Capital Regulatory News (CAPD)

Capital Limited

("Capital", the "Group" or the "Company")

Full Year Results for the year ended 31 December 2021

FULL YEAR FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2021*

Financial Overview

· FY2021 revenue of $226.8 million, up 68% on FY 2020 ($135.0 million);

· 2021 EBITDA of $73.3 million, up 116.9% on FY 2020 ($33.8 million);

· EBITDA margins increased to 32.3% up from 25.0% in FY 2020;

· Net gains from equity investments of $33.7 million in 2021 (realised + unrealised), increasing the value of Group strategic investments to $60.2 million, net of cash proceeds, as of 31 December 2021 (31 December 2020: $27.2 million);

· Net Profit After Tax (NPAT) $70.3 million (including investment gains), an increase of 183.5% on FY 2020 ($24.8 million); and adjusted net profit after tax of $36.6 million, up 226.6% on FY 2020 ($11.2 million);

· Cash capex of $46.3 million, up 9.6% on FY2020 ($42.2 million);

· Cash from operations of $42.6 million, an increase of 18.3% on FY 2020 ($36.0 million);

· Net cash including investments of $28.3 million, down from net cash including investments of $32.2 million at year end 2020;

· Basic earnings per share (including investment gains) of 37.0 cents, up 108.2% on FY 2020 (17.8 cents); and adjusted earnings per share of 19.2 cents, up 141.7% on FY 2020 (7.9 cents)

· Declared a final dividend of US$2.4 cents per share, to be paid on 10 May 2022 which, together with the interim dividend of US$1.2 cents per share brings total dividends declared for 2021 of US$3.6 cents per share (up 64% on 2020 total dividend of US$2.2 cents per share).

Operational and Strategic Highlights

· Rig fleet utilisation increased to 79% in Q4 2021, up 4% on Q4 2020 (76%) and 34% on Q3 2021 (59%); FY 2021 average utilisation was 75%, an increase of 27% on FY 2020 (59%);

· Non-drilling revenue contributed 22% of total revenue for 2021, compared with 2020 (9%[1]), primarily driven by the increased contribution from mining services and MSALABS, which saw significant growth through 2021;

· Average monthly revenue per operating rig ("ARPOR") for Q4 2021 at US$184,000, up 7% (Q4 2020: US$172,000) and up 6% on Q3 2021 (US$182,000); FY 2021 ARPOR was $181,000 up 5.8% on FY 2020 $171,000 as core long-term contracts continue to perform strongly;

· Safety performance remains world class with the Group remaining LTI free across eleven sites through 2021, six of which have remained LTI free in excess of three years;

· Recent contract wins (previously announced):

§ A three-year surface production drilling contract with AngloGold Ashanti at the Geita Gold Mine, Tanzania. This contract will utilise five rigs from the existing fleet together with one new rig during 2022, and is anticipated to generate revenues of $33 million over the contract term;

§ An exploration contract with Firefinch at the Goulamina Lithium mine, Mali, a JV project between Firefinch and the world's largest lithium producer Ganfeng; 

§ An exploration contract with Tembo Mining at the Kabanga Nickel mine, Tanzania. This year has seen an investment from BHP intended to accelerate the development at the project;

§ Expanded grade control services to include underground at North Mara, Tanzania;

§ A one-year contract extension for underground grade control drilling with Resolute at the Syama Gold Mine, Mali.

· New contract wins:

§ A three-year underground drilling contract with Barrick at the Jabal Sayid copper mine, Saudi Arabia;

§ An extension with Cora Gold at the Sanankoro Gold Project for drilling exploration;

§ An exploration contract with Aton Mining, Egypt.

· Sukari Gold Mine (Egypt) waste mining and expanded drilling contracts performed ahead of contract targets in 2021:

§ Operations achieved mining quantities above contract in 2021, with all production phases brought on-line ahead of schedule;

§ The commissioning phase of this contract involved over 400 new employees with associated new equipment, and concluded its first year of operation injury free.

