Centamin PLC Regulatory News (CEY)

Centamin plc ("Centamin" or "the Company")

(LSE:CEY, TSX:CEE)

Centamin plc unaudited results for the year ended 31 December 2018, annual guidance and proposed final dividend

Josef El-Raghy, Chairman, commented: "Ten years ago, we produced our first gold bar from Sukari, a seminal milestone in the Company's history and the Egyptian modern mining industry. Today, we have produced in excess of 3.8Moz of gold from Sukari, with greater than 15 years scheduled future production from this global Tier 1 gold asset.

This year, against an operationally challenging backdrop, Centamin produced 472,418 oz of gold, delivered a solid cost performance and returned excellent exploration results across our portfolio of assets. Our workforce responded to the operational challenges with dexterity and professionalism and, together with a new team in place, are confident in returning Sukari back to its full potential.

We recognise the impact of these short-term challenges on the shareholder experience and would like to take this opportunity to thank you for your support and engagement. Free cash flow generated was US$63.4 million, demonstrating the underlying resilience and financial robustness of the business. The Board of Directors would like to recommend a final dividend of 3.0 US cents (subject to AGM approval), bringing the 2018 total dividend to 5.5 US cents, equivalent to approximately 100% of free cash flow to shareholders.

Financial Highlights(1,2,3,4)

· In accordance with Company dividend policy, proposed final dividend of 3.0 US cents per share (US$34.6 million) bringing 2018 total dividend to 5.5 US cents per share (US$63.5 million); equating to c.100% of free cash flow generated returned to shareholders;

· Revenue of US$603.2 million, an 11% decrease on 2017 ("YoY"), driven by gold sales of 484,322 ounces, a 10% decrease YoY; Average realised gold price of US$1,267 per ounce, largely unchanged YoY;

· Cash costs of production(1,2) of US$289.4 million, a 4% decrease YoY, driven by increase in stockpiles, further reduction in collective stores inventory and improved open pit productivity; collectively offsetting inflationary cost pressures from rising input costs, such as fuel and reagents, and increased consumption, as a result of increased volumes mined and processed;

· Unit cash cost (1,2) increased by 13% YoY to US$624 per ounce produced, in line with reduction in ounces produced;

· All-in sustaining costs ("AISC" (1,2)) of US$420.1 million, largely maintained YoY; 

· Unit AISC(1,2) increased 12% YoY to US$884 per ounce sold, in line with reduction in ounces sold; 

· EBITDA(1,2,4) of US$257.9 million, a 17% decrease YoY, predominantly driven by reduced volumes of production and increased operating costs;

· Profit before tax(4) of US$152.7 million, a 26% decrease YoY, due to the factors outlined above;

· Royalties of US$18.4 million payable to Arab Republic of Egypt ("ARE") and profit share of US$76.4 million paid to Egyptian Minerals Resources Authority ("EMRA"), the Company's government partners;

· Basic earnings per share (2,4) ("EPS") of 6.5 US cents, a 22% decrease YoY, principally reflecting the scheduled ratchet from a 60:40 ratio to 55:45 (Centamin:EMRA) in the Sukari Gold Mine ("Sukari") profit share mechanism from July 2018, as detailed under the terms of the Concession Agreement, and reduced production;

· Operational cash flow of US$223.4 million, a 34% decrease YoY, due to the factors mentioned above and a 7% increase in mine production costs driven by increased volumes of material moved;

· Free cash flow(1) generated of US$63.4 million in 2018, down 56% YoY, due to reduced volume produced and scheduled change in profit share economics; 

· Cash and liquid assets(1,3) of US$322.3 million, at 31 December 2018, after distribution of the interim dividend of US$28.9 million (2.5 US cents per share) on 28 September 2018; and

· The Company remains debt-free and unhedged.

· The consolidated financial information for the year ended 31 December 2018 was approved for issue by the Board of directors of the Company on 25 February 2019. The consolidated financial information is unaudited but is derived from the Group's full financial accounts, which are in the final stages of being audited.

Operational Highlights(1,2)

· Group Lost Time Injury Frequency Rate ("LTIFR") of 0.06 per 200,000 workplace hours, a 76% reduction YoY, with two lost-time injuries, a reflection of our ongoing focus and commitment on health and safety;

· Sukari Gold Mine ("Sukari") produced 472,418 ounces, a 13% reduction YoY;

· Record open pit material movement of 77.9Mt, an 10% increase YoY, including record open pit ore mined of 23.1Mt, a 44% increase YoY, as mining of the Stage 4 transitional zone was completed and progressed into the higher-grade sulphide material, the predominant source of ore from the open pit for the next three years;

· Open pit average milled grade was 0.76g/t, a 15% decrease YoY;

· The run of mine ("ROM") ore stockpile increased from 2.18Mt (at 0.51 g/t) at 31 December 2017, to 12.22Mt (at 0.47g/t) at 31 December 2018, with 7.7Mt at 0.44g/t now classified as longer term stockpiles and including 1.6Mt at 0.37g/t expensed due to the change in stockpiles cut-off grade;

· Total underground ore mining of 1.24Mt, a 9% increase YoY, at an average mined grade of 5.69g/t, a 31% decrease YoY due to increased dilution from the cascading stopes in the Amun zone and increased tonnes of lower grade development ore;

· Cleopatra decline development completed 2,260 metres, delivering 185,333 tonnes of ore at an average mined grade of 1.74g/t, resulting in 8,959 ounces produced;

· The second long-hole drill rig ("LHDR") is on site and commissioned; and

· Plant throughput of 12.6Mt, a 4% increase YoY, at a head grade of 1.26g/t, a 20% decrease YoY.

2019 Outlook(7)

· Gold production guidance of 490,000 - 520,000 ounces for 2019, with increased stripping in the open pit balanced by estimated higher average grades.

· Cash cost of production in 2019 are expected to be between US$675-US$725 per ounce produced and AISC between US$890-US$950 per ounce sold.

· Increase in forecast costs account for increased volumes scheduled to be mined from the open pit, including stripping for Stage 5. Going forward costs will benefit from existing and new cost optimisation initiatives, including the construction of a 40MW (AC) solar plant for which the feasibility design study is being prepared for Board approval.

· Open pit mining will continue predominantly in Stage 4, with grades improving towards the reserve grade throughout the first half ("H1"), with waste stripping to commence on Stage 5. Stripping ratio is expected to increase to 5.85:1.

· Underground mining is focussed in the lower Amun/Osiris flats and Ptah zone. A split of 75:25 stoping to development is expected.

· Guidance provided is annual. The mine plan schedules a progressive quarter on quarter performance, with the underground contribution largely consistent, and the open pit increasing as the grade improves with depth. The first quarter ("Q1") is scheduled to be 105-115koz accounting for increased movement of waste material from Stage 4 and 5.

· Underground decline development scheduled to progress at the Cleopatra decline and Amun/Ptah decline, preparing access to future stoping and further exploration access to Bast and Top of Horus, supporting near and long-term growth upside. 

· Capital expenditure of US$118 million, of which US$89.2 million is sustaining capital investment, including ongoing underground development and phased fleet rebuild programme. Capital expenditure for the solar farm and new TSF, remain subject to board approval, and therefore have not been included in published cost estimates.

· Following the exploration success of 2018, the Group exploration budget (sustaining and non-sustaining spend) of US$40 million is targeting reserve and resource expansion at Sukari underground, Doropo Project and ABC Project, while identifying new scalable targets for future exploration and growth upside.

1 2019 guidance is based on the following assumptions: average gold price of US$1,250/oz; Average oil price of diesel fuel oil at US$0.60/litre.

Exploration Highlights(4)

In 2018, the intensive exploration programme across the portfolio of assets, including a total 150,000 metres of drilling, delivered excellent results.

Group Mineral Resource and Reserve Update(5)

· The Group consolidated mineral resource has grown to 15.7Moz measured and indicated, a 5% increase on 2017 statements. 

· Sukari measured and indicated mineral resource of 11.0Moz at 1.07g/t gold, a 6% decrease in contained metal and a 4% increase in grade, driven predominantly by mining depletion.

· Sukari proven and probable mineral reserves of 7.25Moz proven and probable, a 9% decrease, driven by mine depletion and increased cut-off, adjusting for higher input costs.

· Sukari open pit proven and probable reserves of 6.2Moz at 1.1g/t gold, underpinning greater than 15 years of sustainable production at current mining rates.

· Sukari underground:

o Successfully replaced reserves in excess of mining depletion and increased reserve grade by 11%: 4.4Mt at 5.6g/t gold for 0.8Moz of proven and probable reserves;

o 14% increase in measured and indicated resources, driven by 9% increase in tonnes and 5% increase in grade: 8.1Mt at 7.1g/t gold for 1.85Moz of measured and indicated resources; and

o 40% conversion to highest confidence category: 2.8Mt at 8.3g/t gold, for 0.77Moz of Measured resources, driven by a 47% increase in tonnes and a 6% decrease in grade.

· Doropo Project (as previously announced) mineral resource of 2.13Moz indicated and 0.8Moz inferred, a 58% increase in indicated ounces, driven by a 55% increase in resource tonnes to 50Mt at 1.31 g/t gold.

· ABC Project maiden mineral resource of 19.6Mt at 1.03 g/t gold for 650koz indicated, and 450koz inferred resource.

