa's C1 zinc equivalent cash cost of production for 2021 was $0.63 per pound (2020: $0.50 per pound). Although there were cost increases, the reduced treatment charges countered the impact of these so the $0.13 per pound increase in the C1 calculation was due to the decreased production volumes of zinc ($0.03 per pound) and a higher proportion of pro-rata zinc costing resulting from the zinc equivalent calculation due to the increase in zinc revenue versus lead in 2021 ($0.10 per pound). The on-site costs were $44.1 per tonne (2020: $39.2 per tonne) and reflected global cost increases.

Kounrad

Kounrad's 2021 C1 cash cost of copper production was $0.57 per pound (2020: $0.51 per pound) and this remains amongst the lowest in the copper industry. The increase in C1 cash cost versus 2020 is due to higher on-site costs ($0.07 per pound) offset by higher production volumes ($0.01 per pound) and a weaker Kazakhstan Tenge. Approximately 70% of the C1 cash cost base in Kazakhstan is denominated in Tenge. The average C1 cash cost since production commenced in 2012 is $0.55 per pound.

Group

CAML reports its Group C1 cash cost on a copper equivalent basis incorporating the production costs at Sasa. The Group's 2021 C1 copper equivalent cash cost was $1.32 per pound (2020: $1.15 per pound). This number is calculated based on Sasa's 2021 zinc and lead payable production, which equated to 11,959 copper equivalent tonnes (2020: 15,227 copper equivalent tonnes) which has decreased due to the significantly increased copper price relative to the zinc and lead price and is added to Kounrad's 2021 copper production of 14,041 tonnes (2020: 13,855 tonnes).

The Group C1 cash cost on a copper equivalent basis has increased largely as a result of lower copper equivalent production units mainly due to lower lead and zinc prices relative to copper and partly due to higher costs at both Sasa and Kounrad.

CAML's fully inclusive copper equivalent cost of production has primarily been adversely affected by a reduction in copper equivalent tonnes due to the relative price performance of all three base metals, as well as an increase in royalty costs.

Administrative expenses

During the year, administrative expenses increased to $22.1 million (2020: $19.0 million), largely due to an increased noncash share-based payment charge of $2.4 million (2020: $0.9 million) resulting from the vesting of three years' worth of share options granted to employees. The comparative year shows only one year's worth of vesting share options as the policy long-term incentive plan was recently adjusted. In addition, in the comparative period there were no additional divided share awards made given that the Company did not declare a final 2019 dividend.

There was also an increase in employee related costs due to pay rises, additional insurance premiums, and more business travel following the easing of lockdown restrictions in prior year.

Finance costs

The Group reduced its finance costs in 2021 to $3.9 million (2020: $6.7 million) principally driven by a lower debt balance from further scheduled debt repayments of $38.4 million throughout the year and an additional $10 million early repayment of the corporate debt facility. The interest rates incurred also reflected a lower LIBOR rate.

Taxation

2021 Group corporate income tax increased significantly to $25.1 million (2020: $16.0 million) as a result of higher profits at Kounrad of $102.6 million (2020: $61.7 million) taxed at a corporate income tax rate of 20% and at Sasa of $32.3 million (2020: $16.3 million) at a corporate income tax rate of 10%. The Group's underlying effective tax rate was $23.0% (2020: 26.8%) which reflects the increased profits at both operations.

Discontinued operations

The Group continues to report the results of the Copper Bay entities within Discontinued Operations. These assets were fully written off in prior years.

BALANCE SHEET

Cut and Fill Project

The Group continues to invest significantly at Sasa with the implementation of the Cut and Fill Project, comprising the construction of a Paste Backfill Plant and associated underground reticulation infrastructure, a Dry Stack Tailings Plant and associated landform and the development of the new Central Decline. 

Capital expenditure on Cut and Fill Project totalled $8.3 million of which $5.9 million has been capitalised. This includes $3.3 million on the Paste Backfill Plant including costs of $0.6 million for thickener tank, $0.3 million for displacement pumps and construction and design. There was a further $0.9 million spent on underground reticulation. There was also $1.4 million spent on the Dry Stack Tailings filtration plant including $0.7 million on the larox filter.

Central Decline costs include $1.2 million of capitalised development and $2.4 million on new equipment including new underground fleet.

The Group intends to spend $17-$19 million on its Cut and Fill Project in 2022.

Sustaining Capital expenditure

The Group sustaining capital expenditure capitalised was $8.8 million (2020: $8.5 million), comprising $2.7 million (2020: $1.3 million) costs at Kounrad and $6.1 million (2020: $7.2 million) at Sasa.

Kounrad sustaining expenditure included $1.2 million on solution pipes, lining and dripper pipes and expenditure of $0.7 million on new anodes and a new bulldozer of $0.2 million.

Sasa sustaining capital expenditure includes capitalised mine development of $2.7 million, $0.5 million on underground fleet, $0.3 million on a new drill rig and $0.2 million on TSF 4 pulp line costs.

Working Capital

As at 31 December 2021, current trade and other receivables were $6.2 million (31 December 2020: $8.9 million), which includes trade receivables from the offtake sales of $1.2 million (31 December 2020: $1.9 million) and $2.5 million in relation to prepayments and accrued income (31 December 2020: $2.6 million). The corporate tax recoverable balance at Sasa has decreased by $1.2 million due to increase in zinc and lead prices reducing the previously accumulated recoverable balance.

Non-current trade and other receivables were $7.3 million (31 December 2020: $3.8 million), which has increased due to prepayments made on property, plant and equipment as part of the Sasa Cut and Fill Project as well as prepayments at Kounrad. As at 31 December 2021, a total of $3.3 million (31 December 2020: $3.3 million) of VAT receivable was still owed to the Group by the Kazakhstan authorities. Recovery is still expected through the local sales of cathode to offset these recoverable amounts.

As at 31 December 2021, current trade and other payables were $16.1 million (31 December 2020: $12.9 million).

