Centamin PLC Regulatory News (CEY)

18 May 2020

Centamin plc

("Centamin" or "the Company")

(LSE:CEY, TSX:CEE)

Audited Annual Results

for the twelve months ended 31 December 2019

FINANCIAL HIGHLIGHTS[1]

FY2019 vs FY2018

· Gross revenues[2] of US$658.1 million for the twelve months ending 31 December 2019, up 7% compared to the prior year

· Costs within annual guidance: cash costs of US$699 per ounce produced1, up 12%; all-in sustaining costs ("AISC") 1 of US$943 per ounce sold, up 7%

· EBITDA1 improved 10% to US$284.0 million, at a 43% EBITDA margin[3]

· Profit after tax increased 13% to US$172.9 million

· Basic earnings per share ("EPS") increased 17% to 7.59 US cents

· Operational cash flow improved by 11% to US$249.0 million, after gross capital expenditure of US$97.6 million predominantly invested in the long-term sustainability of the business

· Adjusted Group free cash flow improved by 17% to US$74.3 million, after profit share distribution of US$87.1 million and royalty payments of US$19.7 million to our local partner, the Egyptian government

· Debt-free balance sheet, with no hedging and cash & liquid assets[4] of US$348.9 million, as at 31 December 2019, which has increased further to US$379.2 million[5], as at 31 March 2020[6]

· To give shareholders greater certainty and expedite the dividend timetable, the previously proposed 2019 final dividend of 6 US cents per share was replaced[7] with a 2020 first interim dividend of 6 US cents per share, equating to c.US$69.4 million, and paid on 15 May 2020

GOVERNANCE HIGHLIGHTS

· Substantial Board refreshment delivered in 2019, and thus far in 2020, including:

- Appointment of Dr Sally Eyre, Dr Catharine Farrow, Marna Cloete and James "Jim" Rutherford as independent Non-Executive Directors in 2019

- Josef El-Raghy, Chairman, Gordon "Ed" Haslam, Senior Independent Director and Mark Arnesen, Non-Executive Director will not stand for re-election at the upcoming 2020 annual general meeting ("2020 AGM") on 29 June 2020

· Completing a comprehensive handover, Jim Rutherford will become the independent Non-Executive Chairman ("NEC"), effective 29 June 2020, following the 2020 AGM

· Dr Sally Eyre will become the Senior Independent Director, effective 29 June 2020

2020 OUTLOOK

· The impact and potential duration of the COVID-19 pandemic remain uncertain. The Company has taken prudent steps including risk scenario analysis and put in place contingency plans for the business to navigate these difficult times. Centamin is closely monitoring the situation, with an active response framework in place to manage and mitigate future impacts within its control

· Sukari operations have continued to be uninterrupted with sufficient staffing resources and critical supplies in to Q3, during which it is expected global travel restrictions may begin to ease. Should such restrictions be extended well into H2, it is possible that operations may be affected

· Centamin maintains its 2020 full year guidance[8], targeting production between 510,000-540,000 ounces of gold (production weighted 55% to H2), at cash costs between US$630-680 per ounce produced and AISC between US$870-920 per ounce sold. Open pit material is expected to contribute 80% of the full year production driven by higher grade Stage 4 ore. The balance is scheduled to come from the underground, specifically Ptah as infrastructure upgrades are being implemented at Amun

· As a precautionary move to protect the health and wellbeing of the workforce, non-essential capital expenditure has been temporarily deferred, including the Sukari solar plant. This is in order to minimise additional contractors and other non-operating traffic on and off site, while restrictions related to COVID-19 remain in place. As a result, 2020 capital expenditure is expected to be in the range of US$150-US$170 million (previously US$190 million)

· The Sukari life of asset review is ongoing. A series of independent optimisation studies across each section of the mine are underway, with results expected in H2 2020, identifying areas of improvement

Ross Jerrard, CFO, commented on the Company's full year audited results to 31 December 2019:

"2019 was characterised by continued operational improvements at Sukari, a strong financial performance, excellent exploration target generation, significant progress meeting our ESG initiatives and a continued focus on delivering returns to all of our stakeholders. Underlying EBITDA improved 10% on 2018 and profit after tax improved 13%, demonstrating growing margins, assisted by solid cost management and improved grade, delivering costs per ounce produced and sold in the bottom half of the guidance range.

We have made a good start to 2020 with production and costs on track. The global uncertainty around the impact of the COVID-19 pandemic has created significant volatility in the global investment markets, resulting in increased safe-haven investing. Our clean balance sheet, with no debt nor hedging, offers pure exposure to the gold price and our long cash position of c.US$379 million[9][10] underpins the financial strength of the business and self-funds current growth investment.

We continue to maintain focus on cost discipline and achieving greater operational efficiency as the key margin and cash flow drivers. ESG is rooted at the centre of our decision-making framework, including water efficiency and air quality initiatives, improved workplace training and a Board of Directors all focused on accretive growth of Centamin over the coming years."

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For more information, please visit the website www.centamin.com or contact:

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CHAIRMAN'S STATEMENT

Josef El-Raghy

Chairman

In the past few months, the world has come together to try to safely navigate the threats presented by the coronavirus ("COVID-19") pandemic. We hope that you and your loved ones are safe and well as we all adapt to living in these unprecedented times.

PEOPLE

Centamin's strategy is to maximise free cash flow generation through responsible mining, delivering long term stakeholder returns. Successful execution of our strategy starts with our people. The Company has undergone a tremendous step-change in leadership, reflected in the strong performance at the end of 2019 and the solid start to 2020. In the past two years, investing in people has been a priority for the Company, including attracting high-calibre individuals and ongoing development of our existing workforce, to further improve our technical expertise.

Though such transformational change has occasionally brought some periods of inconsistency as individuals and ideas bed-into our structure and culture, Centamin is pleased that the workforce recruitment is largely complete and now the emphasis is on embracing innovation and adopting technologies suitable for our business.

Our number one priority is the health, safety and wellbeing of our direct and indirect workforce, followed by our host communities. Whilst we are pleased to report there are no cases of COVID-19 on-site and operations have been largely uninterrupted, there remains much uncertainty around true impacts and duration. Centamin is committed to operating in line with our strict corporate response plans and heightened measures for as long as required to keep our people safe and operations secure.

GOVERNANCE

Centamin has a strong and diverse Board. As the Company positions itself for the next decade of growth, we have delivered against the ambitious Board succession programme announced in 2018, ensuring we have the right composition of individuals. This has been transformational, including seven Board appointments and five Board retirements. In 2019, we were delighted to appoint Dr Sally Eyre (10 April 2019), Dr Catharine Farrow (2 September 2019), Marna Cloete (2 September 2019) and in 2020, James "Jim" Rutherford (effective 1 January 2020) as independent Non-Executive Directors.

Targeted succession remains at the forefront in 2020 and on 6 April 2020 it was a great pleasure to welcome Martin Horgan as your new Chief Executive Officer ("CEO"), concluding a competitive six-month recruitment process. Martin brings not only excellent technical, commercial and financial experience but also strong operational and leadership skills. Combined with his deep knowledge and understanding of gold mining across Africa, I believe that he will make an invaluable contribution to the Company.

At the upcoming 2020 AGM on 29 June, completing their nine-year tenures, Non-Executive Directors Gordon "Ed" Haslam and Mark Arnesen will not stand for re-election. Their devoted service has been of significant value to Centamin and to me personally as there have been many challenges on a corporate and personal level that they have guided me through. Ed brought a wealth of crucial Board experience, making him a truly dependable Deputy Chairman, providing wise counsel and support when required. Mark's vast experience in the resource industry has been invaluable in shaping and mentoring the finance team as we transformed from a small explorer to a sizeable gold producer. He has committed his time and energy well in excess of what is traditionally required of a non-executive director. I sincerely thank them both for their contributions.

Furthermore, I would like to announce that I, Josef El-Raghy, will not be standing for re-election at the 2020 AGM. It has been an honour and pleasure to serve as a Director of your company for the last 18 years. Centamin is well placed for the next phase of growth, and I have all the confidence in Jim Rutherford, who will step into the role of Chairman following the 2020 AGM, to guide this Company to even greater success.

Jim and I have worked closely together during the last few months, completing a comprehensive handover process. Jim comes with over 25 years' experience in investment management, investment banking and a multitude of other capital market skills, along with a deep understanding of the global mining industry. His independent views will provide additional value to the evolved Board.

There were some key Executive changes in 2019. Our longstanding colleague, Andrew Pardey, stepped down as CEO in October. His eleven-year tenure was instrumental in placing Centamin where it is today. Andrew joined us as Sukari General Manager, working under Trevor Schultz in building Egypt's first modern gold mine. Present at the first gold pour, Andrew led his team through growth and expansion to the Tier 1 gold operation it is today. Along his journey he progressed to Chief Operating Officer ("COO") and finally CEO. Thank you, Andrew for all your hard work and dedication.

Following Andrew's retirement, Ross Jerrard, Chief Financial Officer ("CFO"), was appointed interim CEO. Ross provided excellent leadership, keeping Centamin focused during challenging circumstances, as we navigated an unsolicited corporate approach and the ongoing global pandemic. Ross' calm and measured management is a valued asset to the Company. Following Martin's appointment, Ross is focused on his role and responsibilities as CFO and Executive Director on the Board.

PRIORITISING STAKEHOLDERS

Collectively we have developed, operated and grown Sukari into a world class operation and a first of its kind in Egypt. This success underpins Centamin's industry leading shareholder returns and is the foundation of local employment, direct financial and infrastructure investment in Egypt, as well as to our developing hubs in Côte d'Ivoire and Burkina Faso.

Our performance in 2019 has seen the Company mature and consolidate its position as one devoted to creating opportunity through gold mining. Gold production was 480,528 ounces, broadly in-line with the lower end of guidance (490,000 ounces). Strong cost management and disciplined capital allocation delivered AISC of US$943 per ounce sold, comfortably within our guidance range. The Group generated strong free cash flow of US$74.3 million, a 17% improvement on 2018.

On 14 January, announced in the Q4 2019 Results, the Board proposed a final 6 US cent per share dividend, bringing the 2019 total dividend to 10 US cents per share which equates to returning US$115.8 million to shareholders of surplus cash. This is an 82% increase on the 2018 total dividend. Our ability to make such strong returns for our shareholders lies in the core strategy of putting our stakeholders first, a strong balance sheet and an effective robust financial strategy.

Given the unprecedented global situation with COVID-19, regulators, governments and public health authorities have issued varying directives which have impacted the timing and structure of 2020 AGMs. As such the opportunity for shareholders to approve the proposed 2019 final dividend could not go ahead with the previously announced timetable. After much consideration, and in order to ensure the dividend payment was made to shareholders in May 2020, the Board resolved to declare a 2020 first interim dividend to replace the 2019 final dividend. The 2020 first interim was paid on 15 May 2020, for 6 US cents per share (US$64.9 million), the same quantum as the previously proposed 2019 final dividend and will not be subject to shareholder approval.