Exploration upside(6)

· Sukari updated reserve and resource effective date 30 June 2018. Continuous exploration throughout H2 returned very strong results and generated highly prospective target extensions to the existing Amun and Ptah underground:

o Drill highlights: 8m @ 180g/t

(outside R&R) 3m @ 428g/t

15m @ 18.5 g/t

1.2m @ 563g/t

3.6m @ 176g/t

· Delineated previously underexplored structures within the Cleopatra zone. Decline development and ore drives scheduled to progress c.2000 metres in 2019:

o Drill highlights: 1m @ 110.9g/t

4.2m @ 18.3g/t

2.5m @ 12.3g/t

7m @ 4.7g/t

4.2m @ 5.7g/t

· As announced on 15 February 2019, an increase on the Doropo Project 2017 maiden mineral resource by 58% to 2.13Moz indicated and 0.8Moz inferred resources and generated significant upside targets with the main structure open along strike and depth:

o Drill highlights: 18m @ 10.4g/t

4m @ 39.7g/t

13m @ 11.2 g/t

37m @ 6.4g/t

7m @ 23.4g/t

· Doropo Preliminary Economic Assessment and supporting viability studies are progressing on schedule for completion in early H2.

· As announced on 15 February 2019 the maiden resource of 650koz indicated and 450koz inferred resource declared at our greenfield project, ABC Prospect:

Drill highlights: 44m @ 2.5g/t

(outside resource) 7.8m @ 3.2 g/t

100m @ 0.8g/t

9m @ 2.7g/t

17m @ 2.6g/t

60m @ 1.2g/t

· 150,000 metres drilling budgeted for 2019 focusing on reserve replacement, resource expansion, unlocking further value from our portfolio by identifying scalable targets with potential to meet our growth and cost project objectives.

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 relating to production guidance, Sukari reserve and resource information and dividend information.

___________________________________________________________________

(1) Cash cost of production, AISC, EBITDA and cash, bullion on hand, gold sales receivables, financial assets at fair value through other comprehensive income and free cash flow are non-GAAP measures and are defined at the end of the Financial Review section.

(2) Basic EPS, EBITDA, cash cost of production and AISC reflect a provision against prepayments to reflect the removal of fuel subsidies which occurred in January 2012 (refer to note 8 of the financial information for further details).

(3) Cash and cash equivalents, bullion on hand, gold sales receivables and financial assets at fair value through other comprehensive income.

(4) The Group accounting policy for Greenfield exploration expenditure, has been updated in line with market practice. This has resulted in prior period results being restated. Accordingly, YoY comparatives are on a consistent basis. For full details, please refer to Note 1 of the financial information.

(5) Cut-off grades vary from asset to asset. Please refer to the detailed mineral reserve and resource tables with in the section Mineral Reserve and Resource Statements, including all details of Qualified Persons and associated notes.

(6) This is a subjective selection of intercepts for illustration. Please refer to the expanded drill highlights tables found in the Exploration Review.

(7) 2019 guidance is based on the following assumptions: average gold price of US$1,250/oz; Average oil price of diesel fuel oil US$0.60/litre.

Results Conference Call

The Company will host a conference call to discuss the results with investors and analysts at 11.00 GMT/06.00 EST on 25 February 2019. Please find below the required access details. Where possible, please dial in 10 minutes before. The Results Presentation can be found on the Company website: www.centamin.com/investors/presentations/2018 ahead of the call.

Participant code: 35168972#

UK Toll: +44 (0)3333 000 804UK Toll Free: 0800 358 9473

Canada/US Toll: +1 631 913 1422

Canada/US Toll: +1 855 85 70686

The conference call will be made available for replay by 15.00 GMT on the website www.centamin.com/media/press-releases/2019.

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

CHAIRMAN’S STATEMENT

Dear shareholders,

On behalf of the Board, herewith, I would like to present the 2018 results.

Purpose Driven Growth

Ten years ago, we produced our first gold bar from Sukari, a seminal milestone in the Company's history and the Egyptian modern mining industry. Today, we have produced in excess of 3.8Moz of gold from Sukari, with greater than 15 years scheduled future production from this global Tier 1 gold asset.

I would personally like to thank our partners, the Egyptian Mineral Resource Authority ("EMRA"), for their support over the years - our shared vision of what we can, and have, achieved together is testament to the success of that partnership. Mining has yet to fulfil its true potential in Egypt, providing jobs, infrastructure, community opportunities, in addition to direct fiscal revenues through royalties and profit share. We look forward to continuing to work in partnership with EMRA to ensure Egypt develops its gold resources for future generations, delivering long-term economic growth to the benefit of the country and all of our other stakeholders.

2018 Performance

This year, against an operationally challenging backdrop, Centamin produced 472,418 oz of gold, beat cost guidance and returned excellent exploration results across our portfolio of assets. Our workforce responded to the operational challenges with dexterity and professionalism.

Throughout 2018, the Company was in regular communication with you, its shareholders, and the broader market to revise expectations in accordance with the operational challenges faced. We recognise the impact of these short-term revisions on the shareholder experience and would like to take this opportunity to thank you for your support and engagement. Together, we demonstrated the underlying resilience and financial robustness of the business and continued to make progress in delivering on our strategy.

Clear Strategy

Centamin's core strategy remains focussed and consistent: deliver organic growth by optimising the performance of our existing operation, while progressing an active pipeline of future growth prospects through the discovery and development of orebodies that meet our operational and cost objectives. Stringent cost management and closely managed disciplined capital allocation has delivered another year of meaningful cash generated from operations of US$223.4 million.

During 2018, we successfully delivered on most of our strategic pillars: Financial Flexibility, Stakeholder Returns and Active Growth Pipeline objectives and made marked progress on Sustainability objectives. Operational developments in 2018 meant we could not deliver against all the objectives set within our Asset Quality strategic pillar. Solutions implemented throughout the year demonstrated good progress: we fully exited the transitional zone, a spare LHDR is on site and operational, and we continue to work through the factors driving increased dilution in the underground, demonstrated by quarter improvements. While this remains a core area of focus, we believe we have navigated the challenges and have the right strategy in place to deliver on our promises in 2019 and beyond. 

Reliable Stakeholder Returns

Centamin aims to generate tangible value for each of its stakeholders, thereby contributing to the socio-economic development of its host countries and supporting long-term sustainable operations to the benefit of its employees, partners and communities. The Group workforce consists of 1,500 direct employees, 94% are local to the country of the asset, and a further 840 contractors, of which 87% are employed locally. Operating and growing a regional hub-based approach lends itself to a cultural, ethnic and gender diverse workforce.

In 2018, Centamin generated and distributed a total US$99.6 million to our host country governments by way of profit share, royalties, tax and license fees, and a further US$40.8 million paid to employees in benefits and salaries. Throughout the year, proactive local engagement with the communities we operate within has been a critical process in ensuring we understand their needs to effectively develop and deliver mutually beneficial sustainable initiatives.

Our aggressive approach to managing the bottom line, and thereby maximising cash flow, resulted in free cash flow generation of US$63.4 million, after the aforementioned stakeholder returns, in spite of a 13% decrease in gold production. In line with the Company's sustainable dividend policy, the Board of Directors are pleased to propose a final dividend for 2018 of 3.0 US cents per share, for shareholder approval at the upcoming Annual General Meeting ("AGM"). The Board returned US$28.9 million to shareholders as an interim dividend of 2.5 US cents per share. The proposed total dividend of 5.5 US cents per share, equal to US$63.5 million cash dividend pay-out for 2018 is equivalent to returning 100% of free cash flow to shareholders.

The Company is in a strong financial position with cash and liquid assets of US$322.3 million, as at 31 December 2018, and no debt or hedging in place. The Board continues to review capital allocation opportunities in line with the Company's growth and cost objectives, We have a number of growth opportunities within our portfolio which we will progress until a stage we can measure them against our internal growth and cost objectives. The Company has a sustainable dividend policy in place, having returned US$418.7 million over the last five years (excluding the proposed 2018 final dividend) and regularly reviews alternative means of returning capital to shareholders.

Maintaining a Strong Board for the Future

There has been a key focus throughout 2018 on succession planning and recruitment across the Group, not just at Board level. Routine review of the operational organisation structure and emphasis on professional development has resulted in multiple internal promotions and successful external recruitment, ensuring we have the right team to deliver our strategy. Sukari is operated from the ground, on a regional-hub approach, led by the General Manager. As Doropo continues to progress up the value-chain towards potential development, we are expanding the regional team ensuring we have the right people in place to deliver the next stage. 

At the Board level, we are delighted to welcome Dr Ibrahim Fawzy as an independent Non-Executive Director. Dr Fawzy is a pioneer who has been responsible for driving and developing Egyptian industry reform through the wide range of senior positions he has held over many years. His extensive experience within the public and private sectors will be an excellent complement to the corporate strategy and the strength of our existing balanced, multi-disciplinary Board.

In March, Trevor Schultz stepped down from the Board having been with the Company for twelve years, much of which was successfully leading the phased construction of Egypt's first modern mechanised gold mine. We wish him well in his future endeavours and look forward to preserving his legacy as we continue to maximise operational efficiency of Sukari's infrastructure, as delivered in 2018 with the plant throughput in excess of design capacity and improved recoveries.

Succession planning will continue with vigour into 2019, maintaining a strong Board for the now and the future. The Nomination Committee is actively pursuing the further appointment of three independent non-executive directors, specifically with technical and capital market expertise. In particular, one individual who will succeed myself, as non-executive chairman, guiding the Board, Management and Company forward in achieving the future decade of milestones.