· MSALABS has had a very successful 2021:

§ The rollout of the Chrysos'™ PhotonAssay units is progressing well:

· The unit at the Bulyanhulu (Tanzania) laboratory has been commissioned and commenced operations in October;

· Two further units are due to be commissioned in Val d'Or (Canada) and the Morila Gold Mine in Mali (80% owned by Firefinch ASX:FFX) in Q1 2022 and Q2 2022 respectively.

· Accordingly, the Group's portfolio of long-term mine-site based operations increased to ten sites, comprising 18 individual contracts with the addition of the new contracts with Barrick in Tanzania and Firefinch in Mali;

Outlook

· Revenue guidance for 2022 of $270 to $280 million driven by an increased drill rig count, contract extensions and expansions from existing long-term contracts, load and haul waste stripping contract at Sukari, Egypt running for the whole year at full capacity and MSALABS continuing to grow through 2022;

· Capital expenditure is expected to be approximately $45 million in 2022. This will fund an increase to the drill rig count, the expansion of MSALABS, including a major hub laboratory in Saudi Arabia, as well as sustaining capex on the enlarged drill fleet and the Sukari mining contract;

· Drill rig fleet size forecast to increase by 11 rigs by the end of 2022, net of depletion;

· The Sukari earth moving contract continues to perform well, with the project now safely commissioned and we expect the operation to contribute at full capacity through 2022;

· Laboratories is seeing strong demand for its services and the rollout of the Chrysos units, with the business expected to deliver revenues of approximately $30 million in 2022, almost double revenue in 2021 (FY 2020 $15.6 million);

· Business mix underpinned by long-term mine-site contracts with blue-chip customers, growing exposure to metals beyond gold, and non-drilling revenues expected to proportionally increase further in 2022;

· Tendering activity across all business units remains robust, with a number of opportunities progressing.

Commenting on the results, Jamie Boyton, Executive Chairman of Capital Limited, said:

'2021 has been another outstanding year for Capital and marks the business's second consecutive year of material growth. While this has been supported by a rapid increase in demand over the past 12 months, we have also taken a notable shift forward in our service offering, increasing our non-drilling revenues to 22% of the Group from just 9% the prior year, while also growing our drilling business.

In order to drive the growth in the business, we increased our headcount by 1,000 new people through the year, and despite this significant new onboarding and increased activity across the group, we maintained our industry leading safety performance, with a TRIFR result of 0.98 (2020: 0.77).

We entered 2021 flagging the disconnect between decade-high commodity prices, with exploration spending at half the levels of a decade ago. We saw this begin to correct through early 2021 with a rapid pickup in market activity evident in our operational metrics. On top of an increased rig count, rig utilisation increased to 75% in 2021 compared to 59% in 2020, while ARPOR also increased by 5.8% to $181,000 from 2020. We are continuing to invest in our drill rig fleet to meet the continued strength in demand we are seeing and ensuring we have a favourable balance of rig type in the regions where we are operating. Our focus will nevertheless remain on growing long term contracts and partnerships with blue-chip customers to reduce the volatility and ensure the sustainability of the business through the cycles.

Our mining business has taken a sizeable step forward in 2021 with the exceptional ramp up of the Load & Haul contract at Sukari, which we delivered ahead of contact expectations. Operations are now fully commissioned and 2022 will be the first complete year with the earth moving contract at full run rate. Following the rise in commodity prices, we are seeing an increase in projects moving forward to development and therefore we expect the pipeline of new mining contracts to expand in the coming years.

MSALABS also performed well through 2021, setting the foundations for further growth in the coming years. 2022 will be an exciting year for MSALABS as it continues the rollout of the revolutionary Chrysos PhotonAssay technology, as well as developing a major hub laboratory in Saudi Arabia. PhotonAssay, which provides gold assay results in minutes rather than weeks or months, has the potential to disrupt the geochemical analysis sector. This technology is a key driver of growth in MSALABS, with revenues expected to approximately double in 2022 YoY.

Another key contributor to our strong result for the year has been returns from our equity investments, which have become a core pillar of our Group strategy. Capital Investments not only contributes through equity returns, which amounted to $33.7 million in 2021, but has also served as a highly effective business development tool for several years, with $41 million or 18% of group revenue coming from investee companies in 2021. This creates a strong partnership approach to our contracting model and remains core to the investment strategy.