Our ability to generate superior returns for our owners and partners is only made possible by the fundamental strength of the relationships with all of our stakeholder groups. On behalf of the Board, I would like to thank the Egyptian Mineral Resource Authority ("EMRA"), not only for their support during 2019, but also for the last 10 years in particular, which with their guidance has seen Egypt placed firmly on the map as a country with immense opportunity to become a leading gold producer. We believe that Sukari is the first of several Tier 1 gold assets which will benefit Egypt for generations to come. In addition to employing and training 2,249 Egyptians, cash flow generated from gold production in 2019 resulted in US$107 million being distributed to Egypt in profit share and royalties.

POSITIONED FOR GROWTH

Given the current volatility in world stock markets, brought on in large part by COVID-19 outbreak, Centamin is well positioned having no debt, unhedged and US$379.2million[11] [12] in cash & liquid assets[13], providing full exposure to the gold price. I have frequently stated a strong balance sheet and stringent cost management as key to sustaining a robust business throughout the cycle. The Company is constantly looking at ways to further identify cost-savings, improve key operating metrics and social improvements to those that work with and around us.

The Board are acutely aware of the quality and opportunity within the Company portfolio of assets, which has attracted the attention of other corporate entities, including the unsolicited approach by Endeavour Mining in late 2019. Your Board is in favour of risk diversification, but as disciplined capital allocators, we believe it is important to be value investors first. As a shareholder myself, I recognise the past two years have been frustrating as our market valuation has at times been impacted by short term performance inconsistencies during a period of change, as well as being in an outperforming gold market. Regardless of short-term performance setbacks we have always adhered to our core principle of paying cash dividends to shareholders bi-annually which we have now done for six consecutive years. The Board is aligned that the best way to generate substantial sustainable returns for shareholders is through long term organic investing and the acquisition of value-accretive assets.

THANK YOU

I would like to take this opportunity to personally thank my Centamin colleagues, friends and family. I am grateful to have worked with you and achieved what we have together. We have demonstrated what a clear plan, passion, and hard work can achieve. The future opportunities for Centamin, and all its stakeholders, are endless. You have the skills, assets, leadership and I look forward to following and supporting your future successes.

Nothing would have been possible without our stakeholders. Together, our shared vision is only the beginning for Centamin and Egypt's growing presence in the gold industry. Thank you.

CORPORATE GOVERNANCE

Effective corporate governance begins with a strong Board, led by the Chairman, with the appropriate skills and experience to challenge and support the Executive team in delivering the corporate strategy. The Board transformation throughout 2019 reflects the Company's ongoing commitment to achieving the highest standards of corporate governance.

BOARD COMPOSITION[14]

In accordance with the 2018 UK Corporate Governance Code ("2018 Code") and Centamin's ongoing board succession programme, the Company has made the following changes to its Board composition:

· Appointment of Dr Sally Eyre, Marna Cloete and Dr Catharine Farrow as independent Non-Executive Directors in 2019, and in 2020, appointment of Jim Rutherford as independent Deputy Non-Executive Chairman

· On 3 October 2019, Andrew Pardey stepped down as CEO and Executive Director; Ross Jerrard, CFO and Executive Director stepped in as interim CEO

· On 6 April 2020, Martin Horgan was appointed as CEO and Executive Director, following a thorough international search process; Ross Jerrard continued with his responsibilities as CFO

· Josef El-Raghy, Chairman, will not stand for re-election at the upcoming 2020 AGM

· Completing a comprehensive handover, Jim Rutherford will become the independent Non-Executive Chairman ("NEC") from 29 June 2020

· Following a nine-year tenure, Gordon "Ed" Haslam, Senior Independent Director ("SID"), will not stand for re-election at the upcoming 2020 AGM

· Dr Sally Eyre will assume the Senior Independent Director role, effective 29 June 2020

· Following a nine-year tenure, Mark Arnesen, Non-Executive Director, will not stand for re-election at the upcoming 2020 AGM

· An active recruitment process is underway to identify and appoint an independent non-executive director to chair the new Technical Committee which will be mandated from 29 June 2020

Following the 2020 AGM, as at 29 June 2020, there will be eight Board Directors, including six Non-Executive Directors and two Executive Directors. In accordance with the 2018 Code the Board is greater than 50% independent.

Committee restructuring

effective 29 June 2020

As part of the Company's recent Board transformation, a full effectiveness review and refreshment was conducted across the Board committee mandates and composition. The material changes are outlined below:

Health, Safety, Environmental and Social Committee ("HSES") to be evolved into the Sustainability Committee

· The new Sustainability Committee will have focus across the health and safety, environmental, social (including employee engagement) and governance. Aspects of risk associated with the Company's licence to operate will be considered by this committee. A review of the charter and interaction with the Board Audit and Risk Committees and other committees, including a new Technical Committee will be considered in the review.

Technical Committee to be established as a new committee

· The new Technical Committee will support and advise the Board in reviewing technical and operational matters. The committee will help in monitoring decisions and processes designed to ensure the integrity of the Group's reserve and resource estimations. The committee will also be responsible for technical reporting, internal quality control and assurance over the Group's mining assets and exploration, including oversight of the life of asset, production and exploration.

· The recruitment process for a new Non-Executive Director, with technical and operating experience, has been led by the Nomination Committee and is well progressed. An appointment is expected to be announced in Q2 2020 and it is intended they will chair the Technical Committee.

Compliance and Corporate Governance Committee to be discontinued in its current form

· The Compliance and Corporate Governance Committee responsibilities have been reassigned to the Sustainability Committee, the Audit and Risk Committee and the Board.

· The Disclosure Committee will continue in accordance with the Company's Continuous Disclosure policy and will report directly to the Audit and Risk Committee and, where necessary, to the Board.

COMMITTEE rotation

effective 29 June 2020

The Board understands the benefits of refreshing its composition, committee structures as well as planning for future succession. The changes to the committee structures illustrate the Company's commitment to continue to evolve and strengthen our governance model in line with the rapidly changing global environment with which we operate. Please see the below planned changes to the Board committee membership, effective 29 June 2020, following the 2020 AGM:

· Dr Sally Eyre will chair the Remuneration Committee and become a member of the Nomination Committee and Technical Committee

· Jim Rutherford will chair the Nomination Committee and become a member of the Remuneration Committee

· Dr Catharine Farrow will chair the new Sustainability Committee and become a member of the Technical Committee and Audit and Risk Committee

· Marna Cloete will chair the Audit and Risk Committee and become a member of the Remuneration Committee and Sustainability Committee

· Dr Ibrahim Fawzy will become a member of the Nomination Committee and Sustainability Committee

· Ongoing succession planning including an active process is underway to appoint an independent Non-Executive Director specifically with technical and operating expertise to Chair the newly established Technical Committee and planned to become a member of the Audit and Risk Committee and Sustainability Committee.

· Mark Bankes will join the Technical Committee and in the short term will remain on the Audit and Risk Committee until the above appointment is made - expected in H1 2020

Current Committee membership[15], as at 18 May 2020

Planned Committee membership, effective 29 June 2020

At the recommendation of the Nomination Committee, the Centamin Board has approved the following planned Committee membership to take effect following the 2020 AGM:

2019 CEO REVIEW

Ross Jerrard

Interim Chief Executive Officer, Chief Financial Officer and Executive Director

Acting as interim CEO and managing the Company during a transformational time has been an honour and a privilege. It is a great pleasure to welcome Martin Horgan as Centamin's new CEO and I look forward to working with Martin to deliver value to all our stakeholders through the implementation of our consistent and long-term strategy.

GOOD BUSINESS

For the past 25 years Centamin has been building a responsible culture that values and supports environmental, social and governance ("ESG") matters. From ethical code of conduct to decision-making, ESG is critical to the sustainability of our business. The key ESG improvement in 2019 has been effectively communicating this culture, framework and progress. To Centamin ESG is simply, good business. Testament to this, Centamin was recognised by the UK FTSE Series and qualified to be a constituent of the FTSE4Good Index. Our second Sustainability Report will be published on 8 June 2020 and will provide the framework and detail of our commitment to good corporate citizenship.

The safety, health and wellbeing of our workforce and local communities are our top priority every day. We instil a strong safety culture and continue to strive for a zero-harm workplace environment and I was disappointed that our safety record suffered a setback in 2019 with ten Lost Time Injuries ("LTIs") and the tragic loss of a contractor in Côte d'Ivoire due to a swarm of killer bees in February 2019. Lost Time Injury Frequency Rate ("LTIFR") was 0.29 per 200,000 workplace hours in 2019. With each safety incident we learn and adapt our conduct accordingly so as to mitigate it from happening again.

In 2019, there were no major environmental incidents recorded and a 33% reduction in total environmental incidents. Improving on-site water management is an ongoing key focus, including developing and implementing a new Water Management Plan. In 2019 we set the target to exit the year with a 50:50 salt water draw vs recycled circuit water balance. I am pleased to report we beat our target and achieved an average of 76% circuit water recycled throughout the year. Consequently, this meant more tailings water was drawn from the tailings dam, which increased the available capacity of our active tailings storage facility ("TSF1") to the end of 2020. Construction of our second tailings storage facility ("TSF2") is underway and on schedule.

Centamin is committed to leaving a strong legacy for the benefit of our local, regional and national hosts - it is with excitement that we embark on significantly lowering our carbon footprint through increased operational efficiencies as well as the construction of the Sukari hybrid solar power plant. The Stage 1 30MW solar plant is expected to replace 18-20 million litres of diesel consumption per annum through operation during daylight hours. Over time it is expected this capacity will be expanded and, importantly, it will continue to operate for decades to come, delivering sustainable energy beyond the life of mine. The plant electrical upgrades and earth clearing works are underway in preparation for construction of the solar plant, which has been temporarily postponed due to health and safety measures around COVID-19.

2019 PERFORMANCE

Centamin matured as a business in 2019. I am very pleased with the teams' efforts and focus, delivering a near record quarter in Q4 2019. A weaker Q3 2019, due to slower mining rates from a section of the open pit, impacted annual production performance of 480,528 ounces, which was a 2% improvement on 2018. Notwithstanding, all other guidance metrics were delivered within range.

In 2019, we significantly strengthened our operational teams across all of our assets, particularly with senior technical managers. Through our workplace development programmes, 2019 concluded with 57% of Group leadership positions held by nationals, as we look to nurture and promote indigenous talent. I am confident we have the right team, mine plan and culture in place to deliver future performance.

We delivered another strong financial performance in 2019, which further benefited from improved gold prices. Revenues increased by 8% to US$652 million and underlying EBITDA1 increased 10% to US$284 million with a 43% margin. Profit after tax increased 13% to US$173 million. Operating cash flow increased 11% to US$249 million and Group free cash flow1, after a 14% increase in profit share paid to EMRA, improved 17% to US$74.3 million.

Through strong cash management and disciplined capital allocation, we have built a stronger financial position, with US$379.2 million8 in cash and liquids assets1 at 31 March 2020, after distributing US$570 million to shareholders in cash dividends, and almost US$500 million in profit share and royalty payments to Egypt, to date. Unique amongst our peers, Centamin has never had debt, hedging nor streaming in place, maximising the strength and flexibility of the balance sheet today and offering shareholders pure gold exposure throughout the cycle.