Asset retirement obligation

At year end an updated Sasa conceptual closure plan was performed by independent external consultants WSP UK Limited ('WSP'). The report reassessed the estimated closure costs at the end of the life of mine in 2038 including rehabilitation, remediation, decommissioning and demolition. The year end provision has therefore been increased to $16.1 million (2020: $7.2 million) to account for the additional estimated costs surrounding managing surface water in-line with the Global Industry Standard on tailings management ('GISTM'). A key addition to the asset retirement obligation proposed is to construct a diversion route to re-join the natural course of the river.

Cash and borrowings

As at 31 December 2021, non-current and current borrowings were nil (31 December 2020: $32.3 million) and $33.0 million (31 December 2020: $48.1 million) respectively comprising of $23.4 million in corporate debt through Traxys Europe S.A. and the $9.6 million of North Macedonian overdraft facilities. The reduction in total borrowings of $48.5 million reflects monthly corporate debt repayments during the year of $38.4 million plus an additional $10 million early repayment of debt.

CASH FLOWS

Increased commodity prices coupled with a credible operational performance resulted in strong cash flows for the Group. Net cash flow generated from operations was $112.6 million (2020: $67.4 million). During the year, corporate debt repayments of $48.4 million were made (2020: $38.4 million), plus Group interest paid totalling $2.4 million (2020: $4.8 million). Net drawdowns on overdrafts during the year were $0.6 million (2020: $8.0 million).

The corporate debt facility agreement with Traxys Europe S.A. is expected to be repaid in August 2022. The monthly repayment schedule is $3.2 million and interest is payable at LIBOR plus 4.00% with effect from 27 March 2020. Security is provided over the shares in CAML Kazakhstan BV, certain bank accounts and the offtake agreements between Traxys and each operation. The financial covenants of the debt which include the monitoring of gearing and leverage ratios are all continuously monitored by management and the Group is both currently compliant and forecast to continue to be compliant with significant headroom.

In 2021, corporate income tax payments to governments totalled $21.6 million (2020: $14.7 million). This included $0.5 million (2020: $1.6 million) of North Macedonia corporate income tax paid in cash in addition to a $3.5 million (2020: $4.0 million) non-cash payment and was offset against VAT receivable and overpaid corporate income tax from the prior year. $21.1 million (2020: $13.1 million) of Kazakhstan corporate income tax was paid during the year. Taking into account sustaining capital expenditure, CAML's free cash flow for 2021 was $103.8 million (2020: $58.9 million).

The overdraft facility agreed with Komercijalna Banka AD Skopje with a fixed interest rate of 2.4% - 2.5%, dependent on conditions, was extended during the year to 30 July 2022. In June 2020, a new overdraft facility was agreed with Ohridska Banka A.D. Skopje with a fixed interest rate of 2.5% denominated in Macedonian Denar. This was originally repayable on 26 June 2021 and was extended for a further year to 26 June 2022.

The Company's dividend policy is to return to shareholders a target range of between 30% and 50% of free cash flow, defined as net cash generated from operating activities less sustaining capital expenditure. The dividends will only be paid provided there is sufficient cash remaining in the Group to meet the ongoing contractual debt repayments and that banking covenants are not breached.

As a result of the strong cash flows during the year, the CAML Board declared a final 2020 dividend of 8 pence and 2021 interim dividend of 8 pence. Total dividends paid to shareholders during the year of $38.9 million (2020: $13.9 million) comprised the 2020 final dividend and the 2021 interim dividend, and compared favourably to 2020 given that the CAML Board did not recommend a 2019 final dividend in March 2020 following the outbreak of the COVID-19 pandemic.

In conjunction with CAML's 2021 annual results, the Board proposes a final 2021 dividend of 12 pence per Ordinary Share which represents 45% of free cash flow. This brings total dividends (proposed and declared) for the year to 20 pence (2020: 14 pence) and the final dividend is payable on 30 May 2022 to shareholders registered on 6 May 2022. This latest dividend will increase the amount returned to shareholders in dividends and share buy-backs since the 2010 IPO listing to $256.9 million.

GOING CONCERN

The Group sells and distributes its copper cathode product primarily through an offtake arrangement with Traxys Europe S.A. ('Traxys') with a minimum of 95% of the SX-EW plant's forecasted output committed as sales for the period extended until December 2022. The Group sells Sasa's zinc and lead concentrate product through an offtake arrangement with Traxys which has been fixed through to 31 March 2023. The commitment is for 100% of the Sasa concentrate production.

The Group meets its day to day working capital requirements through its profitable and cash generative operations at Kounrad and Sasa. The Group manages liquidity risk by maintaining adequate committed borrowing facilities and the Group has substantial cash balances as at 31 December 2021. During 2021, both the Kounrad facility in Kazakhstan and the Sasa mine in North Macedonia continued to operate with no disruptions to production or sales volumes due to COVID-19.

The financial covenants of CAML's debt, which include the monitoring of gearing and leverage ratios, are all routinely monitored by management and the Group is compliant with its covenants. The Board has reviewed forecasts for the period to December 2023 to assess the Group's liquidity and debt covenant compliance which demonstrate substantial headroom. Additional sensitivity scenarios have been considered in terms of pricing and production including consideration of risks together with reverse stress testing of the forecasts in line with best practice. Liquidity and covenant headroom was demonstrated in each reasonably possible scenario. Accordingly, the Directors continue to adopt the going concern basis in preparing the consolidated financial information.

CONFLICT IN UKRAINE

The situation in Ukraine will have an impact on the global economy and financial markets. The outlook in this regard is uncertain and the full extent of consequences cannot be assessed at this stage. Energy and commodity prices have risen adding to the inflationary pressures already faced by CAML. CAML management's focus is to ensure full compliance with sanctions imposed on Russia across all operations, as well as to proactively address any anticipated issues with logistics and supply chains by increasing stock levels of reagents and critical spare parts.

In the meantime our thoughts are with those directly affected.

NON-IFRS FINANCIAL MEASURES

The Group uses alternative performance measures, which are not defined by generally accepted accounting principles ('GAAP') such as IFRS. These measures are used by management, alongside the comparable GAAP measures, in evaluating the business performance. The measures are not intended as a substitute for GAAP measures and may not be comparable to similarly reported measures by other companies. The following non-IFRS alternative performance financial measures are used in this report:

EBITDA

EBITDA is a valuable indicator of the Group's ability to generate liquidity and is frequently used by investors and analysts for valuation purposes. It is also a non-IFRS financial measure which is reconciled as follows:

Gross revenue

Gross revenue is presented as the total revenue received from sales of all commodities after deducting the directly attributable treatment charges associated for the sale of zinc, lead and silver. This figure is presented as it reflects the total revenue received in respect of the zinc and lead concentrate and is used to reflect the movement in commodity prices and treatment charges during the year. The Board considers gross revenue, together with the reconciliation to net IFRS revenue to provide valuable information on the drivers of IFRS revenue.