In view of the significant progress made in 2021, Capital today is a stronger and more robust business. We will continue to pursue our key strategic priorities during 2022 and have confidence in maintaining a growth trajectory in the business, with revenues expected to reach $270-280 million in 2022.'

Results Conference Call

Capital Limited will host a Webcast on Thursday 10 March 2022 at 09.00 am (London, UK time) to update investors and analysts on its results. Participants may join the webcast via the like below. Shareholders may also join the webcast by dialling one of the following numbers, approximately 10 minutes before the start of the call. Participants may also wish to download the 2021 Results Presentation, which is available by clicking http://www.capdrill.com/investors/presentations

Webcast Link

https://webcasting.buchanan.uk.com/broadcast/6221ec7cd196af24e1e91a0c 

Dial-In Details

United Kingdom Toll-Free: 08003589473

United Kingdom Toll: +44 3333000804

PIN: 35312080#

International dial-in numbers - Link

- ENDS -

For further information, please visit Capital Limited's website www.capdrill.com or contact:

Capital Limited +230 464 3250

Jamie Boyton, Executive Chairman investor@capdrill.com

Giles Everist, Chief Financial Officer

Rick Robson, Executive - Corporate Development

Berenberg +44 20 3207 7800

Matthew Armitt

Jennifer Wyllie

Detlir Elezi

Tamesis Partners LLP +44 20 3882 2868

Charlie Bendon

Richard Greenfield

Stifel Nicolaus Europe Limited +44 20 7710 7600

Ashton Clanfield

Callum Stewart

Rory Blundell

Buchanan +44 20 7466 5000

Bobby Morse capital@buchanan.uk.com

James Husband

About Capital Limited

Capital Limited is a leading mining services company providing a complete range of drilling, mining, maintenance and geochemical laboratory solutions to customers within the global minerals industry, focusing on the African markets. The Company's services include: exploration, delineation and production drilling; load and haul services; mining equipment hire and maintenance; and geochemical analysis. The Group's corporate headquarters are in Mauritius and it has established operations in Burkina Faso, Côte d'Ivoire, Egypt, Guinea, Mali, Mauritania, Nigeria, Saudi Arabia and Tanzania.

Cautionary note regarding forward looking statements

Certain information contained in this report, including any information on Capital Limited's plans or future financial or operating performance and other statements that express management's expectations, or estimates of future performance, constitute forward-looking statements. Such statements are based on a number of estimates and assumptions that, while considered reasonable by management at the time, are subject to significant business, economic and competitive uncertainties. Capital Limited cautions that such statements involve known and unknown risks, uncertainties and other factors that may cause the actual financial results, performance or achievements of Capital Limited to be materially different than the Company's estimated future results, performance or achievements expressed or implied by those forward-looking statements. These factors include the inherent risks involved in exploration and development of mineral properties, changes in economic conditions, changes in the worldwide price of commodities and project execution delays, many of which are beyond the control of Capital Limited. Nothing in the report should be construed as either an offer to sell or a solicitation to buy or sell Capital Limited securities.

CHAIRMAN'S STATEMENT

2021 has been a transformational year with Capital delivering three record quarters of revenue growth and the strongest year in our history. We have seen growth in all our business areas, but most notably a sizeable shift forward in our service offering with the addition of large scale load and haul services at Sukari and the beginning of the rollout of the revolutionary Chrysos PhotonAssay units in our laboratory business, MSALABS. The operational execution of this growth has been outstanding, with an exceptional safety performance, maximising the value delivered to shareholders.

We delivered 68% revenue growth, 117% EBITDA growth and 140% EBIT growth. This is the second consecutive year we have delivered material growth, following 18% YoY growth in revenue in 2020. Amongst this growth however, our core focus on long life, mine site contracts (88% of revenue in 2021) with blue-chip customers has remained unchanged to ensure a business that is sustainable through the cycles.

Our strategy to develop a broader range of services continued successfully during 2021. The contribution from our non-drilling services increased significantly during the year to 22% of Group revenues, compared to 9% in 2020, driven primarily by the ramp up of the load and haul operation at Sukari and the continued expansion of MSALABS.