With our disciplined approach to capital allocation and responsibility as custodians of shareholder invested capital, we are proud of our established track record of returning surplus cash to shareholders - as well as investing in both sustaining the business and self-funding investment opportunities. Our commitment to shareholder returns is core to our strategy, as demonstrated with our six-year dividend stream.

INVESTING FOR THE FUTURE

Our strong balance sheet and future cash flow potential enables significant capital to be re-invested in the business for sustainability and future growth, as well as, maintaining industry leading shareholder returns. This year and 2021 will see Centamin invest further in value driven projects, transforming Centamin for the future - including substantial upgrades to the underground, increased brownfield exploration and integrating solar power at Sukari.

In the second half of the year, a series of optimisation studies, across all facets of the mine, commenced, with a focus on long term planning and identifying cost-saving, operational efficiency and improved productivity opportunities. These studies are underway and have already begun to identify potential cost-saving, performance enhancing opportunities and social improvements, including improvements to open pit operations, process plant productivity and on-site camp facilities, which are budgeted for implementation in 2020. We expect the review to be completed during the second half of 2020 and look forward to updating stakeholders on any material developments in due course.

EXPLORATION

During 2019 the discovery of Horus Deeps was made at Sukari, an exciting target which is located 300 metres below the current underground infrastructure of two high-grade shallow dipping structures. Mineralisation was similarly intersected below the Ptah and Amun zones, indicating that the structure extends to both the north and south. A surface step-out drill programme is underway in 2020, at 250 metre spacing which will tie into the current seismic programme, increasing the resource potential and geological understanding across the tenement.

In 2019 we commenced a small-scale regional exploration programme outside the mine gate, though within the larger Sukari tenement. There are several underexplored known deposits, all within trucking distance to our process plant. A 2D geoseismic programme was completed during 2019. Initial data interpretation is very encouraging, identifying multiple potential gold systems and exploration targets for further investigation during 2020 and beyond.

We have over 3,000km2 of exploration ground across some of West Africa's most prolific producing gold belts. Our combined West African resource has grown to over five million Measured and Indicated ounces, all located within 250 metres from surface. After nine months of drilling, the exploration team increased the Doropo Project resource by greater than 20% and made the significant Kilosegui discovery. We believe this could be the source of significant resource growth and is a priority exploration target for 2020, ahead of progressing feasibility infrastructure conceptual layouts.

OUTLOOK

The world is everchanging and it is important we continue to evolve with it. As people, and as an organisation, globally we find ourselves working together more than ever to navigate the challenges that have and will continue to affect us all with the global spread of COVID-19.

Our purpose and strategy remain clear and consistent - create opportunities for our stakeholders through value-focused gold mining over volume - and starting with 2020, we expect to deliver year-on-year operational, financial, exploration, environmental, social and governance progress, and look forward to communicating these developments to you as the year progresses.

Our near-term focus is on driving margins through value over volume decision making. The forecast for 2020[17] is gold production of 510,000 - 540,000 ounces at an AISC1 range of US$870 - US$920 per ounce sold. Production is weighted to the second half of the year, due to the open pit mining sequence, with an approximate split of 45:55. The open pit will do most of the heavy lifting in 2020, contributing 80% of the ounces we expect to produce, as we are mining deeper into the pit in Stage 4 and accessing higher grade ore than in previous years, while the underground focus is on infrastructure upgrades to enhance future production.

Centamin has a very active growth pipeline of opportunities. Today we find ourselves in a strong position, looking back and learning from our ten-year production track record, in which to optimally position ourselves to deliver sustainable returns for at least the next 15 years, as underpinned by our current gold reserve and resource. At present, as caretakers and custodians, our immediate focus is to navigate the current risks associated with the COVID-19 pandemic and delivering our strategy in 2020. We will update shareholders with detailed medium-term forecasts for 2021 and beyond later in the year, in conjunction with the completion of the life of asset review.

Sukari is an exceptional asset and as our sole operating mine, currently dominates our asset portfolio. In the near term, the best return on capital comes from our ESG initiatives including the hybrid solar power farm, employee equipment training, and targeted reductions in reagent consumption. Results driven exploration programmes aimed at significant resource growth and target generation across the portfolio and in line with our development criteria drives medium term value accretion.

We continue to look at strategic opportunities that can add value to shareholders. The Board is extremely encouraged by Centamin's Egyptian government partner, EMRA's launch of a gold license bid round for exploration ground across Egypt. This is the first bid round to be launched under the new tax, rent, and royalty mining code. Whilst in its infancy, we view this to be very positive for the country and believe that Centamin is strategically positioned with an unrivalled operating track record, developed workforce and established supply chain in modern gold mining operations in Egypt. 

TODAY

The first quarter of 2020 was a strong start to the year with operational and financial performance delivered ahead of budget. The commitment and response by our workforce to the COVID-19 pandemic has been exceptional, and we would also like to acknowledge the assistance and support of the Egyptian government.

Our top priority is to safeguard the health and wellbeing of our people, while taking necessary action to protect our business. Centamin has and will continue to implement proactive measures to minimise the impact to our people, business, community and wider stakeholders.

We are closely monitoring the development of COVID-19, including the potential impact of any disruption to our supply chain and gold exports. Our workforce, partners' and community safety and well-being remain our very top priorities, and our Board and Leadership team are actively engaged to respond to any developments as quickly as we can. To date there has been no material impact to our operations and there have been no reported cases of COVID-19 on site.

Centamin is a resilient and responsibly run business with zero debt and US$379.2 million in cash and liquid assets[18] [19], as at 31 March 2020. I am confident in our long-term strategy and our ability to respond quickly in this difficult environment. We continue to operate diligently and invest prudently, and I believe Centamin is both well equipped to navigate these challenges and remains well positioned for the future.

CORONAVIRUS ("COVID-19")

Thus far in 2020, COVID-19 has significantly impacted the world, presenting an unprecedented medical, economic and social challenge. Centamin has been proactive in how it manages and mitigates the impacts within its control. As of 18 May 2020, Centamin has no recorded cases of COVID-19 on-site and has experienced no material disruption to operations, supply chain or gold shipments. The Company has, however, put in place contingency plans to deal with various possible disruption in the coming months.

At the centre of any decision is the health, safety and wellbeing of our employees and communities. We have stringent safety protocols across all sites, including clear operating standards on workplace conduct. In response to COVID-19, early action was taken at Sukari, in line with our Severe Communicable Disease Outbreak Management Plan and in accordance with the advice of governments and health authorities. These include the following actions taken:

· Established social distancing and strict hygiene measures

· Established a robust multi-functional response framework with a clear chain of command

· Proactively engaged with the Egyptian Government, Health Authorities and the City of Marsa Alam

· Ceased non-essential travel

· Extended on-site roster cycles supported by clear fatigue management protocols

· Enabled employees to work from home where possible

· Continue to educate the workforce on the virus (symptoms and preventative measures)

· Ceased non-essential visits and stringent controls in place for essential visitors

· Established multiple mandatory checkpoints (Marsa Alam airport, community centre and mine gate) for possible symptoms and travel history screening for all visitors

· Quarantine requirements for any individuals accessing site with rigid hospital isolation protocols in place for any suspected infected persons

· Ongoing supply chain assessment and reviews to ensure the site can operate for an extended period of time

Safely managing the mobility of our workforce, in line with government and public health advice, has been paramount in mitigating the risk of spreading the virus. Government imposed travel restrictions on the movement of people are expected to ease in the coming months. Until the timing of those changes are fully understood and global mobility stabilises the Company have identified alternative measures for varying scenarios.

Whilst the impact and potential duration of the COVID-19 pandemic remains uncertain, the Company has carried out scenario risk analysis on the Group and the Company believes it is well positioned to continue to manage through these difficult times. As the pandemic progresses we will continue to monitor the global situation - closely within our host countries Egypt, Côte d'Ivoire, Burkina Faso, Jersey and the United Kingdom - adapting our policies, procedures and controls to minimise the impacts that are within our control.

A COVID-19 Executive Committee has been established to provide oversight during the pandemic, supported by multifunctional teams and a framework led by Risk and Operations. At a minimum, the Board are updated weekly, the Executive Committee meets three times a week and the support team meet daily, providing workforce updates and supply chain assessment.

Supply Chain

We are supportive of the action being taken by governments globally to address the threat of COVID-19. As with many countries globally, Egypt has temporarily closed the national borders to commercial air travel until further notice. The ports and air freight borders remain open for importing and exporting goods. Understandably, supply chain logistics have been impacted by the global government imposed travel restrictions on the movement of goods. Increased logistical planning and flexibility has been crucial in mitigating these impacts.

The domestic supply chain has not been materially impacted, allowing for transportation of domestic goods in compliance with State curfews. International essential supplies are sufficiently stocked in to Q3 2020. As a precautionary measure, successful efforts have been made to further identify and, or increase the stores of essential supplies. However, if travel restrictions are extended into H2 and/or critical supply disruptions arise, operations could be affected.

Daily supply chain assessment is conducted, monitoring stock and usage levels, maintaining a risk schedule of our current and prospective suppliers, and supported by continuous open dialogue with our key international and domestic suppliers. Where a potential risk to a supplier has been flagged, and with all essential supplies, precautionary measures have been taken to identify alternative potential supply channels.

Gold Sales

There have been no material disruptions related to gold shipments to our longstanding refiner, Asahi Refining Canada. Regular dialogue is maintained with both Asahi and Brinks, our security company whom take responsibility for the gold at the mine gate.

Comprehensive scenario assessment continues, with precautionary measures in place, including utilising alternative refiners, Brinks stockpiling gold shipments and Centamin stockpiling gold produced. Each scenario involves variable short-term but limited cost implications.

Further information on COVID-19 was provided in our Q1 2020 Report published on 21 April 2020. We have also ensured that where relevant in the document we have referred to the potential impact of COVID-19, which is recognised as a new and emerging risk.

2019 FINANCIAL REVIEW

Centamin is a financially robust, highly cash generative business, committed to responsible mining and balanced stakeholder returns. This is reflected in the Group's financial results for the year ended 31 December 2019.

Strong focus on operational improvement driving positive financial performance - Q4 2019 production figures represent one of the strongest quarterly results from Sukari.

Gross revenues[20] improved by 7% to US$658.1 million, from annual gold sales of 470,020 ounces, down 3%, at an average realised price of US$1,399 per ounce, up 10% year-on-year. A total of 19,410 ounces of unsold gold bullion was held on-site at year-end, due to timing of gold shipments. This has been realised and reflected in the first quarter 2020 gold sold numbers, as released on 21 April 2020.

STRINGENT COST CONTROL

Our business model is focussed on value over volume, through improving operational and cost efficiencies. Whilst the average realised gold price on sales was improved 10% year-on-year, our AISC margin improved 19% to US$456/oz sold.

Annual costs were comfortably within annual guidance. Optimisation studies underway throughout the respective sections of the mine have identified numerous potential costs saving and performance initiatives, with some beginning to bear fruit in the fourth quarter.