Material Upside

We start the tenth year of commercial production with an increased production outlook of 490,000 - 520,000 ounces, as we are actively working through the outstanding factors impacting underground dilution at Sukari. These actions include the installation of a Cemented Hydra Fill plant, which will be used to stabilise the stoping voids and reduce the impact of dilution through cascading.

In 2018, we were able to contain our cost pressures on an absolute basis; however, in 2019 we forecast an 11% increase in cash costs per ounce and a 5% increase in all-in sustaining costs per ounce. This is largely driven by increasing input costs, due to the increased volumes in both mining and processing, as well as rising fuel, reagent and consumable prices. The Company is in the final stages of a detailed design and feasibility study for a solar farm that could ultimately produce c. 40MW(AC). Once installed, this will deliver significant cost saving and environmental benefits, reducing our reliance on fossil fuels.

This year we grew our global resource by 5% to 15.7Moz, predominantly driven by increased contribution from our Cote d'Ivoire assets. Sukari underground reserves were replaced in excess of mining depletion, delivering on our primary underground exploration objective. We remain confident in delivering further Group reserve and resource growth supported by consistent investment into exploration, potentially shaping future development prospects outside of Egypt as well as defining additional sources of high-grade tonnes at Sukari.

Corporately we always look for an opportunity to increase our landholding within the underexplored Arabian Nubian Shield, leveraging off of our established in country foundation, workforce, resources and technical expertise. Centamin, through the construction and operation of Sukari has attracted in excess of US$1 billion in foreign investment into Egypt, the success of which makes us the largest direct financial investor in mining. We continue to work closely with EMRA and would support fiscally fair and commercial terms to unlock Egypt's resource potential and attract more foreign investments, for the benefit of the country. 

We welcome you to attend the AGM, which will be held in Jersey on 8 April 2019. The AGM result in 2018 required immediate action by the board and a consultation process was undertaken with shareholders and proxy advisory groups to address their concerns and understand the reasons for the significant votes cast against the members of the remuneration committee and the remuneration policy/report. Following that review process and taking account of feedback following the consultation process, the board are pleased to recommend the approval of the updated remuneration policy, remuneration report and performance share plan to shareholders at the forthcoming AGM in April 2019. 

By order of the board for and on behalf of Centamin plc.

Josef El-Raghy

Chairman

25 February 2019

Final Dividend Declaration

Final Dividend

In accordance with Centamin's dividend policy, the Board of Directors propose to pay a Final Dividend of 3.0 US cents per ordinary shares, equal to US$34.6 million. This would bring the 2018 total dividend to 5.5 US cents per ordinary shares, totalling US$63.5 million, which is equivalent to returning approximately 100% of free cash flow generated to shareholders.

The Final Dividend will be paid on 13 May 2019 to shareholders on the register on the Record Date of 23 April 2019. The Final Dividend will be paid in US Dollars ("USD"), with an option for shareholders to elect to receive the dividend in Pounds Sterling ("GBP"). Currency elections should be made no later than 29 April 2019 with further details of how to do so on the Company's website http://www.centamin.com/investors/shareholder-services/dividend-information. Payments in GBP will be based on the USD/GBP exchange rate on 30 April 2019 and the rate applied will be published on the website on the 1 May 2019.

London Stock Exchange and Toronto Stock Exchange (T+2)

EX-DIV DATE: 18 April 2019

RECORD DATE: 23 April 2019

LAST DATE FOR RECEIPT OF CURRENCY ELECTIONS: 29 April 2019

PAY DATE: 13 May 2019

The Company's total issued share capital is 1,154,722,984 ordinary shares.

The dates set out above are based on the Directors' current expectations and may be subject to change. If any of the dates should change, the revised dates will be announced by press release and will be available at www.centamin.com .

As a Jersey incorporated company, there is no requirement for Centamin plc to make any withholding or deduction on account of Jersey tax in respect of the dividend. 

REGULATORY UPDATE

Canadian - Foreign Issuer

As at 1 January 2019 Centamin plc is a "designated foreign issuer" within the meaning of the National Instrument 71-102 - Continuous Disclosure and Other Exemptions Relating to Foreign Issuers and is subject to the foreign regulatory requirements of the London Stock Exchange." As such, Centamin plc is exempt from certain requirements otherwise imposed on reporting issuers in Canada. This status will mean that the preparation of quarterly financial statements and MD&A will not be required in 2019. Quarterly preliminary costs and production will, however, be published following each quarter end.

CEO STATEMENT

CEO Statement

As we reflect on 2018, I want to start by thanking you, our shareholders, for your loyal support and contribution. Engagement with shareholders and more broadly stakeholders is critical to the success of our business.

Sustainability

Significant health, safety and environmental risks that affect the mining industry, affect us and how we operate. We believe it is crucial to learn from our peers, particularly in times of catastrophe, to understand our exposure to certain risks and ensure we have taken the necessary actions to mitigate against this happening.

The health, safety and wellbeing of our workforce, is central to our corporate culture. In 2018 we reduced our Group lost time injury frequency rate by 76% to 0.06 per 200,000 workplace hours. It is with much sadness that earlier this month a drilling contractor, working at one of our Ivorian projects, was attacked by a swarm of killer bees. He sustained serious injuries and although he was rushed to the nearest facility for treatment, he later died. Our aim is to create an environment such that every person, employee and contractors, return home safely at the end of their shift - every incident, minor or serious, we learn from and look to apply ways of improving our work environment.

There were no major environmental incidents to report during the year and there has been a reported reduction in low or minor incidents. The industry has been shaken by recent catastrophic tailings dam collapses. Centamin has one purpose-built active downstream tailings storage facility ("TSF") at Sukari. The latest review confirmed the structural integrity of the TSF however a recommendation required managing surface water levels off the TSF. Given the arid environment where the TSF is located, evaporation and re-use of the surface water through the plant provides adequate opportunity to manage this recommendation. We are also in the process of completing an external engineering study to build a second active downstream TSF, targeted for completion in 2024.

Improvements for a better Sukari

This year Centamin's performance was marred by operational challenges experienced in the open pit and underground at Sukari. As a team, our focus has been on resolving the challenges and improving how we run the operations. Total production for 2018 was 472,418 ounces, a 13% reduction on 2017 ("YoY"). We have taken several corrective actions throughout 2018 to address in part the issues faced and mitigate future impact, including personnel changes in order to strengthen our operational leadership team, implementing improved controls, new underground technologies and closer management of underground operations, ensuring improved efficiency. There is further work to be done to return the operations back to a stable and reliable run rate and we are confident we have the right strategy in place to deliver on our objectives.

The open pit, following another record quarter for material moved and ore mined, delivered higher grades as mining progressed deeper into Stage 4. This will continue into 2019 as grades improve towards 1g/t. Open pit equipment availability, productivity and utilisation rates were excellent this year, as we mined through the transitional zone as quickly and efficiently as possible. In 2019, stripping will commence on Stage 5 transitional zone whilst ore mining will remain predominantly on Stage 4.

Costs kept under tight control

We remain firmly focussed on managing the bottom line as we continue to deliver on long-term cost reduction initiatives and actively assess new cost reduction opportunities. Despite reduced production output and increasing cost input pressures, in 2018 we delivered costs comfortably within the bottom half of the global gold producing cost curve. Total unit cash costs of production of US$624/oz gold produced, up 13% YoY, and all-in sustaining costs of US$884/oz gold sold, up 12% YoY. Importantly, our absolute cost base remained broadly flat: total cash costs of production of US$289 million, a 4% reduction YoY, and all-in sustaining cost of US$420 million, a 1% reduction YoY. Where the build-up in stockpiles throughout the year helped to reduce costs, key focus areas for cost savings have been around improvements to fleet scheduling and utilisation, resulting in less trucks per unit moved; continued improvements in working capital, including significant reduction in warehouse stores inventory; and renegotiation of improved commercial terms on some key supply contracts. 

Delivering organic growth

Exploration remains the foundation of our business. Continuous investment in exploration at Sukari allows us to continually improve our geological knowledge. Our objective is reserve replacement and resource expansion and again we have delivered that this year - replacing underground reserves in excess of underground mining and increased the underground Measured & Indicated grade by 5%. We continue to unlock the full potential of the underground. The orebody remains open at depth, to the south, and structurally within the porphyry.

Throughout the year we increased our exploration activity in Cote d'Ivoire and we are delighted with the results. Doropo continues to demonstrate the potential to be our next organic development project. Ongoing exploration and concurrent viability studies will further unlock the potential future scale of this project as we assess the economics against our internal project value creation criteria. The PEA is progressing well and we look forward to reporting the results to the market at the end of H2 2019. Delivery of a maiden reserve and further feasibility work are critical milestones for 2019, ahead of a Board decision on capital allocated for development.

The success and scale of the 2018 ABC discovery results and the reporting of the maiden Kona South resource in less than two years of active exploration, highlights the scale and quality of the Lolosso Gold Corridor and the regional generative potential of the ABC land package. We have only scratched the surface of the potential of these assets, and we will maintain the intensity of our exploration programme in 2019 to define further quality gold ounces.

Generating significant cash flow

The Group generated cash flow from operations of US$223.4 million, invested US$89.2 million in sustaining and exploration capital and distributing US$76.4 million to our Egyptian state partners, EMRA, by way of profit share, resulting in group free cash flow generated of US$63.4 million. In the short-to medium-term, there continues to be a sustainable level of free cash flow generation, excluding any growth from additional sources of ore and material benefits from cost savings initiatives.