Net cash/(debt)

Net cash/(debt) debt is a measure used by the Board for the purposes of capital management and is calculated as the total of the borrowings held with Traxys Europe S.A. and bank overdrafts less the cash and cash equivalents held at the end of the year. This balance does not include the restricted cash balance of $3.5 million (31 December 2020: $3.6 million):

Free cash flow

Free cash flow is a non-IFRS financial measure of the cash from operations less capital expenditure on property, plant and equipment and intangible assets and is presented as follows:

The purchase of sustaining property, plant and equipment figure above does not include the $5.9 million (2020: nil) of expenditure on the Sasa Cut and Fill Project. These costs are not considered sustaining capital expenditure as they are expansionary development costs required for the transition to the cut and fill mining technique. The Cut and Fill Project exceptional costs are expected to continue until 2023.

Sustainability reporting standards

Sustainability is at the core of our business values, and we continue to align our reporting with the Global Reporting Initiative ('GRI') Standards 'Core option'. We have an economically robust business that underpins our ability to generate profits and dividends for our shareholders and ensures that our successes are also felt by other important stakeholders. We strongly believe that by creating shared value we are ensuring the long-term sustainability of our operations and acting as a good corporate citizen. The table below highlights the economic value that has been distributed amongst CAML stakeholders during 2021.

1 The tax disclosed is the total corporate income tax recognised in the income statement, MET, concession fees and property taxes. The figure excludes the payroll taxes and additional cash payments made on corporate income tax during the year.

On behalf of the Board

Gavin Ferrar

Chief Financial Officer

28 March 2022

Consolidated Income Statement

1 Gross revenue is a non-IFRS financial measure which is used by management, alongside the comparable GAAP measures, in evaluating the business performance. The measures are not intended as a substitute for GAAP measures and may not be comparable to similarly reported measures by other companies.

Statements of Financial Position Registered no. 5559627

as at 31 December 2021

Group Company

* A portion of the comparative loans due from subsidiaries have been reclassified from current to non-current assets (see note 23)

The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Parent Company Income Statement or Statement of Comprehensive Income. The profit for the Parent Company for the year was $13,585,000 (2020: $48,526,000).

Consolidated Statement of Changes in Equity

for the year ended 31 December 2021

Company Statement of Changes in Equity

for the year ended 31 December 2021

Consolidated Statement of Cash Flows

Cash and cash equivalents at 31 December 2021 includes cash at bank and on hand included in assets held for sale of $36,000 (31 December 2020: $56,000) (note 22). The Consolidated Statement of Cash Flows does not include the restricted cash balance of $3,516,000 (2020: $3,641,000) (note 25).

The notes below are an integral part of the consolidated financial information. 

Notes to the Financial Information

for the year ended 31 December 2021

Central Asia Metals plc ('CAML' or the 'Company') and its subsidiaries (the 'Group') are a mining and exploration organisation with operations primarily in Kazakhstan and North Macedonia and a parent holding company based in the United Kingdom ('UK').

The Group's principal business activities are the production of copper cathode at its Kounrad operations in Kazakhstan and the production of lead, zinc and silver at its Sasa operations in North Macedonia. CAML owns 100% of the Kounrad SX-EW copper project in Kazakhstan and 100% of the Sasa zinc-lead mine in North Macedonia. The Company also owns a 75% equity interest in Copper Bay Limited which is currently held for sale. See note 22 for details.

CAML is a public limited company, which is listed on the AIM market of the London Stock Exchange and incorporated and domiciled in England, UK. The address of its registered office is Masters House, 107 Hammersmith Road, London, W14 0QH. The Company's registered number is 5559627.

The principal accounting policies applied in the preparation of these Consolidated Financial Statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of preparation of the Financial Information

The financial information set out herein does not constitute the Group's statutory financial statements for the year ended 31 December 2021, but is derived from the Group's audited financial statements. The auditors have reported on the 2021 financial statements and their reports were unqualified and did not contain statements under s498(2) or (3) Companies Act 2006, nor did they contain a material uncertainty in relation to going concern. The 2021 Annual Report was approved by the Board of Directors on 28 March 2022, and will be mailed to shareholders in April 2022. The financial information in this statement is audited but does not have the status of statutory accounts within the meaning of Section 434 of the Companies Act 2006.

The Group's consolidated financial statements, which form part of the 2021 Annual Report, have been prepared in accordance with international accounting standards as adopted in the United Kingdom. The consolidated financial statements have been prepared under the historical cost convention with the exception of assets held for sale which have been held at fair value. The Group financial information is presented in US Dollars ($) and rounded to the nearest thousand.

The parent company meets the definition of a qualifying entity under FRS 100 (Financial Reporting Standard 100) issued by the Financial Reporting Council. The parent company financial statements have therefore been prepared in accordance with FRS 101 (Financial Reporting Standard 101) 'Reduced Disclosure Framework' as issued by the Financial Reporting Council. As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to share-based payments, financial instruments, fair value measurements, capital management, presentation of a cash flow statement, new standards not yet effective, impairment of assets and related party transactions. Where relevant, equivalent disclosures have been given in the Group financial statements of Central Asia Metals plc.

The preparation of financial information in conformity with IFRS, as adopted by the United Kingdom, requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial information are explained in note 4.

The Group sells and distributes its copper cathode product primarily through an offtake arrangement with Traxys Europe S.A.

('Traxys') with a minimum of 95% of the SX-EW plant's forecasted output committed as sales for the period extended until

December 2022. The Group sells Sasa's zinc and lead concentrate product through an offtake arrangement with Traxys which has

been fixed through to 31 March 2023. The commitment is for 100% of the Sasa concentrate production.