Cash costs of production[21] 21 was US$699 per ounce produced, up 12%, reflecting a 1% increase in mined and 2% increase in processed tonnes, offset predominantly by a 3% increase in gold ounces produced (excluding Cleopatra). AISC[22] was US$943 per ounce sold, up 7%, mainly due to a 2% decrease in gold ounces sold (excluding Cleopatra), increased production costs offset by lower sustaining capital costs.

GROWING FREE CASH FLOW GENERATION

Centamin's cash flows and earnings showed further growth in 2019.

Operational cash flow improved by 11% to US$249.0 million, after gross capital expenditure of US$97.6 million predominantly invested in the long-term sustainability of the business. Adjusted Group free cash flow[23]  improved by 17% to US$74.3 million, after profit share distribution of US$87.1 million to our partner, the Egyptian state. Group underlying EBITDA improved by 10% to US$284.0 million, at a 43% EBITDA margin[24] .

Profit after tax increased by 13% to US$172.9 million, offering competitive profit margins, due to:

o an 8% increase in revenue;

o an 8% increase in cost of sales;

o a 13% increase in other operating costs; offset by

o an increase in gains on financial assets at fair value through profit or loss;

o a 9% decrease in other income; and

o a 20% decrease in exploration and evaluation expenditure.

Basic earnings per share ("EPS") increased by 17% to 7.59 US cents.

STRONG, FLEXIBLE BALANCE SHEET

Centamin continues to maintain a robust financial strategy, with cash and liquid assets of US$348.9 million as at 31 December 2019.  As the Company cautiously navigates the unprecedented circumstance due to the COVID-19 outbreak, we have further strengthened the balance sheet to US$379.2 million in cash and liquid assets, as at 31 March 2020[25] [26], reflecting the profitability of the business.

This strong financial discipline provides the flexibility to drive self-funded long term organic growth and pursue strategic inorganic opportunities that meet our corporate strategy and investment criteria.

The Company liquidity and strength of the balance sheet, with no debt, hedging or streaming in place, is fundamental to the longevity of the business and seriously considered when assessing capital allocation. Centamin has an active growth pipeline through results-driven exploration. These self-funded projects are ranked based on results against our development criteria and prospective returns, before capital is allocated.

INCREASED SHAREHOLDER DIVIDEND

Maintaining a sustainable dividend policy is central to our strategy. We have a six year track record of returning surplus cash to shareholders, based on our policy linked to free cash flow generation.

Reflecting improved operating performance, and in line with the dividend policy, on 15 January 2020, the Board proposed a 2019 final dividend, for the year ended 31 December 2019, of 6.0 US cents per share (c.US$69.4 million), bringing the proposed total dividend for 2019 to 10.0 US cents per share (c.US$115.8 million), an 82% increase year-on-year or equivalent to distributing US$241 per ounce produced in 2019.

This 2019 final dividend was subject to shareholder approval at the 2020 AGM. Due to government, regulator and public health guidance around COVID-19, the timing and structure of the 2020 AGM became uncertain. After much consideration the Board resolved to declare a 2020 first interim dividend of 6 US cents per share to exactly replace the proposed 2019 final dividend, in which to provide shareholders with greater certainty and expedite payment, which was paid on the 15 May 2020. The details of the 2020 first interim dividend can be found on the Company's website: www.centamin.com and within the Q1 2020 Report, published 21 April 2020.

The cumulative shareholder returns by way of cash dividends since 2014 is c.US$570 million.

CAPITAL ALLOCATION

Capital allocation continues to be disciplined and closely qualified against value creation. The Company continues to exercise a balanced approach to responsibly maximising operating cash flow generation, reinvesting for future growth and prioritising sustainable shareholder returns.

In 2019 the focus was on improving operational efficiencies to achieve consistent operational performance over growth, and the capital investment was largely sustainable capital expenditure (US$85 million) and results driven exploration (US$33 million).

OUTLOOK

Centamin's financial strategy remains consistent - maintain financial flexibility by maximising free cash flow generation through stringent cost management and disciplined capital allocation. Shareholder returns are prioritised. In line with the dividend policy, a minimum of 30% of free cash flow is allocated to shareholders.

As part of the 2020 budget, US$50 million was identified for removal from the cost base through specific initiatives ranging from training and equipment optimisation, improvements in the supply chain and contractor management. Since the outbreak of COVID-19 the priority is the safety of the workforce and security of the operations. Whilst the Company forecasts potential additional costs and cash outflow associated with COVID-19, including a build-up in working capital through increasing stockpiles and consumables, temporarily increased payroll costs and support costs resulting from logistics planning with government curfews, we do not expect them to affect 2020 guidance.

For the years 2020 and 2021, there is a stronger focus on growth capital investment in the business, in particular at Sukari. Growth projects include construction of the hybrid solar plant, reducing the reliance on fossil fuels and improving operating costs, construction of TSF2 to extend the tailings storage capacity beyond 2030, substantial infrastructure upgrades within the underground, supporting current operations and preparing for future mining at depth, and camp and workplace facility upgrades, improving the wellbeing and standard of living on site.

As a precautionary move to protect the health and wellbeing of the workforce, non-essential capital expenditure has been temporarily deferred, including the construction of the Sukari solar plant. This is in order to minimise contractors and other non-operating traffic on and off site, while restrictions related to COVID-19 remain in place. As a result, 2020 capital expenditure is expected to be in the range of US$150-US$170 million (previously US$190 million).

The impact and potential duration of the COVID-19 pandemic remains uncertain. The Company has undertaken risk analysis scenarios and has put in place contingency plans for the business and believes it has taken prudent steps to continue to navigate these difficult times. Centamin is closely monitoring the situation, with an active response framework in place to manage and mitigate future impacts within its control.

Consolidated statement of comprehensive income

Revenue from gold and silver sales for the period increased by 8% YoY to US$652.3 million (2018: US$603.2 million), with a 10% increase in the average realised gold sales price to US$1,399 per ounce (2018: US$1,267 per ounce) offset by a 2% decrease in gold sold to 465,687 ounces net of Cleopatra (2018: 475,362 ounces net of Cleopatra).

Cost of sales represents the cost of mining, processing, refining, transport, site administration, depreciation, amortisation and movement in production inventories. Cost of sales is inclusive of US$28.0 million expensed as fuel pre-payments (refer to Note 2.8 of the financial statements for further information) and is up 8% YoY to US$439.3 million, mainly as a result of:

· 7% increase in total mine production costs from US$328.1 million to US$351.7 million, due to a 7% increase in open pit mining costs, a 25% increase in underground mining costs, a 4% increase in processing costs and a 18% increase in finance and administration costs offset by a 6% decrease in refinery and transport costs;

· 6% increase in depreciation and amortisation charges YoY from US$109.7 million to US$115.8 million due to higher production affecting amortisation rates and US$79.9 million increase in the cost of Property, plant and equipment (excl. capital work in progress) which increased the associated amortisation charges; and

· A positive movement in inventory adjustment of US$28.3 million compared to positive movement in inventory adjustment of US$31.3 million in 2018 reflecting the movement in mining inventory over the year.

Other operating costs comprise expenditure incurred for communications, consultants, Directors' fees, stock exchange listing fees, share registry fees, employee entitlements, general office administration expenses, the unwinding of the restoration and rehabilitation provision, foreign exchange losses and the 3% production royalty payable to the ARE. Other operating costs increased by US$4.5 million or 13% from US$34.2 million in 2018 to US$38.7 million in 2019, mainly as a result of:

· US$3.0 million increase in corporate costs (+ve) mainly due to advisor fees related to the Endeavour takeover bid;

· US$1.3 million increase in royalty paid to the government of the ARE (in line with the increase in gold sales revenue) (+ve);

· US$0.2 million increase in other expenses (+ve).

Exploration and evaluation expenditure comprise expenditure incurred for exploration activities in Côte d'Ivoire and Burkina Faso. Exploration and evaluation costs decreased by US$4.1 million or 20% from US$21.0 million in 2018 to US$16.9 million in 2019 due to reduced spending in both jurisdictions.

Finance income comprises interest income applicable on the Group's available cash and term deposit amounts. The movements in finance income are in line with the movements in the Group's available cash and term deposit amounts.

As a result of the factors outlined above, Centamin recorded a profit before tax for the year ended 31 December 2019 of US$173.0 million (2018: US$152.7 million).

The Group operates in several countries and, accordingly, it is subject to the various tax regimes in the countries in which it operates. The tax expense of US$0.1 million for 2019 was associated with timings in income taxes provisions and charges.

During 2019, US$87.1 million was paid (2018: US$76.4 million) as dividends to the non-controlling interest in SGM, being the Egyptian Mineral Resources Authority ("EMRA").

Dividends paid to the non-controlling interest in SGM being EMRA, pursuant to the provisions of the Concession Agreement, are recognised as a non-controlling interest attributable to SGM at the base of the income statement of Centamin. EMRA does not own shares in Centamin, therefore Group earnings per share is calculated on the profit attributable to the owners of the parent.

The profit share payments during the year will be reconciled against SGM's audited financial statements. Any variation between payments made during the year (which are based on the Company's estimates) and the audited financial statements, may result in a balance due and payable to EMRA or advances to be offset against future distributions. SGM's June 2019 financial statements are currently being audited.

Basic earnings per share attributable to owners of the parent of 7.59 US cents for 2019 increased when compared with 2018 of 6.50 US cents. The increase was driven by the factors outlined above.

Consolidated statement of financial position

Centamin has a strong and flexible financial position with no debt, no hedging and cash, bullion on hand, gold and silver sales debtor and financial assets at fair value through profit or loss of US$348.9 million at 31 December 2019 (31 December 2018: US$322.3 million).

The majority of funds have been invested in international rolling short-term interest money market deposits.

Current assets have increased by US$26.5 million or 6% from US$420.3 million at 31 December 2018 to US$446.8 million at 31 December 2019 as a result of:

· US$11.4 million increase (+ve) in inventory driven by:

o US$1.9 million increase in stores inventory (+ve);

o US$8.0 million increase in mining inventory (+ve); and

o US$1.5 million decrease in the provision for obsolete stores inventory (+ve).

· US$6.5 million increase in the financial assets at fair value through profit or loss which relates to an equity interest in a listed public company (+ve);

· US$13.6 million increase in trade and other receivables (including gold and silver sales debtor) (+ve);

· US$0.6 million decrease in prepayments (-ve); and

· US$4.4 million decrease in net cash (net of foreign exchange movements) (-ve) driven by the profit for the period less the payment of the 2018 final dividend of US$34.7 million, 2019 interim dividend of US$46.4 million and a US$87.1 million payment to EMRA as distributions to the NCI.

Non‑current assets have decreased by US$2.1 million or 0.2% from US$927.7 million at 31 December 2018 to US$925.6 million at 31 December 2019, as a result of:

· US$84.9 million increase in the cost of property, plant and equipment (+ve);

· US$116.2 million charge for depreciation and amortisation (-ve);

· US$9.0 million increase in exploration and evaluation assets, as a result of the drilling programmes in Sukari Hill (+ve); and

· US$20.2 million increase in inventory related to mine ROM stockpiles (+ve).