The Company is in a strong financial position, with cash and liquid assets of US$322.3 million as at 31 December 2018. We are confident we have the financial flexibility and agility to drive organic growth through our highly prospective exploration pipeline and are well positioned to take advantage of any market opportunities suitable for your business and growth strategy. Shareholder returns are a strategic priority. The Company has a sustainable dividend policy in place, delivering a fifth consecutive year dividend pay-out, and the Board regularly review alternative means of delivering shareholder returns. 

2019 outlook and beyond

We enter 2019 with the same focus on driving operational efficiencies, always looking for opportunities to further optimise the operations whether it be through continued investment in talented people, new technology or through adaptation of existing process and procedures. Our production guidance for 2019 is 490,000 - 520,000 ounces, for total cash costs of US$675 - US$725/oz produced and all-in sustaining costs of US$890-US$950/oz sold.

The Sukari mine plan production is weighted towards the second half of the year, with approximately 55% of ounces produced across Q3 and Q4 2019. The main factor being the open pit, as Stage 4 grade improves with depth, balanced with increased stripping following the challenges with the transitional zone last year and stripping of Stage 5. Q1 is scheduled to be the weakest quarter, budgeting for 105-115koz. The open pit is performing in line with expectations and the focus is on the resolving the factors driving increased dilution from the underground, including a new stoping plan and backfill plant.

Several key personnel changes have been made at an operational level in Q4 2018 and continuing in Q1 2019, this presents increased short-term risks for significant medium and long-term benefits.

We are confident we have the right strategy and personnel on-site to achieve on our main objective, returning Sukari to consistent and steady state production. Our strategy has always been to maximise margins through tight cost controls, deliver operational efficiencies and therefore enabling reliable returns to shareholders. By maintaining a strong balance sheet, we also have the ability to capitalise on opportunities for growth.

Andrew Pardey

Chief Executive Officer

25 February 2019

OPERATIONAL REVIEW

OPERATIONAL REVIEW

Our operational track record is one of the key measure of our progress. This is underpinned by an entrepreneurial culture, striving to find improvements across all sections of the mine. In 2018, challenges experienced in the open pit and underground mining operations impacted the total volume produced. Consequently, record material mined from the open pit and underground and record ore processed are a few parameters demonstrating the increased productivity achieved.

Health and safety

Workplace health and safety is central to our culture. The daily onsite departmental meeting begins with a discussion on HSES matters as the topmost priority. 

In 2018, the LTIFR for Sukari was 0.07 per 200,000 hours worked (2017: 0.26), with a total of 5,784,130 hours worked (2017: 5,464,321).

There was a notable improvement during 2018. Improvements included implementing measures to reduce task related hazards by ensuring that employees completed a Take 5 safety checklist prior to starting any job or by conducting a Job Safety Analysis for all non-routine tasks; There was an improvement in the follow up and close out of corrective actions and recommendations that were raised from incident investigations by ensuring that actions were physically verified before closing out; Additional programs to promote safety leadership were implemented which included a weekly, General Manager led, HSES dominated review of different areas.

Centamin remains committed to further improving health and safety during 2019 towards our zero-harm target. Further details of the safety initiatives, employee welfare and relevant government relations are set out in the CSR report.

Production

Gold production for 2018 was 472,418 ounces, a 13% reduction on the prior year (2017: 544,658oz) driven by lower than expected grade from open pit and underground.

The open pit operations produced 239,687 ounces, a 13% reduction on the prior year (2017: 274,017oz) and the underground operations produced 211,250 ounces, a 18% reduction on the prior year (2017: 257,100oz). The dump leach operations produced 15,219 ounces, a 77% increase on the prior year (2017: 8,597oz) resulting from the increased material delivered to the dump leach as open pit mining progressed through the upper levels of Stage 4. Cleopatra underground decline development in porphyry resulted in the production of 8,959 ounces (2017: 4,944oz). 

Full year production guidance was revised during 2018 in response to operational challenges faced: lower grades delivered from the open pit in the first half of 2018, as mining progressed through the transitional zone; disruption to the underground stoping sequence in Q2, resulting from a damaged rig; and unplanned dilution from the cascading stopes in the Amun underground. The Company identified, evaluated and implemented solutions, reporting and monitoring results throughout the year. The results of which are reported here and throughout the year.

EXPLORATION REVIEW

In 2019, annual production guidance is expected to be 490,000 - 520,000 ounces, supported by a robust updated life of mine plan and ongoing focus on improving operational efficiencies, in particular resolving the ongoing impact of unplanned dilution and mitigating future risks.

Costs

The cash costs of production for 2018 was US$624 per ounce produced, a 13% increase on the prior year, and the all-in sustaining cost was US$884 per ounce sold, a 12% increase on the prior year, due to lower volume of gold produced and sold year-on-year. Both were in line with market guidance.

In 2019, cash cost of production are expected to be between US$675-US$725 per ounce produced and all-in-sustaining cost ("AISC") between US$890-US$950 per ounce sold. Increase in forecast costs account for increased volumes mined. Focus remains on progressing long and near-term cost savings initiatives. 

Open pit

The open pit delivered total material movement of 77.9 Mt, a 10% increase on the prior year (2017: 70.9 Mt). This increase was related to opening up mining in two main areas - Stage 4North and 4West, coupled with good equipment availabilities and focus on increasing equipment utilisation.

Ore mined from the open pit was 23.1 Mt at 0.60 g/t, a 44% increase on the prior year (2017: 16.1Mt), due to increased volumes mined from the transitional zone of Stage 4. The open pit delivered 11.1Mt or ore at an average feed grade of 0.76g/t to the plant and 2.0Mt at an average grade of 0.37g/t to the dump leach pads. The mine ROM ore stockpile increased from 2.18Mt (at 0.51 g/t) at 31 December 2017, to 12.22Mt (at 0.47g/t) at 31 December 2018, with 7.7Mt at 0.44g/t now classified as longer term stockpiles and including 1.6Mt at 0.37g/t expensed due to the change in stockpiles cut-off grade.

The strip ratio was 2.37, a reduction from 3.4 in 2017, based primarily on the increased tonnage of low grade and dump leach material mined.

In 2019, total ore volumes mined are expected to be approximately 50% lower and strip ratio is scheduled to increase to 5.85:1, as the orebody tightens with depth. Mining will continue to focus on Stage 4, scheduled to deliver on average 1.0g/t ore. Early stage preparatory waste stripping will commence on Stage 5 during 2019 delivering small volumes of low-grade material. Stage 4 will continue to be the primary source of ore into 2020 and 2021, when Stage 5 fully comes into production.

Underground mine

The underground mine produced 1.24Mt of ore, a 9% increase on the prior year (2017: 1.14 Mt). Ore from stoping accounted for 59% (0.74 Mt) of the total, with the balance of ore (0.50 Mt) from development. The average mined head grade was 5.69 g/t, comprising 6.5g/t from stoping (2017: 8.9 g/t) and 4.5g/t from development (2017: 7.4 g/t), a 27% and 39% decrease, respectively on the prior year.

Underground development advanced 7,349 metres, comprising 3,459 metres in Amun and 3,741 metres in Ptah. A further 149m was developed in the Horus Decline (which is accessed from the bottom of the Amun Decline) to just below the 590 Level. The Ptah Decline was progressed 247 metres to just below the 590 Level, which is nearly 500 metres vertically below the portal.

Production equipment availability and utilisation issues experienced at the end of Q1, and early Q2, predominantly due to recurring damage to the long hole drill rig ("LHDR"), reducing stoping volumes and leading to an increased mix of lower grade ore-drive development tonnes.

As the year progressed, stope production increased such that by year end, production was weighted 60% stoping and 40% development. Over the course of the year, additional development was undertaken in the Amun zone, resulting in 50% more ounces produced from development than scheduled. This was due to, 1) equipment availability disruptions, and 2) delineation of additional ore along the lower Amun ore drives which were otherwise planned for completion in 2019. For the Ptah zone, development was in line with planned tonnes.

Furthermore, stope grades were impacted by greater than scheduled dilution from low grade porphyry material in the open cascading stopes in the Amun zone. Amun stoping exceeded planned tonnage by 17% though grade was down by 23% on account of unplanned cascading stopes as a result of increased dilution. For Ptah, stope production was 47% of planned tonnage, though grade was 26% higher as lower tonnage, high grade stopes in the Ptah sediments were prioritised over lower grade, bulk stopes.

A total of 14,073 metres of grade control drilling was completed, aimed at short term mine planning and resource development. A further 41,685 metres of underground diamond drilling continued to test for reserve extensions below the current Amun and Ptah zones, with extensive drilling also being undertaken at the Cleopatra zone at the north of the Sukari porphyry. Further details and underground drilling results are discussed in the Exploration Review.

In 2019, the plan for the underground mine revolves around development and stope production in the Amun and Ptah zones and to establish development in the Ptah Eastern stockworks, combined with continued development of the Horus and Ptah declines to open up new production fronts. The decline development requires increased levels of waste development throughout the year. The split of stoping to development tonnes is expected to be 75:25.

Processing

The Sukari plant processed a record 12.6Mt of ore in 2018, a 4% increase on the prior year (2017: 12.0Mt). Processing performance improved over the course of the year, reaching a record 3.2Mt processed in the fourth quarter. Plant utilisation of total time averaged 95% in 2018.