The Group meets its day to day working capital requirements through its profitable and cash generative operations at Kounrad and

Sasa. The Group manages liquidity risk by maintaining adequate committed borrowing facilities and the Group has substantial cash

balances as at 31 December 2021. During 2021, both the Kounrad facility in Kazakhstan and the Sasa mine in North Macedonia

continued to operate with no disruptions to production or sales volumes due to COVID-19.

The financial covenants of CAML's debt, which include the monitoring of gearing and leverage ratios, are all routinely monitored by

management and the Group is compliant with its covenants. The Board has reviewed forecasts for the period to December 2023

to assess the Group's liquidity and debt covenant compliance which demonstrate substantial headroom. Additional sensitivity

scenarios have been considered in terms of pricing and production including consideration of risks, together

with reverse stress testing of the forecasts in line with best practice. Liquidity and covenant headroom was demonstrated in each

reasonably possible scenario. Accordingly, the Directors continue to adopt the going concern basis in preparing the consolidated

financial information.

Please refer to notes 6, 25 and 29 for information on the Group's revenues, cash balances and trade and other payables.

The Group has adopted the following standards and amendments for the first time for their annual reporting period commencing 1 January 2021:

Interest Rate Benchmark Reform - IBOR 'phase 2' (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) that is the second part to a two-phase project which finalises the IBOR and other interest rate benchmarks reform. These amendments are mandatorily effective for periods beginning 1 January 2021 however there is no impact on the current reporting period.

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2021 reporting periods and have not been early adopted by the Group. These standards include:

IAS 37 - Onerous Contracts - Cost of Fulfilling a Contract amending the standard regarding costs a company should include as the cost of fulfilling a contract when assessing whether a contract is onerous. These amendments are mandatorily effective for periods beginning 1 January 2022.

IAS 16 - Property, Plant and Equipment - Proceeds before Intended Use regarding proceeds from selling items produced while bringing as asset into the location and condition necessary for it to be capable of operating in the manner intended by management. These amendments are mandatorily effective for periods beginning 1 January 2022.

IAS 1 - Presentation of Financial statements - The classification of liabilities as current or non-current basing the classification on contractual arrangements at the reporting date. These amendments are effective for periods beginning 1 January 2023.

These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

The Group Financial Statements consolidate the Financial Statements of CAML and the entities it controls drawn up to 31 December 2021.

Subsidiaries are all entities (including structured entities) over which the Group has control. 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. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

Intercompany transactions, balances and unrealised losses/gains on transactions between Group companies are eliminated. Unrealised losses/gains are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Business combinations

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of the acquiree's identifiable net assets. Acquisition-related costs are expensed as incurred and reported within other expenses.

Goodwill

The excess of the consideration transferred of a business combination, the amount of any non-controlling interest in the acquired entity, and acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase. Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated statement of comprehensive income. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date.

After initial recognition, goodwill is stated at cost less any accumulated impairment losses, with the carrying value being reviewed for impairment, at least annually and whenever events or changes in circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill is allocated to the cash-generating unit expected to benefit from the business combination in which the goodwill arose. Where the recoverable amount is less than the carrying amount, including goodwill, an impairment loss is recognised in the Income Statement. The carrying amount of goodwill allocated to an entity is taken into account when determining the gain or loss on disposal of the unit.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries that are not held by the Group and are presented separately within equity in the Consolidated Statement of Financial Position distinct from parent shareholder's equity.

Where losses are incurred by a partially owned subsidiary, they are consolidated such that the non-controlling interests' share in the losses is apportioned in the same way as profits.

Where profits are then made in future periods, such profits are then allocated to the parent company until all unrecognised losses attributable to the non-controlling interests but absorbed by the parent are recovered at which point, profits are allocated as normal.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker which is considered to be the Board. The Group's segmental reporting reflects the operational focus of the Group. The Group has been organised into geographical and business units based on its principal business activities of mining production, having two reportable segments as follows:

· Kounrad (production of copper cathode) in Kazakhstan

· Sasa (production of lead, zinc and silver) in North Macedonia

Included within the unallocated segment are corporate costs for CAML PLC which includes the Group debt held with Traxys and other holding companies within the Group which are not separately reported to the Board

The functional currency for each entity in the Group is determined as the currency of the primary economic environment in which it operates. The Consolidated Financial Statements are presented in US Dollars, which is the Group's and Company's presentation currency. The functional currency of the Company is US Dollars.

Transactions in currencies other than the currency of the primary economic environment in which they operate are initially recorded at the rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss.

Exchange gains and losses arising on the retranslation of monetary financial assets are treated as a separate component of the change in fair value and recognised in profit or loss. Exchange gains and losses on non-monetary OCI financial assets form part of the overall gain or loss in OCI recognised in respect of that financial instrument.

On consolidation, the results of overseas operations are translated into USD at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rates are recognised in other comprehensive income and accumulated in the foreign exchange reserve.

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the profit or loss on disposal.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost comprises the aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to making the asset capable of operating as intended.

The cost of the item also includes the cost of decommissioning any buildings or plant and equipment and making good the site, where a present obligation exists to undertake the rehabilitation work.

Development costs relating to specific mining properties are capitalised once management determines a property will be developed. A development decision is made based upon consideration of project economics, including future metal prices, reserves and resources, and estimated operating and capital costs. Capitalisation of costs incurred and proceeds received during the development phase ceases when the property is capable of operating at levels intended by management and is considered commercially viable. Costs incurred during the production phase to increase future output by providing access to additional reserves, are deferred and depreciated on a units-of-production basis over the component of the reserves to which they relate. Ore reserves may be declared for an undeveloped mining project before its commercial viability has been fully determined. Development costs incurred after the commencement of production are capitalised to the extent they are expected to give rise to a future economic benefit. Development costs are not depreciated until such time as the areas under development enter production.