In 2020, we announced an equity raise to help fund equipment for a waste mining contract with Centamin at the Sukari Gold mine, which represented the largest award of business in the Group's history. The ramp up of this operation in 2021 was ahead of contracted expectations and has reached full run rate going into 2022, while remaining injury free. This contract is anticipated to deliver incremental revenues of US$235 - $260 million over a four-year period.

Our laboratory business, MSALABS, continued to perform well and is positioning itself for material growth as it rolls out the revolutionary Chrysos PhotonAssay units. The first of these units was successfully commissioned in 2021 and in 2022 MSALABS will continue to roll out further units, a key driver of its growth. PhotonAssay technology has the potential to disrupt the geochemical analysis sector and we are encouraged by the demand we are seeing.

In addition to the expansion in our service offering, our core drilling business has also gone from strength to strength. As we entered 2021 there was a clear disconnect between the rapid increase in commodity pricing seen in 2020, compared to capital raisings and exploration budgets, which remained at close to half the level seen when commodity prices were last at these levels. This changed early in the year and we saw a rapid and significant increase in demand which was visible in our utilisation rates in the subsequent three quarters of the year. Elevated commodity prices have continued into 2022, as has the strong demand we are seeing for our services.

Our Direct Investments portfolio has also cemented itself as the fourth key pillar of our strategy. We undertook a significant and well-timed investment strategy in 2019 as we expanded our operations in West Africa. We have engaged in direct investments into exploration and mining companies, and drill for equity, aligning the activity with service contracts. The year-end portfolio was valued at $60.2 million, up 121% compared to the year end 2020 position of $27.2 million, with investment gains (predominantly unrealised) for the year of $33.7 million. This translated into significant net profit growth in 2021 of 184%.

In addition to the investment gains, these positions have cemented key relationships and partnerships with the investees, with contracts from these companies generating $41 million of revenue over 2021 (18% of Group revenue).

At the beginning of 2022 we also launched a buyback programme of up to two million shares. While our focus remains primarily on growth, the buyback demonstrates both the huge success we achieved in 2021 and also the confidence we have in the business going forward.

The Board of Directors has declared a final dividend for the 2021 period of 2.4cps ($4.5 million), payable on 10 May 2022 to shareholders on the register as of 7 April 2022. This brings the total dividend declared in 2021 to 3.6c per share. The dividend is a result of our solid financial and operating position.

OPERATIONAL & SAFETY UPDATE

I am extraordinarily proud of our Company's achievements during 2021. Amongst the significant levels of growth and increased activity, the Group has also increased its headcount by 1,000 people, a 78% increase YoY. Nevertheless we maintained the consistency in our operations throughout the year and our industry leading safety record and I would like to take this opportunity to thank all our employees for their dedication.

The Group's rig count increased from 94 at the end of 2020 to 109 at the end of 2021, with a further three rigs undergoing commissioning. The new rigs supported both existing long-term contracts and new contract wins. We remain very active with our fleet management in order to maintain our position as the provider of best-in-class equipment in the regions where we operate. In addition to the increased fleet size, our rig fleet utilisation increased to 75% in 2021 vs 59% in 2020, while full year ARPOR also increased 5.8% in 2021 to $181,000 (2020: $171,000). This stellar performance is a result of both improving commodity prices and macro conditions together with our successful geographical expansion into West Africa. This expansion has delivered regional revenue exposure beyond our traditional operations in Egypt and Tanzania, and with it new long-term mine site contracts.

Our portfolio of ten long-term mine site contracts continued to perform well through 2021 with a number seeing increased rig counts on site for further support and new services. In addition, we signed multiple new contracts while also expanding our commodity exposure.

By the nature of both the contracting market and also critically the geographic regions where we operate, gold mining remains our main exposure. However, at the beginning of 2022, Capital announced an exploration contract with Firefinch at the Goulamina Lithium Mine, Mali, a JV project between Firefinch and the world's largest lithium producer Ganfeng, as well as an exploration contract with Tembo Mining at the Kabanga Nickel Mine, Tanzania. Both projects have the potential to be very large, long-life assets and the latter project has seen an investment from BHP intended to accelerate development.