Metallurgical recovery averaged 88.7%, a 1% increase on the prior year (2017: 88.1%). Visiofroth cameras were successfully installed on the flotation circuit in plant 2 and will be installed in plant 1 in 2019.

In 2019, plant throughput is expected to be in excess of 13Mt pa. Improved feed grade delivered to the mill with further work to improve operational controls and process stability to ensure recoveries reach target rate of 89%.

Capital expenditure

In 2018, Sukari sustaining capital expenditure was US$89.2 million with key investment attributed to underground exploration and development, scheduled fleet rebuild programme and additional crushing capacity.

Investment in technology, people and training are additional critical areas the Company continues to invest in as a way of driving improved operational performance. During 2018, we invested time and capital in technological upgrades, security and implementation of new software and systems. For example, we began the staged implementation of Deswik, a software solution which engineers a live, dynamic, centralised mine plan.

Succession planning and recruitment has been an ongoing key initiative through 2018 and will continue into 2019. A number of talented, experienced individuals have been recruited to assume key positions at Sukari, including, but not limited to:

· General Manager

· Operations Director

· Open Pit Geology Superintendent

· Processing Manager

· Supply Chain Manager

· Technical Services Manager

· Underground Manager

Total capital expenditure for Sukari in 2019 is expected to be US$120 million, including regional seismic exploration programme, underground exploration and development, solar feasibility study completion, underground backfill plant, North tailings storage facility engineer studies, ongoing fleet rebuild programme.

In 2019, there is a strong managerial and operational focus on improving identification and response times to deviations from the mine plan, as a means to mitigating the potential impact on performance. Technological investment in, for example, Mill Ear to listen and record activity within the mills increasing response time and reducing potential mill liner damage, thereby increasing productivity; Upgrades to the Scada System for real time reporting and operating controls; Slope monitoring to optimise the pit wall slope angles and monitor material movement, creating a safer work environment, are but a few upgrades scheduled for implementation.

(1) Gold produced is gold poured and does not include gold-in-circuit at period end.

(2) Cash cost of production exclude royalties, exploration and corporate administration expenditure. Cash costs of production reflect a provision against prepayments to reflect the removal of fuel subsidies which occurred in January 2012 (refer to note 2.7 of the financial information for further details).

(3) Cash cost of production and all-in sustaining costs are non-GAAP financial performance measures with no standard meaning under GAAP. Please see the financial review for details of non-GAAP measures.

EXPLORATION REVIEW

Exploration is at the heart of everything we do; the foundation we are built upon and will remain our competitive advantage for creating future value.

EGYPT

Centamin has a 160km2 Concession Agreement in Southern Egypt, in the Eastern Desert. Here the Sukari Gold Mine has been explored and developed into a world class mine. Operating in its 9th year of commercial production, there is 11Moz of mineral resources. Including 7.25Moz of reserves and significant reserve and resource upside across the tenement area.

SUKARI GOLD MINE

In 2018, the Group carried out intensive exploration programmes across the portfolio of assets. Near mine exploration at Sukari, successfully replaced underground reserves in excess of mining depletion and thereby sustaining the rolling life of mine, in addition to generating highly prospective target extensions to the existing underground and delineating previously underexplored structures within the Cleopatra zone.

Exploration drill campaign remained focused within the mine site aiming to continue to unlock the underground resource potential at Amun, Ptah and Cleopatra. The Sukari porphyry remains open at depth and along strike and the high-grade structures within the porphyry are not fully defined.

A 40,511 metres diamond drilling programme was completed at an average cost of US$168 per metre.

Amun / Ptah Production Decline

Within the existing underground operations, systematic exploration, included routine infill drilling, resource extension drilling, and drilling ahead of the current underground development designs.

Exploration within the Amun zone was focussed on resource extension along the southern strike of the mine. A total of 5,535 metres were drilled from the 650 and 665 level, targeting reserve and resource extensions within the Osiris flat structure and resource extensions to the south of the Top of Horus zone. Results confirmed the high-grade consistency along the southern and western extension of the Osiris zone. This is proximal to the current decline development drives and outside the existing reserve and resource. Top of Horus zone is still open to the south with higher grade located at the brecciated contact. This is an area of significant potential for high-grade reserve and resource growth, with further drilling scheduled in 2019.

The Osiris zone is characterised by a major, low-angle thrust rotating the major W-WNW gently dipping porphyry block. The main high-grade veins occur on the upper and lower contacts of the porphyry with high-angle steeper dipping secondary veins ramping up, linking through to the western porphyry contact. The Top of Horus, forms on the contacts and develops within the steeply dipping Horus porphyry. The Top of Horus high grade veins are typically high-angle dipping towards the Northwest. This structural setting, where the low-angle Osiris thrust caps and possibly shifts laterally the top of the sub-vertical Horus porphyry, is open up and down plunge along strike.

2018 Significant Amun Drill Intercepts (0.4g/t cut-off)

During the year, greater than 14,500m were drilled within Ptah, a key growth driver for the underground mine. Drilling from the 660 and 735 levels, tested along the ore strike length, exploring short-term underground development design, and infill drilling, driving resource reserve potential for future mine life.

Results confirmed grade continuity with high-grades concentrated along strike, on both the Eastern and Western contacts of the porphyry, where breccia and/or stockwork zones form internally within the porphyry. The quartz lodes on the Western contact remain a priority high-grade target (high-grade intercepts returned along the mineralized structure south of Ptah going to the north) where the interaction between the Hapi structure and the Western contact shear results in dilation and gold enrichment. The Porphyry Keel drill results confirm resource potential extension at depth plunging towards the north.

2018 Significant Ptah Drill Intercepts (0.4g/t cut-off)

Cleopatra Exploration and Development Decline

The Cleopatra zone consists of a set of three stacked WNW dipping mineralised zones, located at the north of the Sukari porphyry, named from surface as Cleopatra, Antoni and Julius. Exploration and development is systematically to focussed on the Upper Cleopatra zone collating increasing detailed geological information, progressing decline development and establishing drill platforms.

Cleopatra exploration completed 2,260m of decline development extracting 185,333 tonnes of mineralised development ore at an average grade of 1.74 g/t. A total of 20,392m were drilled from two drill sites in Upper Cleopatra, 1120mRL and 1150mRL levels, targeting the northern extension of the Porphyry-Keel/Ptah Deeps.

2018 Significant Cleopatra Drill Intercepts (0.3g/t cut-off)

In 2019, exploration is focused on infill drill of the Antoni and Julius zones to provide resource information for both underground and open pit potential, and resource definition drilling at depth within the Ptah Deeps. A grade control programme is underway to fully define potential for future small-scale stoping blocks. Exploration development has been scheduled to continue at current mining rates, exceeding 2000m in decline development in porphyry.

Figure. 2019 Cleopatra Development Plan

SUKARI REGIONAL EXPLORATION

Sukari is a world-class gold district (+15Moz) hosted on a major ANS terrane boundary, a NW verging, abducted, ophiolite thrust belt. Sukari Resources are currently drill defined around the 2.7km long by 0.6km deep Sukari porphyry that sits axially within a much wider 17km long by 3.7km ophiolite shear zone. There are 7 main surface prospects hosted along 5 primary domain gold trends, within the license. All surface prospects are within trucking distance to the existing processing plant and infrastructure.

Initial exploration work commenced to construct a robust district 3D geo-seismic architecture of the license area to depths >1.5km, targeting potential new Sukari-style porphyries. The first stage of Petrophysics were completed for the application of 3D seismic across the license area.

By Q3, Rock property measurements were conducted where P-wave velocity (Vp) and Density (SG) were measured on Sukari core samples. Vp and SG were logged across three holes that intersect significant mineralization, geology and structures at Sukari. HiSeis personnel in consultation with staff at Sukari have chosen the holes where the Acoustic Impedance (AI) obtained from these measurements was used to assess which interfaces will act as reflectors and identify the controls on these relationships. The acquired values were then applied to a schematic geological cross-section, which was then used in numerical simulations to create a forward seismic model.

The surface exploration is focused on creating a detailed geological map of the entire tenement highlighting areas of enhanced fluid flow, or anomalism, which are prospective for gold fluid movement and deposition.

In 2019, the plan is to complete the 3D seismics across the concession and construct a detailed geological map highlighting areas for future exploration.

COTE D'IVOIRE

(The below announced as part of a Company regulatory news release on material progress on Cote d'Ivoire exploration projects on the 15 February 2019. It is included here for completeness in review of 2018.)

Centamin has 11 permits covering circa 3,472 km2 and a further ten permits covering 3,413 km2 under application. The key achievements were the Doropo Project resource growth, progress on the PEA development studies and the ABC Project Kona South maiden resource release.

Mineral Resources

The mineral resource data presented in the tables, comprise a summary extract of the of the Doropo and ABC mineral resource report, using drill assay results received up to and including 10 December 2018. For comparative purposes, data for 2017 has been included for Doropo. In the instance of ABC, this is a maiden mineral resource and therefore no previous data has been provided for comparative purposes. Numbers have been rounded and therefore they may be small differences in the totals.

DOROPO PROJECT

The Doropo Project, located in the northeast Cote d'Ivoire, is wholly owned by the Company, consisting of nine permits, over a 2,721km2 highly prospective landholding that lies between the Boromo-Batie and the Hounde-Tehini greenstones belts.