Current liabilities have increased by US$18.8 million or 40% from US$47.4 million at 31 December 2018 to US$66.2 million at 31 December 2019, as a result of:

· US$3.8 million increase in trade payables (+ve);

· US$14.4 million increase in accruals (+ve) mainly at a corporate level related to advisor fees regarding the Endeavour bid;

· US$0.2 million increase in tax provisions (+ve); and

· US$0.4 million increase in current provisions (+ve).

Non‑current liabilities have increased by US$0.9 million from US$13.7 million at 31 December 2018 to US$14.6 million at 31 December 2019, as a result of an increase in the rehabilitation provision.

There has been a 1,232,400 increase in the number of issued shares over the period due to share-based payment awards vesting.

Share option reserves reported have decreased by US$1.5 million to US$4.2 million as result of:

· US$1.7 million due to the reversal of a 2016 RSP awards that didn't meet the vesting conditions (-ve);

· US$1.3 million due to the vesting of the remaining 2016 RSP awards on 4 June 2019 (-ve);

· US$1.0 million due to forfeiture of share-based payment awards on resignation (-ve); offset by

· US$2.5 million for the recognition of the share‑based payment expenses for the year and new share-based payment awards granted in 2019 (+ve).

Accumulated profits increased by US$4.8 million from US$610.5 million at 31 December 2018 to US$615.4 million at 31 December 2019, as a result of:

· US$173.0 million profit for the year after tax (+ve); offset by

· US$87.1 million profit share paid to EMRA in the year (-ve); and

· US$34.7 million 2018 shareholder approved final dividend and US$46.4 million 2019 interim dividend paid (-ve).

Consolidated statement of cash flows

Net cash flows generated by operating activities comprise receipts from gold and silver sales and interest income, offset by operating and corporate administration costs.

Net cash flows used in investing activities comprise exploration expenditure and capital development expenditures including the acquisition of financial assets. The primary use of the funds in the period was for purchase and disposal of an equity interest in a listed public company, purchase of property, plant and equipment and investment in underground development at the Sukari site in Egypt.

Net cash flows used in financing activities comprise dividend payments to the non-controlling interest in SGM, being EMRA and dividend payments to the owners of the parent, being shareholders of the Group.

Effects of exchange rate changes are as a result of movements of the currencies used across the operations in the year.

Capital expenditure

The following table provides a breakdown of the total capital expenditure of the Group:

(1) Includes US$7.8 million of Sukari expenditure relating to Cleopatra in non-sustaining capital expenditure before the offset of net pre-production gold sales.

Cumulative exploration expenditure capitalised for Cleopatra at Sukari is US$23.0 million (project to date) offset by pre-production net revenues of US$17.8 million (refer to notes 2.2 and 2.3 to the financial statements for further details) resulting in US$5.2 million remaining on the statement of financial position at 31 December 2019.

Exploration expenditure

The following table provides a breakdown of the total exploration expenditure of the Group:

(1) Cleopatra expenditure before the offset of net pre-production gold sales.

Exploration and evaluation assets - impairment considerations

In consideration of the requirements of IFRS 6 an impairment test has been performed. On review, no impairment was required.

Foreign exchange gains have decreased from a US$6.4 million gain to a US$5.8 million gain, resulting in a US$0.6 million decrease on 2018.

Subsequent events

As referred to in note 5.2, subsequent to the year end, the Board have resolved to declare a 2020 first interim dividend to replace the 2019 final dividend. The 2020 first interim dividend is for 6 US cents per share (US$64.9 million), the same quantum as the previously proposed 2019 final dividend (announced on 14 January 2020), and will not be subject to shareholder approval, the first interim dividend was paid on 15 May 2020 to shareholders.

The outbreak of the coronavirus COVID-19 will likely have an impact on the Group as well as on supply chain and production. Considering that the spread of the virus accelerated during the first quarter of 2020 and its impact as at 31 December 2019 was minimal, this event was classified as a non-adjusting event for accounting purposes. Given the uncertainties on scope and length as well as the ongoing developments, the Group cannot give any accurate or reliable estimates on potential quantitative impacts currently. This may result in an overall challenged and volatile market environment. The assessment on the ability of the Group to operate as going concern is disclosed under note 1.3.7.

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

Non‑GAAP financial measures

Four non‑GAAP financial measures are used in this report:

1) EBITDA and adjusted EBITDA

EBITDA is a non‑GAAP financial measure, which excludes the following from profit before tax:

· Finance costs;

· Finance income; and

· Depreciation and amortisation.

Management considers EBITDA a valuable indicator of the Group's ability to generate liquidity by producing operating cash flow to fund working capital needs and fund capital expenditures. EBITDA is also frequently used by investors and analysts for valuation purposes whereby EBITDA is multiplied by a factor or "EBITDA multiple" that is based on an observed or inferred relationship between EBITDA and market values to determine the approximate total enterprise value of a company. EBITDA is intended to provide additional information to investors and analysts and does not have any standardised definition under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. EBITDA excludes the impact of cash cost of production and income of financing activities and taxes, and therefore is not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate EBITDA differently. The following table provides a reconciliation of EBITDA to profit for the period before tax.

Reconciliation of profit before tax to EBITDA and adjusted EBITDA:

(1) Profit before tax, depreciation and amortisation and EBITDA includes a charge to reflect the removal of fuel subsidies (refer to note 2.8 to the financial statements for further details).

(2) Adjustments made to normalise earnings, for example profit on financial assets at fair value through profit or loss, impairments of property, plant and equipment, non-current mining stockpiles and exploration and evaluation assets.

2) Cash cost of production per ounce produced and sold and all-in sustaining costs per ounce sold calculation

Cash cost of production and AISC are non-GAAP financial measures. Cash cost of production per ounce is a measure of the average cost of producing an ounce of gold, calculated by dividing the operating costs in a period by the total gold production over the same period. Operating costs represent total operating costs less sustaining administrative expenses, royalties, depreciation and amortisation. Management uses this measure internally to better assess performance trends for the Company as a whole. Management considers that, in addition to conventional measures prepared in accordance with GAAP, certain investors use such non-GAAP information to evaluate the Company's performance and ability to generate cash flow. Management considers that these measures provide an alternative reflection of the Group's performance for the current period and are an alternative indication of its expected performance in future periods. Cash cost of production is intended to provide additional information, does not have any standardised meaning prescribed by GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. This measure is not necessarily indicative of operating profit or cash flow from operations as determined under GAAP. Other companies may calculate these measures differently.

During June 2013 the World Gold Council ("WGC"), an industry body, published a Guidance Note on the 'all in sustaining costs' metric, which gold mining companies can use to supplement their overall non-GAAP disclosure. AISC is an extension of the existing 'cash cost' metric and incorporates all costs related to sustaining production and in particular recognising the sustaining capital expenditure associated with developing and maintaining gold mines. In addition, this metric includes the cost associated with developing and maintaining gold mines. In addition, this metric includes the cost associated with corporate office structures that support these operations, the community and rehabilitation costs attendant with responsible mining and any exploration and evaluation costs associated with sustaining current operations. AISC US$/oz is arrived at by dividing the dollar value of the sum of these cost metrics, by the ounces of gold sold (as compared to using ounces produced which is used in the cash cost of production calculation).

On 14 November 2018 the World Gold Council published an updated Guidance Note on 'all-in sustaining costs' and 'all-in costs' metrics. Per their press release it was expected that companies have chosen to use the updated guidance from 1 January 2019 or on commencement of their financial year if later. The Group have applied the updated guidance from 1 January 2019 with no impact on our results or comparatives.

Reconciliation of cash cost of production per ounce produced:

(1) Mine production costs, cash cost of production, cash cost of production per ounce, AISC and AISC per ounce sold includes prepayments recorded since Q4 2012 to reflect the removal of fuel subsidies (refer to note 2.8 to the financial statements for further details).

(2) The movement in inventory on ounces produced is only the movement in mining stockpiles and ore in circuit while the movement in ounces sold is the net movement in mining stockpiles, ore in circuit and gold in safe inventory.

A reconciliation has been included below to show the cash cost of production metric should gold sold ounces be used as a denominator.

Reconciliation of cash cost of production per ounce sold:

(1) Mine production costs, cash cost of production, cash cost of production per ounce, AISC and AISC per ounce sold includes prepayments recorded since Q4 2012 to reflect the removal of fuel subsidies (refer to note 2.8 to the financial statements for further details).

(2) The movement in inventory on ounces produced is only the movement in mining stockpiles and ore in circuit while the movement in ounces sold is the net movement in mining stockpiles, ore in circuit and gold in safe inventory.

Reconciliation of AISC per ounce sold:

(1) Mine production costs, cash cost of production, cash cost of production per ounce, AISC and AISC per ounce sold includes prepayments recorded since Q4 2012 to reflect the removal of fuel subsidies (refer to note 2.8 to the financial statements for further details).

(2) Includes refinery and transport.

(1) Please note that non-sustaining corporate costs relate to accruals recognised for work performed by the Group's advisors on the successful defence of the Endeavour all-share acquisition attempt of Centamin plc. This is not a normal cost incurred in the day to day operations of running the Group and as such has been excluded from our Non-GAAP reporting measures.

3) Cash and cash equivalents, bullion on hand, gold and silver sales debtor and financial assets at fair value through profit or loss

Cash and cash equivalents, bullion on hand, gold and silver sales debtor and financial assets at fair value through profit or loss is a non-GAAP financial measure. Cash and cash equivalents, bullion on hand, gold and silver sales debtor and financial assets at fair value through profit or loss is a measure of the available cash and liquid assets at a point in time. Management uses this measure internally to better assess performance trends for the Company as a whole. Management considers that, in addition to conventional measures prepared in accordance with GAAP, certain investors use such non-GAAP information to evaluate the Company's performance and ability to generate cash flow. Management considers that these measures provide an alternative reflection of the Group's performance for the current period and are an alternative indication of its expected performance in future periods. Cash and cash equivalents, bullion on hand, gold and silver sales debtor and financial assets at fair value through profit or loss is intended to provide additional information, does not have any standardised meaning prescribed by GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. This measure is not necessarily indicative of cash and cash equivalents as determined under GAAP. This is a non‑GAAP financial measure and other companies may calculate these measures differently.

Reconciliation to cash and cash equivalents, bullion on hand, gold and silver sales debtor and financial assets at fair value through profit or loss:

4) Free cash flow and adjusted free cash flow

Free cash flow is a non-GAAP financial measure. Free cash flow is a measure of the available cash after distributions to the NCI in SGM, being EMRA, that the Group has at its disposal to use for capital reinvestment and to distribute to shareholders of the parent as dividends in accordance with the Company's dividend policy. Management uses this measure internally to better assess performance trends for the Company as a whole. Management considers that, in addition to conventional measures prepared in accordance with GAAP, certain investors use such non-GAAP information to evaluate the Company's performance and ability to generate cash flow. Management considers that these measures provide an alternative reflection of the Group's performance for the current period and are an alternative indication of its expected performance in future periods. Free cash flow is intended to provide additional information, does not have any standardised meaning prescribed by GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. This measure is not necessarily indicative of operating profit or cash flow from operations as determined under GAAP. This is a non-GAAP financial measure and other companies may calculate these measures differently.