Depreciation is provided on all property, plant and equipment on a straight-line basis over its total expected useful life. As at 31 December 2021 the remaining useful lives were as follows:

· Construction in progress - not depreciated

· Land - not depreciated

· Plant and equipment - over 5 to 21 years

· Mining assets - over 2 to 21 years

· Motor vehicles - over 2 to 10 years

· Office equipment - over 2 to 10 years

· Right of use assets - term of lease agreement

Mineral rights are depreciated on a Unit of Production basis ('UoP'), in proportion to the volume of ore mined in the year compared with total proven and probable reserves as well as measured, indicated and certain inferred resources which are considered to have a sufficiently high certainty of commercial extraction at the beginning of the year. Assets within operations for which production is not expected to fluctuate significantly from one year to another or which have a physical life shorter than the related mine are depreciated on a straight-line basis.

Construction in progress is not depreciated until transferred to other classes of property, plant and equipment.

The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable and are written down immediately to their recoverable amount. Useful lives and residual values are reviewed annually and where adjustments are required, these are made prospectively.

An item of property, plant and equipment is de-recognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on de-recognition of the asset is included in the Income Statement.

Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

· fixed payments (including in-substance fixed payments), less any lease incentives receivable and variable payments based on index or rate;

· amounts expected to be payable by the Group under residual value guarantees ; and

· payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

The Group leases offices and equipment. Rental contracts are typically made for fixed periods of six months to five years and have extension options.

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.

Intangible assets

a) Exploration and evaluation expenditure

Capitalised costs include costs directly related to any Group exploration and evaluation activities in areas of interest for which there is a high degree of confidence in the feasibility of the project. Exploration and evaluation expenditure capitalised includes acquisition of rights to explore, topographical, geological, geochemical and geophysical studies, exploration drilling, trenching, sampling and activities in relation to the evaluation of the technical feasibility and commercial viability of extracting a mineral resource.

Exploration and evaluation assets are measured at cost less provision for impairment, where required.

b) Mining licences, permits and computer software

The historical cost model is applied, with intangible assets being carried at cost less accumulated amortisation and accumulated impairment losses. Intangible assets with a finite life have no residual value and are amortised on a straight-line basis over their expected useful lives with charges included in either cost of sales or administrative expenses:

Computer software - over two to five years

Mining licences and permits - over the duration of the legal agreement

The carrying value of intangible assets is reviewed for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable.

The Group carries out impairment testing on all assets when there exists an indication of an impairment. If any such indication exists, the Group makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell or its value in use.

Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses are recognised in the Income Statement.

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 assessments of the time value of money and risks specific to the asset.

The best evidence of an asset's fair value is the value obtained from an active market or binding sale agreement. Where neither exists, fair value less costs to sell is based on the best available information to reflect the amount the Group could receive for the cash-generating unit in an arm's length sale. In some cases, this is estimated using a discounted cash flow analysis on a post-tax basis.

A previously recognised impairment loss is reversed if the recoverable amount increases as a result of a reversal of the conditions that originally resulted in the impairment. This reversal is recognised in the Income Statement and is limited to the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised in prior years.

Goodwill is also reviewed annually, as well as whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Non-financial assets other than goodwill which have suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. These steps are as follows: identification of the 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.

Under IFRS 15, revenue is recognised when the performance obligations are satisfied and the customer obtains control of the goods or services, usually when title has passed to the buyer and the goods have been delivered in accordance with the contractual delivery terms.

Those sales of zinc and lead made abroad to China and Korea are sold under Cost insurance and freight ('CIF') where legal title transfers when the goods are loaded onto the ship and leave the port. However, part of the transaction price is allocated to a distinct 'shipping and insurance' as we are responsible for arranging the freight and insurance on behalf of customer. This amount is not material to the Group so no adjustment has been made to the financial statements.

Sales of lead made to our new European smelter customer are sold under Free on Board ('FOB') where legal title transfers when the goods are loaded onto the ship and leave the port.

Revenue is measured at the fair value of consideration received or receivable from sales of metal to an end user, net of any buyers' discount, treatment charges and value added tax. The Group recognises revenue when the amount of revenue can be reliably measured and when it is probable that future economic benefits will flow to the entity.

The value of consideration is fair value which equates to the contractually agreed price. The offtake agreements provide for provisional pricing i.e. the selling price is subject to final adjustment at the end of the quotation period based on the average price for the month following delivery to the buyer. Such a provisional sale contains an embedded derivative which is not required to be separated from the underlying host contract, being the sale of the commodity. At each reporting date, if any sales are provisionally priced, the provisionally priced copper cathode, zinc and lead sales are marked-to-market using forward prices, with any significant adjustments (both gains and losses) being recorded in revenue in the Income Statement and in trade receivables in the Statement of Financial Position.

The Company may mitigate commodity price risk by fixing the price in advance for its copper cathode with the offtake partner and also its zinc and lead sales with the banks where a facility has been set up and agreed. The price fixing arrangements are outside the scope of IFRS 9 Financial Instruments: Recognition and Measurement and do not meet the criteria for hedge accounting.

The Group reports both a gross revenue and revenue line. Gross revenue is reported after deductions of treatment charges but before deductions of offtakers fees and silver purchases under the Silver Stream (note 6).

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method.

The cost of finished goods and work in progress comprises raw materials, direct labour and all other direct costs associated with mining the ore and processing it to a saleable product.

Net realisable value is the estimated selling price in the ordinary course of business, less any further costs expected to be incurred to completion. Provision is made, if necessary, for slow-moving, obsolete and defective inventory.

Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and investment property that are carried at fair value and contractual rights under insurance contracts, which are specifically exempt from this requirement.

An impairment loss is recognised for any Initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.

Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.

Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the balance sheet.

A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the Statement of Comprehensive Income.

The current income tax charge is calculated based on the tax laws enacted or substantively enacted at the reporting date in the countries where the Group's subsidiaries operate and generate taxable income.

Deferred income tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base, except for differences arising on:

· The initial recognition of goodwill,

· The initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit, and

· Investments in subsidiaries and joint arrangements where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered). When there is uncertainty concerning the Group's filing position regarding the tax bases of assets or liabilities, the taxability of certain transactions or other tax-related assumptions, then the Group:

· Considers whether uncertain tax treatments should be considered separately, or together as a group, based on which approach provides better predictions of the resolution;

· Determines if it is probable that the tax authorities will accept the uncertain tax treatment; and

· If it is not probable that the uncertain tax treatment will be accepted, measure the tax uncertainty based on the most likely amount or expected value, depending on whichever method better predicts the resolution of the uncertainty. This measurement is required to be based on the assumption that each of the tax authorities will examine amounts they have a right to examine and have full knowledge of all related information when making those examinations.