For the ramp up of the Sukari mining project we hired over 400 new employees and purchased 4 excavators, 17 mining trucks and other associated vehicles. Nevertheless we delivered ahead of our contract terms with the ramp up also completed with its first year of operation injury free. This outstanding performance in our first major earth moving contract both reinforces our relationship with Centamin at Sukari, where we have provided drilling services since 2005, and also positions us well for future tender awards.

MSALABS is quickly becoming a key growth area for the Group. 2021 saw the start of the company's rollout of Chrysos PhotonAssay units, with the first unit now commissioned at Barrick's Bulyanhulu Gold Mine in Tanzania. This contract marked both the largest contract since MSALABS' establishment, and the first PhotonAssay unit deployed outside Australia. Two more units were deployed in Q1 2022, the first in Val d'Or in Quebec, Canada, and the second at the Morila Gold Mine, Mali. MSALABS will also establish a third major hub laboratory in Saudi Arabia later this year, which will assist in setting the foundations for further growth in 2023 and beyond.

Once again, our focus and commitment to the safety of our employees delivered results significantly better than industry standards, and I congratulate everyone for their effort. We expect visible safety leadership at all levels of the business, from the Executive Leadership Team to crews on site, and we actively invest in training programs to ensure our workforce is skilled, competent and can identify and mitigate hazards in the workplace. Our Total Recordable Injury Frequency Rate (TRIFR) was 0.98 per 1,000,000 hours worked. We also achieved a number of site records and safety milestones during 2021 including:

· 13 years LTIF at Mwanza, Tanzania

· 5 years LTIF at the Syama Gold Mine, Mali

· 5 years LTIF at the North Mara Gold Mine, Tanzania

· 4 years LTIF at the Geita Gold Mine, Tanzania

· 3 years LTIF at Bamako, Mali

· 3 years LTIF at Hummingbird, Mali

· 2 years LTIF at the Jabal Sayid Copper Mine, Saudi Arabia

· 1 year LTIF at the Bulyanhulu Gold Mine, Tanzania

· 1 year LTIF at the Bonikro Mine, Cote d'Ivoire

· 1 year LTIF at the Sukari Gold Mine, Egypt

· 1 year LTIF at the Bankan gold project, Guinea

OUTLOOK

As we look to the year ahead, trading conditions continue to point to very strong demand. Commodity prices, including our main exposure gold, remain at very high levels which provide strong profitability and cash flows for the producers and is a positive indicator for continued momentum throughout 2022.

Equity markets also remain highly supportive for the mining industry, with financings through 2021 at decade highs according to S&P Global Market Intelligence. Together this suggests a further improvement in exploration budgets and demand for our services across all of our business units.

Our focus on long-term mine site contracts continues to underpin our business through 2022. At the end of 2020, we saw an extension and expansion of the drilling contract at Sukari (in line with the mining contract award) and in 2021 we saw major contract renewals at Geita. These contract renewals provide clear revenue visibility and a strong foundation for the year ahead.

At Sukari, operations are now fully commissioned, and 2022 will be the first complete year with the earth moving contract at full run rate. MSALABS is also at an exciting inflection point, with one Chrysos PhotonAssay unit successfully commissioned in Q4 2021 and 2022 set to see material growth driven by the rollout of further units, as well as the construction of the Group's third major hub lab in Saudi Arabia.

As we enter 2022, our core drilling business has the highest rig count in the group's history and we are confident in maintaining strong utilisation levels given the increased activity we are seeing from our existing clients, as well as the strength we continue to see in commodity pricing. We are also continuing to invest in our fleet and this will drive a further increase to our fleet size (net of decommissioning old rigs).

We will continue to execute our key strategic priorities in 2022, focussing on growing our full-service mining business, growing revenues from our ancillary services businesses, particularly MSALABS, expanding capacity with our existing clients and maintaining high levels of utilisation through our fleet.

I would like to take this opportunity to thank all our employees, business partners, shareholders, our Board of Directors and other stakeholders for their continued support of our Company.

Jamie Boyton

Executive Chairman

9 March 2022

CHIEF FINANCIAL OFFICER'S REVIEW

OVERVIEW

Capital Limited has delivered a stellar performance in 2021 with all our business areas achieving growth through the year. We have made transformational steps through 2021, including expanding our service offering in order to continue to grow the business even further in 2022 and beyond.