(1) Adjustments made to free cash flow, for example acquisitions and disposals of financial assets at fair value through profit or loss, which are completed through specific allocated available cash reserves.

PRINCIPAL RISKS AND UNCERTANTIES

MANAGING RISK

The management of risk through identification, monitoring and mitigation allows the Group to improve its decision-making process, deliver on its objectives and improve its performance as a mining company.

The Board has overall responsibility for establishing a robust risk management framework that allows for the assessment and management of material strategic and operational risks. In addition, the Board is responsible for articulating the Group's risk appetite against the principal risks. The Board reviews existing and emerging risks in the context of both opportunities and potential threats. This is then applied when challenging the strategic objectives of the Company that underpin the business model.

Due in part to the nature of the business as an operating mining company, the headline principal risks, whilst fundamental to the ongoing operation, remain constant. The Audit & Risk Committee and Board regularly review the principal risks as well as the wider operational, corporate and general business risks including a discussion on new and emerging risks. The Executive and senior management review, challenge and monitor ongoing risks on a day-to-day basis. The consolidation and analysis of this information is assessed on a quarterly basis and reported to the Board through the Audit and Risk Committee.

Centamin takes a number of measures to mitigate risks associated with its underlying operational and exploration activity which are monitored and evaluated regularly. Due to the nature of these inherent risks, it is not possible to give absolute assurance that mitigating actions will be wholly effective.

The Directors confirm that a robust assessment of the principal, new and emerging risks impacting the Company has been undertaken which identified principal, strategic and operational risks at a corporate level through to those impacting our operations in Egypt and West Africa

PRINCIPAL RISKS

The principal risks and uncertainties facing the Group are set out in detail within the Strategic Report section of the 2019 Annual Report[27] and relate to the following:

Strategic risks

• Loss of revenue due to single project dependency

• Sukari Gold Mine relationship with our partners EMRA

• Jurisdictional taxation exposure

External risks

• Gold price

• Political risk - Egypt

• Political risk - West Africa

• Litigation

Operational risks

• Failure to achieve exploration development success

• Reserve and resource estimates

• Failure to achieve production estimates

EMERGING RISKS

Below we have outlined a non-exhaustive list of emerging risks assessed during the year, which are set out within the Strategic Report section of the 2019 Annual Report:

• Coronavirus ("COVID-19")

• Environment and Sustainability

• Climate Change

• Tailings Storage Facility ("TSF")

• Corporate Action

• Retention of Personnel

• Governance & Regulation

• Business Development

• Capital Projects

• Local Security - West Africa

Set out below are the audited consolidated Financial Statements for the group, including notes thereto, for the year ended 31 December 2019. The independent auditors report on these Financial Statements was unmodified.

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and adopted for use by the European Union and in accordance with the Companies (Jersey) Law 1991.

Consolidated statement of comprehensive income

for the year ended 31 December 2019

(1) The 2018 comparative figures for Other income and Other operating costs have changed due to reclassifications, refer to note 2.3 for further information.

The above audited consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

Consolidated statement of financial position

as at 31 December 2019

The above audited consolidated statement of financial position should be read in conjunction with the accompanying notes.

The audited consolidated financial statements were authorised by the Board of Directors for issue on 18 May 2020 and signed on its behalf by:

Ross Jerrard Darren Le Masurier

Chief Financial Officer Company Secretary

Director On behalf of the Board

18 May 2020 18 May 2020

Consolidated statement of changes in equity

for the year ended 31 December 2019

The above audited consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Consolidated statement of cash flows

for the year ended 31 December 2019

The above audited consolidated statement of cash flows should be read in conjunction with the accompanying notes.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

for the year ended 31 December 2019

1. Current reporting period amendments

1.1 Changes in critical judgments and estimates

There were no updates and/or changes to critical accounting judgments and estimates that management have made in the year in applying the Group's accounting policies, that have the most significant effect on the amounts recognised and the disclosure of such amounts in the financial statements.

1.2 Changes in policies and estimates

The financial position and performance of the Group was particularly affected by the following events and transactions during the reporting period:

· adoption of the following new and revised accounting standards:

· IFRS 16 'Leases' has been assessed by management, for further information, see note 1.2.1 below.

· No new standards, amendments and interpretations not yet adopted.

For a detailed discussion about the Group's performance and financial position, please refer to the financial review.

1.2.1 IFRS 16 Leases

In the current year, this new standard has been adopted and has not had a material impact on the amounts reported in these financial statements.

Nature of change

IFRS 16 was issued in January 2016. It has resulted in almost all leases being recognised on the balance sheet by lessees, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short term and low-value leases.

Impact

In the year ended 31 December 2018 the Group set up a project team which reviewed all the Group's leasing arrangements in light of the new lease accounting rules in IFRS 16. The standard affects primarily the accounting for the Group's operating leases.

Management performed an impact assessment of IFRS 16 on the Group's contracts and financial statements. All active contracts were assessed under the requirements of IFRS 16 to determine whether they had arrangements that contained a lease. Under IAS 17 'Leases' and IFRIC 4 'Determining whether an arrangement contains a lease', contracts were initially assessed on the date of their inception to determine whether or not they should be accounted for under those standards. If, on initial assessment, they didn't meet the requirements of IAS 17 or IFRIC 4, but on reassessment do meet the requirements of IFRS 16, they were excluded from this assessment by application of paragraph C3(b) of IFRS 16. Management elected to apply paragraph C3(b) and therefore paragraph C4 of IFRS 16 as a practical expedient to not apply this standard to all the Group's existing contracts.

Mandatory application date and date of adoption by Group

The Group has applied the standard from its mandatory adoption date of 1 January 2019. The Group has applied the simplified transition approach and has not restated comparative amounts for the year or period prior to the current reporting period. Right-of-use assets for property leases have been measured on transition as if the new rules had always been applied. All other right-of-use assets will continue to be measured at the amount of the lease liability on adoption (adjusted for any prepaid or accrued lease expenses).

As at 31 December 2018, the Group had non-cancellable operating lease commitments of US$3.2 million, see note 5.2 of the 2018 annual report. Of these commitments, approximately US$1.1 million related to low value leases which are and will be recognised on a straight-line basis as an expense in profit or loss.

For the remaining lease commitments, the Group recognised right-of-use assets of approximately US$1.6 million on 1 January 2019 and lease liabilities of US$1.6 million (after adjustments for prepayments and accrued lease payments recognised as at 31 December 2018). Overall net assets have changed, and net current assets are US$0.3 million lower due to the presentation of a portion of the liability as a current liability.

Due to these IFRS 16 adjustments at 1 January 2019 and the consequential transactions in the year not being material, the full disclosure of the impact of the new standard has been excluded from these results.

Standards not affecting the reported results or the financial position

In the current year, the following new and revised standards and interpretations that have been adopted have not had a material impact on the amounts reported in these financial statements:

· IFRIC 23 'Uncertainty over Income Tax Treatments' has been adopted from its effective date of 1 January 2019, its impact has been assessed by management, with no material impact on these results.

There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

1.3 Critical judgments and estimates in applying the entity's accounting policies

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

Management has discussed its critical accounting judgments and estimates and associated disclosures with the Company's Audit and Risk Committee.

The critical accounting judgments are as follows:

1.3.1 Judgment: Control

1.3.1.1 Accounting treatment of Sukari Gold Mine ("SGM")

Pharaoh Gold Mines NL (holder of an Egyptian branch) ("PGM") and EMRA are 50:50 partners in SGM. In prior periods the FRC questioned management's judgment of control and resulting full consolidation of SGM as a subsidiary within the Group's financial statements.

SGM is consolidated within the Group, reflecting the substance and economic reality of the Concession Agreement ("CA") (see note 4.1 to the financial statements). The IFRS 10 definition of control encompasses three distinct principles, which, if present, identify the existence of control by an investor over an investee, hence forming a parent-subsidiary relationship:

· power over the investee;

· exposure, or rights, to variable returns from its involvement with the investee; and

· the ability to use its power over the investee to affect the amount of the investor's returns.

An investor has power over an investee when the investor has existing rights that give it the current ability to direct the relevant activities (i.e. the activities that significantly affect the investee's returns). The following is a list of some of the relevant activities considered which the Company directs, through PGM, in relation to the operation of the Sukari Gold Mine that most significantly affect the returns of SGM:

· the following activities are controlled by the Company, through PGM, by having the right to appoint or remove the managing Director of SGM under the terms of the CA:

· the appointment of the General Manager ("GM") at SGM;

· the GM makes all day-to-day decisions to allow the mine to operate which involve:

· preparing SGM's work programmes through determination of the daily and longer term mine plans, the budgets covering the operations to be carried out throughout the life of the mine and approval of the same;

· capital expenditure, procurement, cost control and treasury;

· conducting exploration, development, production and marketing operations;

· co-ordinating SGM operations and activities, including its dealings with all contractors and subcontractors;

· bearing ultimate responsibility for all costs and expenses required in carrying out any and all operations under the CA;

· funding the operations of SGM and recovering costs and expenses throughout the life of the mine (i.e. exploration, development and production phases);

· funding additional exploration and expansion programmes within the mine during the production phase;

· custody of SGM's stock and management of its funds;

· selling and shipping of all gold and associated metals produced; and

· entering into and managing gold sales or hedging contracts and forward sale agreements.

· EMRA must, in terms of the CA, make the required approvals to allow the mine to operate.

· Role and function of the board of SGM:

· there are six board members:

· three of which are appointed by the Company, through PGM; and

· three of which are appointed by EMRA:

· the executive chairman, as one of the three EMRA appointed board members, is a representative of EMRA and is appointed by the Egyptian Ministry of Finance.

· it convenes twice a year to:

· facilitate a forum for sharing information between the owners of SGM;

· provide a mechanism to scrutinise the timing and amounts of expenses; rather than as a decision-making body over SGM's most significant relevant activities;

· consider and approve the budget, annual financial statements of SGM, review and approve the cost recovery position and other compliance matters; and

· is not allowed to unreasonably withhold approval;

· resolving a deadlock position:

· disputed matters are resolved through open discussion at board level;

· the executive chairman does not have a veto or casting vote;

· where matters cannot be agreed upon, an ad-hoc committee is appointed with each party having equal representation. This committee will then recommend an appropriate course of action to the board with the best interest of all shareholders in mind; and

· should the board still not agree on a course of action, there is a provision for arbitration and ultimately matters can be presented to the International Court of Arbitration at The Hague;

· the board of SGM cannot appoint or remove the GM, this right belongs solely to the Company, through PGM, in terms of the CA;

· EMRA and/or the Egyptian government have no downside risk in their share of SGM. If SGM were to become loss making or insolvent, these costs are absorbed in its entirety by the Company, through PGM, in accordance with the CA.

The Company is therefore exposed to the variable returns, has the ability to affect the amount of those returns, has power over SGM through its ability to direct its relevant activities and therefore meets all the criteria of control to consolidate SGM's results within the Group to reflect the substance and economic reality of the CA.