Deferred income tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

· The same taxable group company, or

· Different group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.

Restricted cash

Restricted cash is cash with banks that is not available for immediate use by the Group. Restricted cash is shown separately from cash and cash equivalents on the Statement of Financial Position.

Investments

Investments in subsidiaries are recorded at cost less provision for impairment.

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

Where any Group company purchases the Company's equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company's equity holders until the shares are cancelled or reissued. Where such Ordinary Shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company's equity holders.

Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the consolidated statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied. An option pricing model is used to measure the fair value of the options.

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the consolidated statement of comprehensive income over the remaining vesting period.

Trade and other receivables are accounted for under IFRS 9 using the expected credit loss model and are initially recognised at fair value and subsequently measured at amortised cost less any allowance for expected credit losses.

Impairment provisions for current and non-current trade receivables are recognised based on the 'simplified approach' within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised in profit or loss. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Impairment provisions for receivables from subsidiaries and loans to subsidiaries are recognised based on the 'general approach' within IFRS 9. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset with the assessment also taking into account the ability of the subsidiary to repay the receivable or loan in the event that it was called due. For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised. Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of the loan whereas twelve month expected credit losses are a portion of lifetime expected credit losses that represent the expected credit losses that result from default events that are possible within twelve months of the reporting date.

From time to time, the Group elects to renegotiate the terms of trade receivables due from customers with which it has previously had a good trading history. Such renegotiations will lead to changes in the timing of payments rather than changes to the amounts owed and, in consequence, the new expected cash flows are discounted at the original effective interest rate and any resulting difference to the carrying value is recognised in the consolidated statement of comprehensive income (operating profit).

Trade and other payables are not interest bearing and are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method.

Silver stream commitment

The silver stream arrangement has been accounted for as a commitment as the Group has obligations to deliver silver to a third party at a price below market value. On acquisition, following completion of the business combination, the silver stream commitment was identified as an unfavourable contract and recorded at fair value. Payments received under the arrangement prior to the acquisition by the Group were not considered to be a transaction with a customer. Management has determined that the agreement is not a derivative as it will be satisfied through the delivery of non-financial items (i.e. silver commodity from the Company's production), rather than cash or financial assets. Subsequent to initial recognition the silver stream commitment is not revalued and is amortised on a units of production basis to cost of sales.

The fair value of consideration received for delivered silver under the agreement is recorded as revenue. In addition, silver produced in conjunction with the Group's lead and zinc production and sold under the offtake agreement is recorded in gross revenue with a corresponding deduction for silver purchased to deliver under the silver stream recorded in arriving at net revenue.

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)

• Inputs other than quoted prices within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2)

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). For the derivative contracts held the Group are recognising the financial instruments with level 2 data as the valuation is obtained using MTM market data using the forward curve of the commodity prices. However, there is no readily observable market information for these exact derivative instruments. The realised losses gains are recognised in other gains and losses in the income statement.

a) Asset retirement obligation

Provisions for environmental restoration of mining operations are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount can be reliably estimated. Provisions are not recognised for future operating losses.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the cash flows incorporate assessments of risk. The increase in the provision due to passage of time is recognised as interest expense.

b) Employee benefits - pension

The Group, in the normal course of business, makes payments on behalf of its employees for pensions, health-care, employment and personnel tax, which are calculated based on gross salaries and wages according to legislation. The cost of these payments is charged to the Consolidated Statement of Comprehensive Income in the same period as the related salary cost.

c) Employee benefits - retirement benefits and jubilee awards

Pursuant to the labour law prevailing in the North Macedonian subsidiaries, the Group is obliged to pay retirement benefits for an amount equal to two average monthly salaries, at their retirement date. According to the collective labour agreement, the Group is also obliged to pay jubilee anniversary awards for each ten years of continuous service of the employee. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. In addition, the Group is not obligated to provide further benefits to current and former employees.

Retirement benefit obligations arising on severance pay are stated at the present value of expected future cash payments towards the qualifying employees. These benefits have been calculated by an independent actuary in accordance with the prevailing rules of actuarial mathematics and recognised as a liability with no pension plan assets. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to profit and loss over the employees' expected average remaining working lives.

The Group's activities expose it to a variety of financial risks; market price risk (including foreign currency exchange risk, commodity price risk and interest rate risk), liquidity risk, capital risk and credit risk. These risks are mitigated wherever possible by the Group's financial management policies and practices described below. The Group's risk management is carried out by a central treasury department (Group treasury) under policies approved by the Board. Group treasury identifies, evaluates and hedges financial risks in close co-operation with the Group's operating units.

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. The primary Group currency requirements are US Dollar, British Pound, Kazakhstan Tenge, Euro and North Macedonian Denar.

The following table highlights the major currencies the Group operates in and the movements against the US Dollar during the course of the year:

Foreign exchange risk does not arise from financial instruments that are non-monetary items or financial instruments denominated in the functional currency. Kazakhstan Tenge and North Macedonian Denar denominated monetary items are therefore not reported in the tables below, as the functional currency of the Group's Kazakhstan-based and North Macedonian-based subsidiaries is the Tenge and Denar respectively.

The Group's exposure to foreign currency risk based on US Dollar equivalent carrying amounts at the reported date:

Trade and other receivables excludes prepayments and VAT receivable and trade and other payables excludes corporation tax, social security and other taxes as they are not considered financial instruments.

At 31 December 2021, if the foreign currencies had weakened/strengthened by 10% against the US Dollar, post-tax Group profit for the year would have been $1,021,000 lower/higher (2020: $205,000 lower/higher).

The Group has a hedging policy in place to allow us to manage commodity price risk and during the year the Group had put in place hedging arrangements with ING, a relationship bank for a portion of its 2021 metal production. Kounrad's Zero Cost Collar contract for 30% of copper production included a put option of $6,900 per tonne and a call option of $8,380 per tonne. Sasa's zinc and lead arrangements were Swap contracts, with 30% of Sasa's zinc production sold at $2,804 per tonne and 30% of its lead sold at $2,022 per tonne.