Revenue increased by 68% to $226.8 million (2020: $135.0 million). H2 revenue ($128.1 million) was 30% higher than H1 revenue ($98.7 million) primarily due to the weighting of the ramp up of the Sukari waste mining contract, but also new drilling contract wins through the year, an associated increase in rig count and improved revenues at MSALABS.

Profitability also improved, with margin improvements across all key metrics on the back of increased expenditure discipline. YoY EBITDA and EBIT increased by 117% and 140% respectively.

Primarily as a result of our expanded service offering into waste mining and the associated equipment purchases, our capex remained elevated relative to 2020 with cash capital expenditure of $46.3 million (2020: $42.2 million). In addition to the Sukari load & haul contract, growth capex funded the expansion of the rig fleet in 2021 and also deposits for rigs due to arrive and commission in 2022.

Through 2021 we have increased our debt profile through additional financing to fund equipment purchases in combination with operating cash flow. We obtained this financing from Macquarie Bank ($27.7 million) and OEM financing from Sandvik and Epiroc.

Cash generated from operations was $42.6 million (2020: $36.0 million). Closing cash was $30.6 million (2020: $35.7 million), aided by an additional $27.7 million in new financing in the year, with net debt of $31.9 million (2020: $5.0 million net cash). Weighing on cash flows was the increased capex outflow associated in particular with the Sukari mining ramp up. Nevertheless our balance sheet remains in a very strong position with the group finishing 2021 with net cash including investments of $28.3 million.

Our portfolio of long-term mine-site based contracts continues to underpin our cash flow and growth strategy. Mine-site based contracts represent 88% (2020: 93%) of our Company revenue and growth of this portfolio remains a focus.

Our investment portfolio generated a $33.7 million gain on investments reflected in the Profit and Loss. This outstanding performance reflects a significant value increase in a number of investments within the portfolio. The result is a consequence of the successful 2019 investment strategy. Investment activity decreased in 2020 and 2021 as the cycle improved and capital markets became significantly more accommodating to equity issuance. The Company's strategy has therefore matured and rationalised to a portfolio of strategic core holdings, while continuing to evaluate new opportunities.

Our focus on long-term mine site contracts both reduces the volatility of earnings and ensures the sustainability of the business through the cycles. This stable business platform was demonstrated through 2020 and early 2021 through the COVID-19 pandemic where our portfolio of mine-site based contracts continued uninterrupted. However, given the sometimes unpredictable nature of the countries where we operate, we have evaluated a downside model taking the aggregate effect of the reasonable downside short term risks and demonstrated that the business is robust to scenarios far worse than experienced or expected. Refer to Note 1.1 of the Annual Financial Statements for further detail.

Statement of Comprehensive Income

Table 1: Statement of Comprehensive Income (Summary)

Average rig utilisation increased 16% to 75% (2020: 59%) on a larger average fleet size of 104 (2020: 98). Average revenue per operating rig (ARPOR) per month also saw an increase in 2021 to $181,000 (2020: $171,000) attributed to the increased mobilisation of exploration rigs and some renegotiation of existing contracts.

Non-drilling revenues saw a notable increase in contribution to Group revenues in 2021, driven by the ramp up of the Sukari mining contract as well as the continued ramp up of MSALABS. 2021 contribution to revenue from non-drilling services was 22% in 2021 (2020: 9%) and is expected to increase further in 2022.

EBITDA increased 117% to $73.3 million delivering a 32.3% margin (2020: $33.8 million/25.0%).

EBIT increased 140% to $51.9 million delivering a 22.9% margin (2020: $21.6 million/16.0%).

Profit Before Tax (PBT) increased by 141% to $82.0 million (2020: $34.1million) impacted by Net Interest of $3.6 million (2020: $1.1 million) and benefitting from an investment gain of $33.7 million (2020: $13.6 million gain). These investments were aligned to activity with service contracts and provided greater revenue and earnings. Depreciation of $21.4 million (2020: $12.2 million), flat as a percentage of revenue at 9%.

NPAT increased 184% to $70.3 million (2020: $24.8 million). The improved NPAT benefitted from net gains on unrealised equity investments of $33.7 million (2020: $13.6 million gain).