As the Company, through PGM, is determined to be the controlling party, it should consolidate its subsidiary, SGM, and should apply consolidation procedures, combining balance sheet and profit and loss items line by line as well as applying the rest of the consolidation procedures set out in IFRS 10 App B para B86. The Group therefore prepares consolidated financial statements on this basis.

1.3.1.2 Treatment and disclosure of EMRA profit share

EMRA holds 50% of the shares in the Group subsidiary, SGM, which are not attributable to the Company, and it is entitled to receive net proceeds from the operations of SGM on a residual basis in accordance with their specified shareholding per the CA (this distribution is in accordance with the profit share mechanism and not as a consequence of accumulated profits as defined by accounting standards). Therefore, the Group recognises a non-controlling interest in SGM ("NCI") to represent EMRA's participation.

In terms of the CA, the NCI's rights to any profit share payments (dividend distributions) is only triggered after the cost recovery of all amounts invested (or spent during operations) during the exploration, construction and development stages have been repaid to PGM. The profit share mechanism was only triggered in November 2016 (after all amounts due to be cost recovered were complete). Until that time the NCI had no rights to claim any distribution of accumulated profits or profit share.

It is important to note that the availability of cash in SGM for distribution to its shareholders as profit share is under the control of the Company, through PGM, by the decisions made on SGM's strategic direction and day-to-day operational requirements of running the mine. This is regarded as discretionary and exposes the Company to variable returns.

Distributions to shareholders in SGM:

· once all expenditure requirements have been met, excess cash reserves, if any, are distributed to both SGM shareholders:

· distributions are always made simultaneously to both shareholders;

· the split of the distribution is in accordance with the ratchet mechanism (i.e. the standard profit share ratios of 60/40 (first two years), 55/45 (second two years) and 50/50 to PGM and EMRA respectively through time) as governed by the CA; but:

· distributions are not mandatory, entirely discretionary and there are only distributions if there are excess funds;

· distributions are paid in advance on a weekly or fortnightly basis by mutual agreement between shareholders;

· at end of the SGM reporting period, final profits are determined, externally audited and then approved by the board of SGM:

· final profit distributions become payable within 60 days of the financial year end, SGM is unable to avoid payment at this point and the amount payable is recorded as equity attributable to the NCI until paid;

· the CA is merely a shareholder agreement specifying how and when profits from SGM will be distributed to shareholders and is typical of a minority shareholder protection mechanism.

The Group should attribute the profit or loss for the year after tax and each component of other comprehensive income for the year to the owners of the parent and to the NCI in SGM. The entity shall also attribute total comprehensive income for the year to the owners of the parent and to NCI even if this results in the NCI having a deficit balance (IFRS 10 App B para B94). The CA only contemplates the distribution of profit to shareholders. The NCI would only have a deficit balance where advance distributions paid during the year have exceeded final distributions payable after year end financial statements have been prepared and audited. This deficit would be entirely funded by the Company, through PGM, and would first be redeemed from future excess cash before regular distributions to both parties resume. SGM has no claw back provision for advance profits paid to the NCI. We note that annual dividend payments, after approval of audited financial statements, is a standard feature of transactions with an NCI and that such payments are not normally treated as non‑discretionary payments triggering a liability in the consolidated statement of financial position of the parent.

Any losses generated by SGM will be entirely funded by the Company, through PGM, but attributed to both shareholders. These losses will first be recovered before further profit share distributions commence.

In the Group statement of financial position, all the accumulated profits of SGM are attributable to the Company as EMRA have already received their share through the advance profit distribution payments made, therefore NCI is usually disclosed in the financial statements as nil unless there is an outstanding distribution payable to or deficit from EMRA due to timing differences of the cash sweep. Please refer to note 2.4 for further information.

The treatment and disclosure of the EMRA profit share as an NCI for 2019 is consistent with the amended disclosure presented for the first time in the 2018 annual report. This amended disclosure was in response to the FRC query finalised in 2018. For further information on how the disclosures were amended in 2018, please see note 1.1.1.2 of the 2018 annual report.

1.3.2 Impairment assessment of Group assets

IFRS requires management to test for impairment if events or changes in circumstances indicate that the carrying amount of a finite live asset may not be recoverable.

Considering the requirements of IAS36 an impairment test has been performed. On review, no impairment was required.

In making its assessment as to the possibility of whether any impairment losses had arisen, management considered the following as part of its assessment of the recoverable amount:

· internal sources of information; and

· external sources of information.

1.3.2.1 Sukari Gold Mine

The assessment compared the recoverable amount of the Sukari gold mine cash generating unit ("CGU") with its carrying value for the year ended 31 December 2019. The recoverable amount of the CGU is assessed by reference to the higher of value in use ("VIU"), being the net present value ("NPV") of future cash flows expected to be generated by the asset, and fair value less costs to dispose ("FVLCD"). The FVLCD is derived using discounted cash flow techniques (NPV of expected future cash flows of a CGU), which incorporate market participant assumptions. Cost to dispose is based on management's best estimates of future selling costs at the time of calculating FVLCD. Costs attributable to the disposal of the CGU are not considered significant. The expected future cash flows utilised in the FVLCD model are derived from estimates of projected future revenues, future cash costs of production and capital expenditures contained in the life of mine ("LOM") plan, and as a result FVLCD is considered to be higher than VIU. The Group's LOM plan reflects proven and probable reserves, assumes limited in-situ resource conversion, and is based on detailed research, analysis and modelling to optimise the internal rate of return.

The discount rate applied to calculate the present value is based upon the real weighted average cost of capital applicable to the CGU. The discount rate reflects equity risk premiums over the risk-free rate, the impact of the remaining economic life of the CGU and the risks associated with the relevant cash flows based on the country in which the CGU is located. These risk adjustments are based on observed equity risk premiums, historical country risk premiums and average credit default swap spreads for the period.

During the impairment assessment management applied the following key assumptions: long term gold price US$1,350/oz, real discount rate of 6.5% and an in-situ resource multiple of US$45/oz.

For purposes of testing for impairment of the Sukari CGU, we have assessed whether a reasonably possible change in any of the key assumptions used to estimate the recoverable value for the CGU would result in an impairment charge. Sensitivity calculations were performed for the CGU based on:

· a decrease in the gold price of US$100 per ounce for 2020;

· a decrease in the in-situ resource multiple to US$23/oz;

· an increase in the real discount rate to 9%; and

· a reduction in 2020 production to 480,000 ounces.

In isolation, none of the changes set out above would result in an impairment. This sensitivity analysis also does not take into account any of management's mitigation factors should these changes occur.

1.3.2.2 Exploration and evaluation assets

In accordance with the requirements of IAS 36 'Impairment of assets' and IFRS 6 'Exploration for and evaluation of mineral resources' the assessment compared the recoverable amount of the individual Exploration and Evaluation Asset Cash Generating Units ("E&E CGU") with their carrying value for the year ended 31 December 2019. The recoverable amount of the E&E CGUs is assessed by reference to the higher of VIU, being the NPV of future cash flows expected to be generated by the asset, and FVLCD. The FVLCD is derived using discounted cash flow techniques (NPV of expected future cash flows of a CGU), which incorporate market participant assumptions. Cost to dispose is based on management's best estimates of future selling costs at the time of calculating FVLCD. Costs attributable to the disposal of the E&E CGUs are not considered significant. The expected future cash flows utilised in the FVLCD model are derived from estimates of resource multiples multiplied by proven and probable reserves of the E&E CGUs and were considered to be higher than the VIU amount.

For purposes of testing for impairment of the E&E CGUs, we have assessed whether a reasonably possible change in any of the key assumptions used to estimate the recoverable value would result in an impairment charge. Sensitivity calculations were performed based on:

· a decrease in the in-situ resource multiple to US$10/oz

In isolation, none of the changes set out above would result in an impairment. This sensitivity analysis also does not take into account any of management's mitigation factors should these changes occur.

1.3.3 Litigation

The Group exercises judgment in measuring and recognising provisions and the exposures to contingent liabilities related to pending litigation, as well as other contingent liabilities (see note 5.1 to the financial statements). Judgment is necessary in assessing the likelihood that a pending claim will succeed, or a liability will arise, and to quantify the possible range of the financial settlement.

The Group is currently a party to two significant legal actions, both of which could affect its ability to operate the mine at Sukari in the manner in which it is currently operated and adversely affect its profitability. The details of this litigation, which relate to the loss of the Egyptian national subsidy for Diesel Fuel Oil and the Concession Agreement under which Sukari operates, are given in note 5.1 to the financial statements. Although it is possible to quantify the effects of the loss of the national fuel subsidy, it is not currently possible to quantify with sufficient precision the impact of any restrictions placed on the terms of the Group's operations under the Concession Agreement.

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

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

The changes to critical accounting estimates and assumptions are disclosed in notes 1.2 and 1.3 above. The other critical estimates and assumptions are as follows:

1.3.4 Ore reserves

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

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

1.3.5 Mineral reserve and resource statement

The Group mineral reserve and resource statement for the Sukari Gold Mine with an effective date of 18 July 2019 will be published on 27 May 2020 as part of the 2019 Annual Report. The mineral reserve estimation has used an assumed gold price of US$1,300 per ounce as a basis of preparation. The information on the mineral resources and reserves was prepared by Qualified Persons as defined by the National Instrument 43-101 of the Canadian Securities Administrators.

There are numerous uncertainties inherent in estimating mineral resources and ore reserves. Assumptions that are valid at the time of estimation may change significantly when new information becomes available.

1.3.6 Recovery of capitalised exploration, evaluation and development expenditure

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

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

1.3.7 Going concern

Under guidelines set out by the FRC, the Directors of UK listed companies are required to consider whether the going concern basis is the appropriate basis of preparation of financial statements.

COVID-19

The FRC has released updated guidelines regarding disclosure of "material uncertainties" to going concern in current circumstances. Material uncertainties refers to uncertainties related to events or conditions that may cast significant doubt upon the entity's ability to continue as a going concern. In other words, if boards identify possible events or scenarios (other than those with a remote probability of occurring) that could lead to corporate failure, then these should be disclosed. When assessing whether material uncertainties exist, boards should consider both the uncertainty and the likely success of any realistically possible response to mitigate this uncertainty.

The economic impact of the COVID-19 pandemic will have its effect on the Group. Currently there are no material financial implications to our operations and Sukari continues to operate with no confirmed cases on site. Gold sales are still commencing on a weekly basis although due to travel restrictions in certain countries the route flown to Canada has changed slightly and resulted in an additional transport cost of c.US$0.40/oz. Gold sales are continuing, and this trend is expected to continue assuming further travel restrictions are not implemented and there are no operational issues caused by the pandemic. Weekly cash flow forecasts continue to be performed and distributions to EMRA and PGM are continuing, however these can be halted should cash be locally required. To date there has been no significant impact to critical stock on site but this in continuously being assessed and backup plans are in place. Due to the current travel restriction on people in Egypt some expatriates and Egyptian nationals on site will be required to work longer shifts and will be compensated accordingly, however everything possible is being done to ensure they are operating within the health and safety guidelines, they are having sufficient time to rest after their shifts and to assist them to meet their rotation schedules.