The offtake agreement at Kounrad provides for the option of provisional pricing i.e. the selling price is subject to final adjustment at the end of the quotation period based on the average price for the month following delivery to the buyer. The Company may mitigate commodity price risk by fixing the price in advance for its copper cathode sales with the offtake partner.

The following table details the Group's sensitivity to a 10% increase and decrease in the copper, zinc and lead price against the invoiced price. 10% is the sensitivity used when reporting commodity price internally to management and represents management's assessment of the possible change in price. A positive number below indicates an increase in profit for the year and other equity where the price increases.

Estimated effect on earnings and equity

Liquidity risk relates to the ability of the Group to meet future obligations and financial liabilities as and when they fall due. The Group currently has sufficient cash resources to service the debt and a material income stream from the Kounrad and Sasa projects. The Group has no undrawn borrowings as at 31 December 2021 (2020: nil).

Capital risk

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal structure to reduce the cost of capital.

The Group manages its capital in order to provide sufficient funds for the Group's activities. Future capital requirements are regularly assessed and Board decisions taken as to the most appropriate source for obtaining the required funds, be it through internal revenue streams, external fund raising, issuing new shares or selling assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The financial covenants of the debt which include the monitoring of gearing and leverage ratios are all continuously monitored by management and the Group is both currently compliant and forecast to continue to be compliant with significant headroom.

Consistent with others in the industry, the Group monitors capital on the basis of the following gearing ratio:

Net cash/(debt)

The total borrowings as at 1 January 2021 were $80,412,000 (1 January 2020: $108,768,000). During the year, total repayments were $48,400,000 (2020: $38,400,000). During the year, there were drawdowns on our unsecured overdrafts of $644,000 (2020: $9,105,000) and repayments of $nil (2020: $1,110,000). Other changes amounted to $322,000 (2020: $2,049,000) leading to a closing debt balance of $32,978,000 (2020: $80,412,000). See note 31 for more details.

The cash and cash equivalents including cash at bank and on hand in assets held for sale brought forward were $44,287,000 (2020: $28,672,000) with a net $11,444,000 inflow (2020: $15,615,000 inflow) during the year and therefore a closing balance of $55,731,000 (2020: $44,287,000).

Credit risk refers to the risk that the Group's financial assets will be impaired by the default of a third party. The Group is exposed to credit risk primarily on its cash and cash equivalents as set out in note 25 and on its trade and other receivables as set out in note 23. The Group sells a minimum of 95% of Kounrad's copper cathode production to the offtake partner which pays on the day of dispatch and during the year 100% of Sasa's zinc and lead concentrate was sold to Traxys which assumes the credit risk.

For banks and financial institutions, only parties with a minimum rating of BBB- are accepted. 98% of the Group's cash and cash equivalents including restricted cash at the year-end were held by banks with a minimum credit rating of A- (2020: 98%). The rest of the Group's cash was held with a mix of institutions with credit ratings between A to BB- (2020: A to BB-). The Directors have considered the credit exposures and do not consider that they pose a material risk at the present time. The credit risk for cash and cash equivalents is managed by ensuring that all surplus funds are deposited only with financial institutions with high quality credit ratings.

The expected credit loss for intercompany loans receivable is considered immaterial (note 23).

The Group's main interest rate risk arises from long-term borrowings with variable rates, which expose the Group to cash flow interest rate risk. During 2021, the Group's borrowings at variable rates were denominated in US Dollars. The Group's borrowings are carried at amortised cost. The Group has borrowings at variable interest rates and a 1% point rise in market interest rate would have caused the interest paid to increase by $526,000 (2020: $843,000) while a similar decrease would have caused the same decrease in interest paid. The Group does not hedge its exposure to interest rate risk.

The Group had $31,655,000 of cash balances on short-term deposit as at 31 December 2021 (2020: $28,896,000). The average fixed interest rate on short-term deposits during the year was 0.2% (2020: 0.3%).

Categories of financial instruments

Financial assets

Trade and other receivables excludes prepayments and VAT receivable as they are not considered financial instruments. All trade and other receivables are receivable within one year for both reporting years.

Financial liabilities

Trade and other payables excludes the silver streaming commitment, corporation tax, social security and other taxes as they are not considered financial instruments.

The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The following are key areas where critical accounting estimates and judgements are required that could have a material impact on the Financial Statements:

Impairment of non-current assets

Significant accounting judgements

The carrying value of the goodwill generated by accounting for the business combination of the Group acquiring an additional 40% in the Kounrad project in May 2014 (the "Kounrad Transaction") and the CMK Resources Limited acquisition in November 2017 requires an annual impairment review. This review determines whether the value of the goodwill can be justified by reference to the carrying value of the business assets and the future discounted cash flows of the respective CGUs. The key assumptions used in the Group's impairment assessments are disclosed in note 20.

Key sources of estimation uncertainty

Estimates are required periodically to assess assets for impairment. The critical accounting estimates are future commodity prices, treatment charges, future ore production, discount rates and projected future costs of development and production. Ore reserves and resources included in the forecasts include certain resources considered to be sufficiently certain and economically viable. The Group's resources statements include additional resources which are not included in the life of mine plan or impairment test.

Decommissioning and site rehabilitation estimates

Significant accounting judgements

Provision is made for the costs of decommissioning and site rehabilitation costs when the related environmental disturbance takes place. External expert consultants conducted an independent assessment and judgement and experience is used in determining the expected timing, closure and decommissioning methods, which can vary in response to changes in the relevant legal requirements or decommissioning technologies. The estimated costs included a re-assessment of the surrounding managing surface water in-line with the GISTM and lining of the tailings facilities as well as updating the discount rate using latest assumptions on inflation rates and discount rates.

Key sources of estimation uncertainty

The discounted provision recognised represents management's best estimate of the costs that will be incurred, and many of these costs will not crystallise until the end of the life of the mine. Estimates are reviewed annually and are based on current contractual and regulatory requirements and the estimated useful life of mines. Engineering and feasibility studies are undertaken periodically and in the interim management make assessments for appropriate changes based on the environmental management strategy; however significant changes in the estimates of contamination, restoration standards, timing of expenditure and techniques will result in changes to provisions from period to period.