The Effective Tax Rate for 2021 was 14.3% (2020: 27.4%). The decrease YoY reflects adjustments in 2020 that did not recur in 2021. In 2020 tax included a $2.8m adjustment in respect of prior periods' assessments which were finalised in 2020. The tax recognised in respect of prior periods in 2021 was $0.2 million. As the Group operates in multiple jurisdictions, there is an inherent uncertainty in the interpretation of income tax laws. As at 31 December 2021, the Group had uncertain income tax positions with an assessment valued at $2.0 million (2020: $2.7 million). The Group has recognised a provision of $0.2 million (2020: $0.9 million) as management's best estimate of the likely exposure.

As at 31 December 2021, the Group had uncertain income tax positions with an assessment valued at $2.0 million (2020: $2.7 million). The Group has recognised a provision of $0.2 million (2020: $0.9 million) as management's best estimate of the likely exposure.

The Basic Earnings Per Share (EPS) for the year increased 108% to 37.0 cents (2020: 17.8 cents). The weighted average number of ordinary shares used in the earnings per share calculation was 189,765,149 (2020: 138,367,746).

The substantial growth in Earnings per Share was driven by the strong operating performance and investment gains.

Statement of Financial Position

Table 2: Statement of Financial Position (Summary)

(1) Excludes non-controlling interest of $3.8 million

As at 31 December 2021, shareholders' equity increased by 49.4% driven primarily by strong net profit of $70.3 million. The Group distributed dividends of $4.7 million (2020: $2.2 million) to shareholders.

The total rig fleet size at the end of 2021 was 109 drill rigs with 3 further rigs undergoing commissioning (2019: 94).

Overall PPE increased from $89.0 million in 2020 to $143.6 million in 2021, reflecting depreciation of $21.4 million (2020: $12.2 million), assets disposed of $0.5 million (2020: $0.8 million) and additional operating capital expenditure of $75.7 million (2020: $48.7 million).

Current assets increased to $189.1 million (2020: $135.2million). Inventory increased by $13.2 million to $37.9 million (2020: $24.7 million) due to increased inventory levels primarily in Egypt. Prepaid expenses decreased by $10.7 million to $17.7 million (2020 $28.4 million). Cash and cash equivalents decreased by $5.1 million to $30.6 million (2020:$35.7 million). Investments held of $60.2 million (2020: $27.2 million) are the fair value of trade investments.

Non-current liabilities of $53.0 million (2020: $26.5 million) includes $45.6million (2020: $26.1 million) of long term loans. Total long term debt includes $15 million of the renewed Revolving Credit Facility, a $37.7 million asset backed facility with Macquarie and OEM financing direct through Epiroc & Sandvik .

Current liabilities consisted of trade and other payables, $46.5 million (2020: $39.7million), current portion of long-term liabilities $16.9 million (2020: $4.6 million) and tax liabilities of $10.0 million (2020: $7.2 million). Trade and other payables includes increased trade payables of $22.1 million (2020: $19.9 million) due to increased activity levels and investment in the Sukari contract.

Statement of changes in equity

Table 3: Statement of changes in equity (Summary)

Statement of Cash Flows

Table 4: Statement of Cash Flows (Summary)

Reconciliation of net cash (debt) position

Table 5: Reconciliation of net cash (debt) position

Cash generated from operations was $42.6 million (2020: $36.0 million), an increase of 18.3% year-on-year.

The investing cash flow have decreased year-on-year with some investments, including prepayments, for the new Sukari contract occurring in 2020. We continued to invest through 2021, however, both to complete the ramp up for the Sukari mining contract as well as increase our drill rig count to meet existing client requirements and maintain fleet operational readiness.

Financing activities included the dividend cash payment of $4.8 million (2019: $2.2 million).

 The dividend history for the past three years is as follows:

Principal Risks and Uncertainties

Given the breadth of operations and the geographies and markets in which the Group operates, a wide range of risk factors and uncertainties have the potential to impact Capital. While Capital attempts to mitigate and manage risks where it is efficient and practicable to do so, there is no guarantee these efforts will be successful. Aside from the generic risks that face all businesses, the Group's business, financial condition or results of operations could be materially and adversely affected by any of the risks described below.