The Company began extensive exploration at Doropo in late 2014, leading to maiden resource declared in 2017. The Company's experienced exploration team have achieved year-on-year resource growth. The team applies a systematic approach to prioritise resource-focussed target generation and ranking to fast-track the most prospective target.  

Geology

The Doropo landholding lies entirely within the granitic domain, bounded on the eastern side by the Boromo-Batie greenstones belt, in Burkina Faso, and on the western side by the Tehini-Hounde greenstones belt.

At the project scale, the geology consists of a granite-gneiss terrain, the granite being mostly of coarse granodioritic composition, bound by major bimodal greenstone belts, which express progressive assimilation and strain gradients at the margins, evidenced by the presence of pyroxenites and amphibolites in the volcanic suites and migmatites in the granitoids (mostly on the western side).

Gold mineralisation occurs late in the regionally-extensive, reactivating compressional shear networks, framed by intense silica-sericite-carbonate alteration haloes. The main structural hosts are cross-cutting quartz veins with diffuse overprinting with fine to medium grained pyrite sulphide selvages. Gold grade correlates with the thickness of the pyrite and high grades are coextensive with native gold within the structural laminations and contacts of the quartz veining. The veins range up to several metres. Late regional, post-gold, doleritic dykes intrude along a number of the gold-bearing shear structures.

Exploration

In 2018, nearly 100,000 metres were drilled across Doropo. Over 56,000 metres of RC drilling focusing on mineral resource definition and exploration targeting; 36,000 metres of aircore and auger drilling defining new strong surface anomalies and follow up targets; and approx. 2,800 metres of diamond drilling for metallurgical test work samples as part of the PEA study.

Assay results received in 2018 significantly extended Chegue Main, Chegue South and Enioda deposits, defined new high-grade shoots at Souwa, Han and Nokpa and discovered the new Tchouahinin resource. The Doropo mineral resource grew to 2.13Moz at 1.31g/t in the Indicated category, and 760koz at 1.3g/t in the Inferred category, using a 0.5g/t cut-off grade.

The currently defined mineral resource deposits lie within a 6km radius. Souwa, Nokpa, Chegue Main and Chegue South, which hosts 75% of the total mineral resource, are clustered within 3km radius of a proposed plant location. Han, Kekeda Tchouahinin are satellite deposits located 4 to 6km to the southeast and Enioda sits 12km to the east.

The Souwa deposit currently hosts the largest resource and remains structurally open in all directions. Mineralisation extends over a 2.6km strike and dips 25o west to greater than 250m vertical depth. Drilling in 2019 will target the down-plunge extensions of the composite high-grade shoots and the northern strike extension of the resource to where it intersects the Nokpa-Chegue structure. 

The Nokpa deposit returned some excellent intercepts, including: 37m at 6.4g/t, 9m at 14.0g/t, 2m at 19g/t. Nokpa is centred on a high-grade WNW moderately plunging shoot. The high-grade core sits in a 200m long dilational jog created at the intersection of 3 major structures; the major Nokpa-Chegue Main shear, the Souwa shear and a third major fault infilled by late dykes. Mineralisation extends to 300m vertical depth and remains open. 2019 drilling will follow the high-grade plunge of the core Nokpa lode and similar structural analogs within the proximal district.

Drilling has successfully connected both Chegue Main and Nokpa, along a 2.4km strike mineralised structure. Drilling started and will be ongoing in 2019.

Similar in origin to Nokpa, Chegue South hosts a significant resource immediately south of the Nokpa-Chegue Main shear zone. Drilling and exploration in 2018 drilling solidified the high-grade shoots within the resource and extended on plunge and towards the south.

Infill drilling at Kekeda and Han satellite deposits will continue into 2019 with the objective of improving the resource confidence classification. Tchouahinin, located centrally within the resource area, 3km between Souwa and Kekeda, is a new satellite deposit. The mineralisation is currently defined along 700m strike and open in all directions. 2019 drilling will continue to develop the new Tchouahinin structural setting.

At Enioda deposit, drilling successfully bridged two smaller shoots into a coherent 2.2km long surface deposit which strikes north to south and dips 40° west. Enioda forms the southernmost section of a continuous 7km regional mineralised shear. Drilling in 2019 will continue to develop the Enioda resource on strike and down dip.

Mineral Resources, by deposit

(0.5g/t gold cut-off)

Outside of the 6km radius mineral resource area, regional Doropo exploration focused generative geochemical surveys on Tehini 1, 2 and 3 permits, Gogo and Bouna. The most significant discovery of 2018 was the Kilosegui anomaly, a coherent 8km long gold in soils-auger anomaly, located 35km south-west of Souwa,. Further new additional target anomalies were defined in Kalamon, Danoa and Gogo permits. First pass drilling will commence on the Kilosegui target and other prioritised new targets will be drilled throughout H1 2019.

2018 Significant Drill Intercepts (0.3g/t cut-off)

ABC PROJECT

The ABC Project, located in northwest Côte d'Ivoire, approximately 600km west of Doropo, the Company's advanced exploration project. ABC is a greenfield exploration project, consisting of two permits, Kona and FarakoNafana, covering a 750km2 highly prospective landholding along the underexplored contact zone between the Archean and Birimian cratons. The Company has an additional four permits under application.

Geology

The LGC is characteristically 300m to 800m wide, hosting a greenschist to low amphibolite grade, Birimian volcano-sedimentary greenstone package thrusted between an earlier granitoid of Archaean age inferred from structural position to the west and a paragneiss on the east. The eastern footwall contact is a major structural and metamorphic feature and it controls the regional setting of the gold mineralisation along the corridor. The paragneiss is interpreted to be the stratigraphic continuity of the detrital sediments but at higher granulite facies.

Surface geochemistry clearly maps the core of the LGC along a 23km strike which runs axially through the Kona permit. The two main prospects, identified by the initial mapping and rock chip sampling, were subdued silicified ledges in the topography. These anomalous ridges developed into the Kona South and Kona Central Prospects. On a regional scale, mapping and remote sensing of the LGC defined a 60km structural feature.

Exploration

After the permits were granted, greenfield exploration began in early 2017 with reconnaissance mapping and initial rock chip sampling of the Kona permit area.

Geochemical sampling identified the LGC, at the time as an outcropping 12km gold mineralised structure. Further detailed fieldwork, including GAIP survey and c.5,900 metre RC drill programme was carried out in 2017, returning the first significant mineralised intercepts on some wide spaced and shallow drill sections.

In 2018, exploration activities successfully focussed on developing the Kona South prospect by RC and Diamond drilling, while extending the understanding of surface geochemistry through a c.20,000 metre auger drilling programme to cover the whole of the LGC length in the Kona permit. The auger results have highlighted the strike continuity in mineralisation, plus multiple sub parallel zones along the +23km strike of the LGC. Surface geochemistry sampling also began on the FarakoNafana permit that overlays the northern extend of the Lolosso structure.

In 2018, an 18,500 metre drill programme was completed (including c. 13,400 RC metres and 5,100 diamond drill metres). Significant drill intercepts are reported quarterly as part of our detailed Quarterly Results, which can be found on the Company's website. The table at the end of this announcement shows 2018 highlight drill intercepts, including new intercepts published for Q4, clearly annotated. The primary objective of 2018 was the delivery of a maiden resource estimate for Kona South. The Kona South maiden resource stands at 650koz at 1.03 g/t Indicated category and 450koz at 0.87g/t Inferred category, at a 0.5 g/t cut off. The table below shows how the resource behaves at higher cut-offs.

Beyond the Kona South and Central ridges that have been tested by some drilling, the LGC is totally virgin from any other exploration work other than the surface work (mapping, geochemistry, geophysics). Geochemistry results (auger) successfully delineated the anomalous contacts and internal plumbing of the LGC, highlighting several new resource potential targets along it.

Modelling

To support the rapidly growing resource, a detailed 4D geological modelling exercise was conducted reviewing the core logging and the regional context of the macro-structure hosting the deposits. Detailed geological interpretations were compiled from prospect mapping, satellite imagery and geophysical imagery. These district geological models were integrated with the evolving drill database to produce sophisticated resource models, based on detailed structural modelling and direct deeper plunge drill targeting.

The Kona South resource remains open in all directions and detailed 3D grade modelling indicates there are higher-grade, plunging shoots within the broad-spaced resource drilling. Additional resource quality intercepts were identified at wide spacing in Kona Central, which require closer examination, infill drilling and 3D modelling in 2019.

2019

Building on the success of 2018, exploration continues, including a 34,000 metre drill programme focussing on resource development at Kona Central and Kona South, while testing the resource extension potential between the two prospects, drill testing high priority targets along the LGC, airborne magnetic/radiometric surveying, and geochemical sampling.

2018 Significant Drill Intercepts (0.3g/t cut-off)

BURKINA FASO

Batie West Project

The Batie West project, located in southwest Burkina Faso, is wholly owned by Centamin. The 1,100km2 landholding, includes one exploitation (mining) licence and nine exploration permits. The 64km2 Konkera exploitation license holds a NI 43-101 compliant 1.9Moz Indicated resource, at a grade of 1.7g/t and a 1.3Moz Inferred resources, at a grade of 1.7g/t.

Beyond Konkera, the Group's drill programmes have identified significant additional potential resources across the exploration areas, most notably at Napelapera (c.10km south of Konkera), and Wadarado (c. 35km north of Konkera).