A 1% change in the discount rate on the Group's rehabilitation estimates would result in an impact of $2,520,000 (2020: $948,000) on the provision for environmental rehabilitation. A 5% change in cost on the Group's rehabilitation estimates would result in an impact of $919,000 (2020: $460,000) on the provision for environmental rehabilitation.

Mineral reserves and resources

Key sources of estimation uncertainty

The major value associated with the Group is the value of its mineral reserves and resources. The value of the reserves and resources have an impact on the Group's accounting estimates in relation to depreciation and amortisation, impairment of assets and the assessment of going concern. These resources are the Group's best estimate of product that can be economically and legally extracted from the relevant mining property. The Group's estimates are supported by geological studies and drilling samples to determine the quantity and grade of each deposit.

Ore resource estimates may vary from period to period. This judgement has a significant impact on impairment consideration and the period over which capitalised assets are depreciated within the Financial Statements.

The Kounrad resources were classified as JORC Compliant in 2013 and mineral resources were estimated in June 2017 and the Sasa JORC ore reserves and mineral resources were estimated on 31 December 2021.

Tax

Significant accounting judgements

Management make judgements in relation to the recognition of various taxes payable and receivable by the Group and VAT recoverability for which the recoverability and timing of recovery is assessed. The Group operates in jurisdictions which necessarily require judgment to be applied when assessing the applicable tax treatment for transactions and the Group obtains professional advice where appropriate to ensure compliance with applicable legislation.

The segmental results for the year ended 31 December 2021 are as follows:

Depreciation and amortisation includes amortisation on the fair value uplift on acquisition of Sasa and Kounrad of $16.9m.

The segmental results for the year ended 31 December 2020 are as follows:

Depreciation and amortisation includes amortisation on the fair value uplift on acquisition of Sasa and Kounrad of $17.7m.

A reconciliation between profit for the year and EBITDA is presented in the Financial Review section.

Group segmental assets and liabilities for the year ended 31 December 2021 are as follows:

Kounrad

The Group sells and distributes its copper cathode product primarily through an offtake arrangement with Traxys, which has been retained as CAML's offtake partner through to December 2022. The offtake arrangements are for a minimum of 95% of the SX-EW plant's output. Revenue is recognised at the Kounrad mine gate when the goods have been delivered in accordance with the contractual delivery terms.

The offtake agreement provides for the option of provisional pricing i.e. the selling price is subject to final adjustment at the end of the quotation period based on the average price for the month following delivery to the buyer. The Company may mitigate commodity price risk by fixing the price in advance for its copper cathode sales with the offtake partner.

The costs of delivery to the end customers have been effectively borne by the Group through means of an annually agreed buyer's fee which is deducted from the selling price.

During 2021, the Group sold 13,983 tonnes (2020: 13,763 tonnes) of copper through the offtake arrangements. Some of the copper cathodes are also sold locally and during 2021, 68 tonnes (2020: 97 tonnes) were sold to local customers.

Sasa

The Group sells Sasa's zinc and lead concentrate product to smelters through an offtake arrangement with Traxys which has been fixed through to 31 March 2023. The commitment is for 100% of the Sasa concentrate production.  The agreements with the smelters provide for provisional pricing i.e. the selling price is subject to final adjustment at the end of the quotation period based on the average price for the month, two months or three months following delivery to the buyer and subject to final adjustment for assaying results.

The Group sold 18,856 tonnes (2020: 19,930 tonnes) of payable zinc in concentrate and 25,257 tonnes (2020: 28,218 tonnes) of payable lead in concentrate. The lead in concentrate is lower than prior year as the final shipment did not depart from the port until 4 January 2022 and, under the Free on Board ('FOB') terms, this revenue will be recognised in 2022.

The revenue arising from silver relates to a contract with Osisko Gold Royalties where the Group has agreed to sell all of its silver at a fixed price of $5.96/oz, significantly below market value and arising from the silver stream commitment inherited on acquisition (note 30).

The above distribution and selling costs are those incurred at Kounrad and Sasa in addition to the costs associated with the offtake arrangements.

The Group entered into derivative financial instruments to manage the Groups commodity price risk during the year and has made a realised loss of $6,736,000 (2020: nil) as the actual commodity prices were in excess of the agreed financial instruments. The Kounrad Zero Cost Collar contract for 30% of copper production has made a realised loss of $3,953,000 (2020: nil). Sasa's zinc and lead arrangements were Swap contracts, with 30% of Sasa's zinc production making a realised loss of $1,182,000 (2020: nil) and 30% of its lead sold making a realised loss of $1,601,000 (2020: nil). The derivative financial instruments were classified as Fair Value Through Profit and Loss ('FVTPL') and expired at the end of the year so therefore have a zero fair value at year end and therefore no unrealised losses have been recognised.

During the year, the Group obtained the following services from the Company's Auditors and its associates:

The aggregate remuneration of staff, including Directors, was as follows:

The total employee benefit expense includes an amount of $1,418,000 (2020: $1,346,000) which has been capitalised within property, plant and equipment.

Key management remuneration is disclosed in the Remuneration Committee report.

The monthly average number of staff employed by the Company during the year was 18 (2020: 16).

Taxation for each jurisdiction is calculated at the rates prevailing in the respective jurisdictions.

The tax on the Group's profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:

Corporate income tax is calculated at 19% (2020: 19%) of the assessable profit for the year for the UK parent company, 20% for the operating subsidiaries in Kazakhstan (2020: 20%) and 10% (2020: 10%) for the operating subsidiaries in North Macedonia.

Expenses not deductible for tax purposes includes share-based payment charges, transfer pricing adjustments in accordance with local tax legislation and depreciation and amortisation charges. Non-taxable income includes intercompany dividend income.

Deferred tax assets have not been recognised on tax losses primarily at the parent company as it remains uncertain whether this entity will have sufficient taxable profits in the future to utilise these losses.

Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to owners of the Company by the weighted average number of Ordinary Shares in issue during the year excluding Ordinary Shares purchased by the Company and held as treasury shares (note 26).

The diluted earnings/(loss) per share is calculated by adjusting the weighted average number of Ordinary Shares outstanding after assuming the conversion of all outstanding granted share options.