Outlined below is an overview of a number of material risks facing Capital. These risks should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties, nor are they listed in order of magnitude or probability. Additional risks and uncertainties that are not presently known to the Directors, or which they currently deem immaterial, may also have an adverse effect on the Group's operating results, financial condition and prospects.

The principal and emerging risks associated with the business are:

VIABILITY STATEMENT

The activities of the Group, together with the factors likely to affect its future development, performance, the financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in pages 50 to 59.

The Directors have carried out a robust assessment of the emerging and principal risks facing the Group over the coming three years, including those that would threaten its business model, future performance, solvency or liquidity. These risks and the ways they are being managed and mitigated by a wide range of actions are summarised on pages 54 to 56.

Taking account of the Group's position, emerging and principal risks, the Directors assessed the prospects of the Group by reviewing and discussing the annual forecast, the three-year strategic plan and the Group risk framework. The review is a robust consideration of all risk factors and sensitivities. Whilst all the risks identified could have an impact on the Group's performance, the specific risks which could potentially impact the Group's financial position / viability include:

· A deterioration in global demand and commodity prices;

· Non-renewal of key contracts within the time frame;

· Idled mining equipment at the end of the large scale load & haul contract;

· A potential decrease in turnover due to a prolonged operational disruption such as political unrest; and

· Increases in the Group's cost base.

Given the Group had minimal operational impacts from COVID-19 over the past two years, the Directors no longer view it as a significant risk to the Group's performance and financial position.

In view of the recent escalation of the Russia-Ukraine conflict and sanctions imposed on Russia and Belarus, the Directors have considered the likely impact on the Group as detailed in Note 1.1 and assessed the risk to the Group's operations as minor. The Directors will continue to carefully assess the impact of this situation on the Group's operations. 

The evaluation of the potential downturn in commodity pricing considered the long term nature of the majority of our contracts, the low operating costs of the mines where we operate, the liquidity of the company, its robust balance sheet and good relationship with financiers.

The evaluation of mining equipment remaining idle at the end of the mining contract considered that the asset backed debt facilities drawn to purchase the equipment over the life of the contract and therefore would not affect group viability if left idled for a period.

The Directors have also evaluated short term major disruptions from due to political events and while these risks are considered remote, in such a scenario, the Group would be able to continue operating without reaching its borrowing capacity nor breaching its covenants, given the diversification of the company's geographic mix and through additional measures available to mitigate the impact on the Group's liquidity and cash flows such as reduction in inventories and capital expenditure and renegotiation of creditor terms.

The Directors have also reviewed the forecasts and downward scenario against the Group's current and projected future net cash/debt and liquidity position. The Group closed the financial year with a net debt1 position of $31.9 million (2020: $5.0 million net cash). The revolving credit facility has financial covenants interest cover, debt-equity ratio, gross debt to EBITDA and tangible net worth and is not due for renewal until June 2023.

A three-year period is considered appropriate for this assessment because:

· It is the period covered by the strategic plan;

· It is aligned with the terms of our principle financing facilities;

· The majority of our major contracts are for a period of three to five years; and

· It enables a high level of confidence, even in extreme adverse events, due to a number of factors such as:

o The Group has considerable financial resources together with established business relationships with major, mid-tier and junior mining houses and suppliers in countries throughout the world; High cash generation by the Group's operations;

o Low levels of gearing and strong debt capacity;

o Flexibility of cash outflows including capital expenditure and dividend payments; and

o The Group's long-term contracts, equipment availability and diverse geographic operations.

Based on the results of this analysis, the Directors believe that the Group is well placed to manage its business risks successfully as the market conditions continue to improve. The Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period of their assessment.

CAUTIONARY STATEMENT

This Business Review, which comprises the Chairman's Statement and Chief Financial Officer's Review, has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed.

The Business Review contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

By order of the Board

Giles Everist

Chief Financial Officer

9 March 2021

The following customers from the Africa segment contributed 10% or more to the Group's revenue

Segmental reporting summary by region:

The business has considered this segmental distribution to be appropriate as it represents the discrete areas of operations that make up the group's revenue stream.