Detailed desktop scoping work is underway to assess and prioritise the value opportunity of the project against the Company's internal operational and cost objectives.

There were zero lost-time injuries across all project areas in Burkina Faso during 2018. The Group undergoes regular routine training and a focus on leading indicators to maintain the highest standards of health and safety.

MINERAL RESOURCE AND RESERVE STATEMENTS

Group Mineral Resource and Mineral Reserve Update

Group mineral resources, including mineral reserves, increased by 5% to 15.7Moz, driven by a 44% increase in mineral resource ounces from our West African land package and reserve replacement from the Sukari underground:

o 11.0Moz Sukari mineral resource, a 6% decrease YoY, including 1.1Moz underground resources, excluding mineral resources that constitute the underground mineral reserves;

o 2.1Moz Doropo mineral resource, a 58% increase YoY, reflecting the maiden resources declared at Tchouahinin and Enioda deposits, and greater than doubling the resources at Chegue Main and Kekeda; and

o 650koz maiden ABC mineral resource estimate.

· Sukari mineral reserves have decreased 9% YoY to 7.25Moz, driven by mine depletion and adjusting for higher input costs, in particular rising fuel costs:

o 0.8Moz of underground reserves, successfully replacing reserves in excess of mining depletion;

o 4.4Mt of underground reserve tonnes, at a 5.6g/t, an 11% increase in grade YoY; and

o 6.2Moz open pit reserves underpinning greater than 15 years of sustainable production at current mining rates.

Consolidated Group Mineral Resource

The mineral resource data presented in the tables included in this document, comprise a summary extract for the mineral resource reports for all the Group's properties. For comparative purposes, data for 2017 has been included where possible. Numbers have been rounded and therefore there may be small differences in the totals. Varying cut-off grades have been clearly stated.

Notes

· The open pit resources are estimates of recoverable tonnes and grades using Multiple Indicator Kriging with block support correction produced in the GS3 software.

· Sukari Gold Mine:

o Measured open pit resources lie in areas where drilling is available at a nominal 25 x 25 metre spacing, Indicated resources occur in areas drilled at approximately 25 x 50 metre spacing and Inferred resources exist in areas of broader spaced drilling.

o The resource estimate extends over a strike length of 2.6 kilometres and to a maximum depth of 0 m in elevation (a maximum depth of approximately 1000 metres below wadi level).

o All available surface drilling and channel samples were used as at 22 August 2018, but underground production holes were excluded. The resource data set comprised 326,021 two-metre down hole composites and surface rock chip samples.

o Mineral Resource Estimates were adjusted to the mining surface and underground mining voids as at end of June 2018, and planned underground mining voids were excised to avoid double counting of underground resources.

· Doropo and ABC Indicated resources occur in areas drilled at approximately 50 x 50 metre spacing and Inferred resources exist in areas of broader spaced drilling.

· The reported Doropo estimates are limited to blocks with a maximum depth of 250 metres below surface and within 80 metres of drill hole data.

· All available Doropo data was used as at 6 December 2018.

· The reported ABC estimates are limited to blocks with a maximum depth of 250 metres below surface and within 100 metres of drill hole data.

· All available ABC data was used as at 10 December 2018

· The Doropo and ABC resource data set includes RC and Diamond drill data and gold estimates are based on 50 g Fire Assays completed at Bureau Veritas Mineral Laboratories, Abidjan.

Group Mineral Reserves (Sukari Gold Mine only)

The mineral reserve data presented in the tables included in this announcement, comprise a summary extract for the Sukari Gold Mine mineral reserve report. Currently all the ore reserves are contained within the Sukari tenement. For comparative purposes, data for 2017 has been included. Numbers have been rounded and therefore there may be small differences in the totals.

Notes.

* Open pit reserve includes 5.0Mt at 0.3g/t for 46koz gold using a 0.2 g/t gold cut-off for the dump leach

** Underground cut-offs for reporting are 0.4g/t gold for development with stopes defined within a 3.0g/t gold cut-off

Sukari Gold Mine Mineral Open Pit Resource Estimates

Sukari Gold Mine Underground Resource Estimates (included within the above mineral resource estimates)

Qualified Person and Quality Control

Information of a scientific or technical nature in this document, including but not limited to the mineral reserve and resource estimates, was prepared by and under the supervision of Group Qualified Person(s) and independent Qualified Person(s) as below: 

Sukari Gold Mine, Egypt

· Open Pit Mineral Reserve Quinton de Klerk of Cube Consulting Pty Ltd

· Underground Mineral Reserve Adrian Ralph of Cube Consulting Pty Ltd

· Mineral resource (underground) Mark Zammit of Cube Consulting Pty Ltd

· Mineral resource Arnold van der Heydyn of H&S Consultants Pty Ltd

· Resource database and economic assumptions for open-pit resource Norm Bailey of Centamin Plc

Doropo Project, Cote d'Ivoire Rupert Osborn of H&S Consultants Pty Ltd

ABC Project, Cote d'Ivoire Rupert Osborn of H&S Consultants Pty Ltd

A "Qualified Person" is as defined by the National Instrument 43-101 of the Canadian Securities Administrators.

The named Qualified Person(s) have verified the data disclosed, including sampling, analytical, and test data underlying the information or opinions contained in this announcement in accordance with standards appropriate to their qualifications. Each Qualified Person consents to the inclusion of the information in this document in the form and context in which it appears.

Investors should be aware that the figures stated are estimates and no assurances can be given that the stated quantities of metal will be produced.

Mineral resource estimates contained in this document are based on available data as at:

Sukari Gold Mine 22 August 2018

Doropo Project 10 December 2018

ABC Project 10 December 2018

Varying cut-off grades have been used, and clearly marked, for calculating the mineral resource estimates at different Group properties, depending on the stage of project, maturity and ore type.

The consolidated financial information has been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use by the European Union and in accordance with the Companies (Jersey) Law 1991.

There have been two major changes to the consolidated financial information for the year ended 31 December 2018 and its comparatives:

· The change in the presentation of the EMRA profit share to Non-controlling interest ("NCI") in SGM, refer to note 1.1.1.

· The change in accounting policy regarding the treatment of costs related to Exploration and Evaluation of Mineral Resources under IFRS 6, refer to note 1.2.1.

Now in its ninth year of production, the Sukari Gold Mine remains cash generative and this is reflected in the Group's financial results for the year ended 31 December 2018:

· 2018 was an operationally challenging year for the Group and despite the challenges, costs were kept under tight control and it remained cash generative;

· free cash flow(1) of US$63 million generated in 2018 to the Company after the distribution to the NCI, down 56% on the prior year (2017: US$146 million) almost entirely due to lower production, the increase in fuel and reagent costs and the increase in the percentage share of distributions to the NCI from 1 July 2018(3) in accordance with the CA although the absolute distributions decreased on 2017;

· 2018 revenues of US$603 million were down 11% on the prior year (2017: US$676 million) with a 0.5% increase in realised gold prices offset by a decrease in gold sales;

· cash costs of production(1) increased to US$624 per ounce produced on the prior year (2017: US$554), driven predominantly by a 15% decrease in gold ounces produced (excluding Cleopatra), an increase in mined and processed tonnes and an increase in fuel and reagent costs;

· AISC(1) of US$884 per ounce sold was below our forecast, but was an increase on the prior year (2017: US$790), mainly due to a 12% decrease in gold ounces sold (excluding Cleopatra), increased production costs and higher sustaining capital costs resulting from planned fleet rebuilds;

· EBITDA(1) decreased by 17% to US$258 million, as a result of increased production and operating costs and an 11% decrease in revenues;

· profit before tax decreased by 26% to US$152.7 million, due to the factors outlined above;

· earnings per share attributable to owners of the parent of 6.50 US cents were down 22% on the prior year due to lower revenue, higher costs and the increase in distributions to the NCI from 1 July 2018 in accordance with the CA (2017: 8.38 US cents);

· operational cash flow of US$223 million was 34% lower than 2017, due to the lower gold production base with higher gold prices offset by a higher cost base; and

· the Egyptian state has benefited directly from dividends paid to the non-controlling interest in SGM of US$76 million in addition to US$18 million in royalty payments during the year ended 31 December 2018 (2017: US$112 million and US$20 million respectively).

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(1) Cash cost of production, AISC, EBITDA and cash, bullion on hand, gold sales receivables, financial assets at fair value through other comprehensive income and free cash flow are non-GAAP measures and are defined at the end of the Financial Review section.

(2) Basic EPS, EBITDA, cash cost of production and AISC reflect a provision against prepayments to reflect the removal of fuel subsidies which occurred in January 2012 (refer to note 2.7 of the financial information for further details).

(3) 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.

A final dividend for 2018 of 3.0 US cents per share has been proposed for approval at the AGM on 8 April 2019. Together with the interim dividend of 2.5 US cents paid during the year, this represents a paid and proposed full year dividend of 5.5 US cents per share (2017: 12.5 US cents per share). Payment of the proposed final dividend would result in a full year pay-out of approximately US$63.5 million, which is equivalent to 100% of our free cash flow for 2018, in line with the Company's policy of returning to shareholders capital not required for future investment.

Centamin remains committed to its policy of being 100% exposed to the gold price through its unhedged position, and maintained a healthy cash, bullion on hand and gold sales receivable balance during the year. Cash and cash equivalents stood at US$282.6 million as at 31 December 2018 (2017: US$359.7 million).