In order to secure the health and safety of our employees and the production capabilities of Sukari, the Group established a COVID-19 Executive Committee and support team which meets and provides daily updates on COVID-19 globally to site, Production, Supply Chain and HSE activities. Sukari is operating a very strict three-point check for all people movements to prevent the spread of the disease and all corporate offices are currently closed with employees working from home. The Group is continuously evaluating further potential actions to mitigate risk due to the COVID-19 crisis. As a result, and even though globally everyone is confronted with a high level of uncertainty, it is not expected that the coronavirus COVID-19 will have a material negative impact on the ability of the Group to operate as going concern.

Management have performed detailed analyses and forecasts to assess the economic impact of COVID-19 from a going concern and viability perspective. The Group continues to benefit from a strong balance sheet with large cash balances and no debt. At 31 December 2019 the Group had cash and cash equivalents of US$278 million and therefore it is very likely that the Group will have sufficient liquidity for at least 12 months after the date of approval of these financial statements. As part of assessing the Group's ability to continue as a going concern, management performed various stress testing scenarios on the Group's balance sheet to assess the potential downturn this pandemic could have on its business, the scenarios addressed were:

· Current state;

· Underground shutdown;

· Reduced processing - Plant 2 shutdown;

· Processing plant shutdown - Plant 1 & 2; and

· All activities suspension.

The sensitivities applied were informed by internal and external data sources, including a review of the Group's most recent production levels with reductions in production levels to various stages of slowdown and suspension. Consultations regarding the impact of this pandemic have also been had both with our critical suppliers and refiners. The Group doesn't engage in any hedging activities and as such all gold sales are exposed to movements in market prices.

In each scenario, sufficient liquidity was demonstrated, and we have no information that an All Activities Suspension scenario is likely to occur. In the event of such further deterioration of market conditions as a result of the COVID-19 outbreak, and implementation of the mitigating actions identified by the Board, the Group will have sufficient liquidity to meet obligations when they fall due for a period of at least 12 months after 18 May 2020.

Based on these detailed cash flow forecasts prepared by management, in which it included any reasonably possible change in the key assumptions on which the cash flow forecasts were based and assessing various scenarios related to COVID-19, the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for twelve months from 18 May 2020 and that at this point in time there are no material uncertainties regarding going concern. Key assumptions underpinning the forecasts include:

· available cash balances;

· favourable litigation outcomes, for current litigation refer to note 5.1 to the financial statements;

· gold price of US$1,500/oz.; and

· production volumes in line with 2019 guidance.

These financial statements for the year ended 31 December 2019 have therefore been prepared on a going concern basis, which contemplate the realisation of assets and liquidation of liabilities during the normal course of operations.

1.3.8 Depreciation of capitalised underground mine development costs

Depreciation of capitalised underground mine development costs at the Sukari Gold Mine is based on reserve estimates. Management and Directors believe that these estimates are realistic based on current information. Please refer to ore reserves, note 3.1.1(i).

2. How numbers are calculated

2.1 Segment reporting

The Group is engaged in the business of exploration for and mining of precious metals, which represents three operating segments, two in the business of exploration and one in mining of precious metals. The Board is the Group's chief operating decision-maker within the meaning of IFRS 8 'Operating segments'. Management has determined the operating segments based on the information reviewed by the Board for the purposes of allocating resources and assessing performance.

The Board considers the business from a geographic perspective and a mining of precious metals versus exploration for precious metals perspective. Geographically, management considers separately the performance in Egypt, Burkina Faso, Côte d'Ivoire and Corporate (which includes Jersey, United Kingdom and Australia). From a mining of precious metals versus exploration for precious metals perspective, management separately considers the Egyptian mining of precious metals from the West African exploration for precious metals in these geographies. The Egyptian mining operations derive its revenue from the sale of gold while the West African entities are currently only engaged in precious metal exploration and do not produce any revenue.

The Board assesses the performance of the operating segments based on profits and expenditure incurred as well as exploration expenditure in each region. Egypt is the only operating segment mining precious metals and therefore has revenue and cost of sales whilst the remaining operating segments do not. All operating segments are reviewed by the Board as presented and are key to the monitoring of ongoing performance and assessing plans of the Company.

Non-current assets other than financial instruments by country:

Additions to non-current assets mainly relate to Egypt and are disclosed in note 2.9.

Statement of financial position by operating segment:

Statement of comprehensive income by operating segment:

(1) Please note that the cost recovery model on which profit share is based under the Concession Agreement is different to the accounting results presented above due to various adjustments and as such the share of profit disclosed above is not reflective of the 55%:45% split that occurs in practice, refer to the statement of cash flows by operating segment below and the free cash flow - Egypt note in the financial review section for further information.

(1) Please note that the cost recovery model on which profit share is based under the Concession Agreement is different to the accounting results presented above due to various adjustments and as such the share of profit disclosed above is not reflective of the 55%:45% split that occurs in practice, refer to the statement of cash flows by operating segment below and the free cash flow - Egypt note in the financial review section for further information.

Statement of cash flows by operating segment:

(1) Please note that the cash generated by operating activities for Burkina Faso and Côte d'Ivoire are affected by the movements in working capital, specifically intercompany loans, with its direct parent entity Centamin West Africa Holdings Limited which is included within the corporate segment.

(1) Please note that the cash generated by operating activities for Burkina Faso and Côte d'Ivoire are affected by the movements in working capital, specifically intercompany loans, with its direct parent entity Centamin West Africa Holdings Limited which is included within the corporate segment.

Exploration expenditure by operating segment:

The following table provides a breakdown of the total exploration expenditure of the Group by operating segment:

2.2 Revenue

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

All gold and silver sales during the year were made to a single customer in North America, Asahi Refining Canada Ltd.

2.3 Profit before tax

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

Net foreign exchange gains have been recognised within Other income disclosures, in prior years these were netted off against Other operating costs, prior year comparatives have been reclassified accordingly where there have been net foreign exchange gains.

2.4 Non-controlling interest in SGM

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

Earnings attributable to the non-controlling interest in SGM (i.e. EMRA) are pursuant to the provisions of the CA and are recognised as profit attributable to the non-controlling interest in SGM in the attribution of profit section of the statement of comprehensive income of the Group. The profit share payments during the year will be reconciled against SGM's audited financial statements. The SGM financial statements for the year ended 30 June 2019 have not been signed off at the date of this report and are in the process of being audited.

Certain terms of the CA and amounts in the cost recovery model may also vary depending on interpretation and management and the Board making various judgments and estimates that can affect the amounts recognised in the financial statements.

(a) Statement of comprehensive income and statement of financial position impact

(1) Profit share commenced during the third quarter of 2016. The first two years was a 60:40 split of net production surplus to PGM and EMRA respectively. From 1 July 2018 this changed to a 55:45 split for the next two-year period until 30 June 2020, after which all net production surpluses will be split 50:50.

Any variation between payments made during the year (which are based on the Company's estimates) and the SGM audited financial statements, may result in a balance due and payable to EMRA or advances to be offset against future distributions. This will be reflected as an amount attributable to the non-controlling interest in SGM on the statement of financial position and statement of changes in equity.

(b) Statement of cash flows impact

(1) Profit share commenced during the third quarter of 2016. The first two years was a 60:40 split of net production surplus to PGM and EMRA respectively. From 1 July 2018 this changed to a 55:45 split for the next two-year period until 30 June 2020, after which all net production surpluses will be split 50:50.

EMRA and PGM benefit from advance distributions of profit share which are made on a weekly or fortnightly basis and proportionately in accordance with the terms of the CA. Future distributions will take into account ongoing cash flows, historical costs that are still to be recovered and any future capital expenditure. All profit share payments will be reconciled against SGM's audited June financial statements for current and future periods.

2.5 Tax

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

In Egypt, Pharaoh Gold Mines NL has entered into a Concession Agreement that provides that the income generated by Sukari Gold Mining Company's activities is granted a long term tax exemption from all taxes imposed in Egypt, other than the fixed royalty attributable to the Egyptian government, rental income on property and interest income on cash and cash equivalents.

The Concession Agreement grants certain tax exemptions, including the following:

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

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

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

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

· PGM's contractors and subcontractors are entitled to import machinery, equipment and consumable items under the "Temporary Release System" which provided exemption from Egyptian customs duty; and

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

Relevance of tax consolidation to the consolidated entity

In Australia, Centamin Egypt Limited and Pharaoh Gold Mines NL, both wholly owned Australian resident entities within the Group, have elected to form a tax-consolidated Group from 1 July 2003 and therefore are treated as a single entity for Australian income tax purposes. The head entity within the tax-consolidated Group is Centamin Egypt Limited. Pharaoh Gold Mines NL, which has a registered Egyptian branch, benefits from the 'branch profits exemption' whereby foreign branch income will generally not be subject to Australian income tax. Ampella Mining Limited is a single entity for Australian income tax purposes.

Nature of tax funding arrangements and tax-sharing agreements

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

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

Tax recognised in profit is summarised as follows:

Tax expense

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

(1) The tax rate used in the above reconciliation is the corporate tax rate of 0% payable by Jersey corporate entities under the Jersey tax law (2018: 0%). There has been no change in the underlying corporate tax rates when compared with the previous financial period.

Tax recognised in the balance sheet is summarised as follows:

2.6 Financial assets at fair value through profit or loss

The financial assets at fair value through profit or loss at 31 December 2019 relates to an equity interest in a listed public company. Subsequent to 31 December 2019 and as at the date of approval of these financial statements this equity interest has been disposed of in full.

2.7 Trade and other receivables

Trade and other receivables are classified as financial assets subsequently measured at amortised cost.

All gold and silver sales during the year were made to a single customer in North America, Asahi Refining Canada Ltd, and are neither past due nor impaired.

The average age of the receivables is nine days (2018: nine days) and expected credit losses are highly immaterial. No interest is charged on the receivables. There are no trade receivables past due and impaired at the reporting date, and thus no allowance for doubtful debts has been recognised. Of the trade receivables balance, the gold and silver sales debtor is all a receivable from Asahi Refining Canada Ltd. The amount due has been received in full subsequent to year end. Other receivables represent GST and VAT owing from the various jurisdictions that the Group operates in, inventory returns to vendors where refunds are expected to occur and amounts receivable from the sale of shares in a listed public company.

The Directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value, therefore no expected credit loss is recognised within this note, see note 3.1.1 for the risk assessment related to trade receivables.

2.8 Prepayments

Diesel Fuel Oil ("DFO") dispute

As more fully described in note 5.1, the Group is currently involved in court action concerning the price at which it is supplied with DFO. Since January 2012, the Group has had to pay for DFO at the international price rather than the subsidised price which it believes it is entitled to. It is seeking recovery of the funds advanced since 2012 through court action. However, management recognises the practical difficulties associated with reclaiming funds from the Egyptian government and for this reason has fully provided against the prepayment of US$362.9 million to 31 December 2019, of which US$35.9 million was provided for during 2019.

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

Movement in fuel prepayments

Cumulative fuel prepayment and provision recognised

This has resulted in a net charge of US$28.0 million in the profit and loss for the year.