Revenue

Revenue from gold and silver sales has decreased by 11% to US$603.2 million (2017: US$675.5 million), with a 0.5% increase in the average realised gold price to US$1,267 per ounce (2017: US$1,261 per ounce) and a 10% decrease in gold sold to 484,322 ounces (2017: 539,726 ounces). The movement is also net of US$11.5 million of gold sold which is related to Cleopatra (exploration decline) netted against capitalised exploration costs.

Cost of sales

Cost of sales represents the cost of mining, processing, refinery, transport, site administration and depreciation and amortisation, and movement in production inventory. Cost of sales is inclusive of US$49.5 million categorised as fuel prepayments (refer to note 2.7 to the financial information for further information) and has decreased by US$7.8 million to US$406.5 million (2017: US$414.3 million), mainly as a result of a:

· US$20.5 million increase in total mine production costs from US$307.6 million to US$328.1 million, due to a 10% increase in mined tonnes combined with a 4% increase in processed tonnes and an increase in unit costs mainly due to increased fuel and reagent costs;

· US$5.5 million increase in depreciation and amortisation charges from US$104.3 million to US$109.7 million due to mine development within capital work in progress being capitalised to mine development properties during the year, a reclassification of brownfield exploration and evaluation expenditure to mine development properties and a change in the associated amortisation charges; and

· Offset by a US$33.8 million decrease in the movement in inventory due to the increase in mining stockpiles.

Other operating costs

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 movements and the 3% royalty payable to the Egyptian government. Other operating costs decreased by US$9.1 million, or 25% on the prior year, to US$27.9 million, mainly as a result of a:

· US$4.9 million increase in net foreign exchange gains (-ve);

· US$2.0 million decrease in royalty paid to the government of the Arab Republic of Egypt ("ARE") in line with the decrease in gold sales revenue (-ve);

· US$1.8 million increase in corporate and other costs (+ve); and

· US$4.0 million swing in the expense related to the stock obsolescence provision (-ve).

Exploration and evaluation expenditure

Exploration and evaluation expenditure comprise expenditure incurred for exploration activities in Côte d'Ivoire and Burkina Faso. Exploration and evaluation costs increased by US$0.7 million or 4% from US$20.3 million in the year ended 31 December 2017 to US$21.0 million in the year ended 31 December 2018. These expenses are now recorded in the income statement after the change in accounting policy regarding the treatment of Greenfield exploration and evaluation costs, please refer to note 1.2.1 of the financial information.

Finance income

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.

Profit before tax

As a result of the factors outlined above, the Group recorded a profit before tax for the year ended 31 December 2018 of US$152.7 million (2017: US$207.4 million).

Tax

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 charge of US$0.05 million for the year was associated with interest and rental income in Egypt. For further information, please refer to the Payments to Governments disclosure on our website.

Dividends paid to non-controlling interest in SGM

During the year ended 31 December 2018, US$76.4 million (2017: US$111.6 million) was paid 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 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 2018 financial statements are currently being audited.

Earnings per share

Earnings per share attributable to owners of the parent of 6.50 US cents in 2018 decreased when compared with the prior year (2017: 8.38 US cents). The decrease was driven by the factors outlined above.

Other comprehensive income

Other comprehensive income movement was the result of the revaluation of financial assets at fair value through other comprehensive income.

Financial position

Centamin has a strong and flexible balance sheet with no debt and no hedging. Cash, bullion on hand and gold sales receivables at 31 December 2018 of US$322.3 million, down from US$417.9 million at 31 December 2017, following dividend payments of US$144.6 million during the year.

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

Current assets have decreased by US$89.0 million, or 17%, from US$509.3 million in 2017 to US$420.3 million, as a result of a:

· US$7.7 million decrease (-ve) in inventory driven by a US$8.3 million decrease (-ve) in collective stores inventory value to US$70.3 million (due to significant cost reduction and minimisation initiatives), a US$1.1 million decrease (-ve) in overall mining stockpiles and gold in circuit levels to US$30.6 million and a US$1.8 million decrease (+ve) in the provision for obsolete stores inventory to US$3.3 million;

· US$0.1 million decrease in financial assets at fair value through other comprehensive income (-ve);

· US$1.0 million decrease in trade and other receivables (including gold sale receivables) (-ve);

· US$3.1 million decrease in prepayments (-ve); and

· US$77.1 million decrease in net cash (net of foreign exchange movements) (-ve) driven by a US$115.6 million final dividend payment to registered shareholders for 2017, a US$28.9 million interim dividend payment to registered shareholders for 2018 and a US$76.4 million payment to EMRA as distributions to the NCI during the year.

Non-current assets have increased by US$12.6 million, or 1%, from US$915.1 million in 2017 to US$927.7 million, as a result of a:

· US$94.7 million increase in the cost of property, plant and equipment due to additions (+ve);

· US$109.8 million charge for depreciation and amortisation (-ve);

· US$4.7 million decrease in capitalised brownfield exploration and evaluation assets (net of a US$8.7 million Cleopatra net revenue adjustment and US$9.7 million transfer to mine development property, plant and equipment), as a result of the drilling programmes in Sukari Hill (-ve);

· US$32.4 million increase in inventory related to mining stockpiles that will not be processed within 12 months (+ve); and

· US$0.01 million decrease in prepayments and other receivables (-ve).

Current liabilities have decreased by US$14.0 million, or 23%, from US$61.4 million in 2017 to US$47.4 million, as a result of a:

· US$9.0 million decrease in trade payables and a US$3.3 million decrease in accruals (-ve);

· US$0.5 million decrease in tax liabilities accrued during the year (-ve); and

· US$1.2 million offset in current provisions primarily driven by withholding tax, customs and rebate provisions, employee benefits provision and Egypt health insurance provision held at year end (-ve).

Non-current liabilities have increased by US$2.8 million, or 25%, from US$10.9 million in 2017 to US$13.7 million as a result of an increase in the rehabilitation provision.

The value of share capital has increased by US$1.9 million to US$670.6 million, which can be attributed to the value of awards granted under the employee share plans for the period. There has been an increase of 2,615,000 in the number of issued shares over the same period.

Share option reserves reported have increased by US$1.4 million to US$5.7 million as result of the recognition of the share-based payment expenses for the year, offset by vesting and/or forfeiture of awards and the resultant transfer to issued capital and accumulated profits respectively.

Accumulated profits decreased by US$68.4 million to US$610.5 million as a result of a:

· US$152.6 million profit for the year after tax (+ve); offset by

· US$76.4 million profit share paid to EMRA in the year (-ve); and

· US$144.5 million in dividend payments to external shareholders, comprising a US$115.6 million final dividend payment for 2017 and a US$28.9 million interim dividend payment for 2018 (-ve).

Cash flow

Net cash flows generated by operating activities comprise receipts from gold and silver sales and interest income, offset by operating and corporate administration costs. Cash flows from operating activities decreased by US$113.7 million to US$223.4 million, primarily attributable to a decrease in revenue due to a 10% decrease in gold ounces sold at by a slightly higher average realised price offset by an increase in costs as explained above.

Net cash flows used in investing activities comprise brownfield exploration expenditure capitalised and capital development expenditures. Cash outflows have increased by US$3.7 million to US$83.6 million. The primary use of the funds in the year was for purchases of property, plant and equipment and investment in underground development at the Sukari site in Egypt.

Net cash flows used in financing activities decreased by US$75.1 million to US$221 million, which comprises US$76.4 million of dividends paid to the NCI and US$144.6 million of dividends paid to the owners of the parent during the year.

Effects of exchange rate changes have increased by US$5.4 million 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) Only includes US$7.6 million of the Sukari expenditure relating to Cleopatra in non-sustaining capital expenditure before the offset of net pre-production gold sales.

(2) Please refer to note 1.2.1 of the financial information for the change in accounting policy regarding exploration and evaluation expenditure.

Cumulative exploration expenditure capitalised for Cleopatra at Sukari is US$15.2 million project to date offset by pre-production net revenues of US$13.5 million (refer to notes 2.2 and 2.3 to the financial information for further details) resulting in US$1.7 million remaining on the statement of financial position at 31 December 2018.

Exploration expenditure

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

(1) Please refer to note 1.2.1 of the financial information for the change in accounting policy regarding exploration and evaluation expenditure.

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

Sukari and exploration and evaluation assets - impairment considerations

In accordance with the requirements of IAS 36 'Impairment of assets' and IFRS 6 'Exploration for and Evaluation of Mineral Resources' it was concluded that the devaluation of the share price of the Company was an impairment indicator for the Sukari Gold Mine and the exploration and evaluation assets. An impairment review has subsequently been performed, refer to note 1.1.2 of the financial information for further information, however no impairment resulted from the review. As no impairment indicators were identified in 2017 an impairment review was not performed in that period.

Exchange rates

Foreign exchange gains have increased from US$1.5 million to US$6.4 million, resulting in a US$4.9 million increase on the prior year.

Ross Jerrard

Chief Financial Officer

Director

25 February 2019

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 believes that EBITDA is 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 profit for the year before tax to EBITDA:

(1) Profit before tax, depreciation and amortisation and EBITDA includes a charge to reflect the removal of fuel subsidies (refer to note 2.7 to the financial information for further details).

(2) Please refer to note 1.2.1 of the financial information for the change in accounting policy regarding exploration and evaluation expenditure.

(3) Adjustments made to normalise earnings, for example impairments on non-current assets (i.e. net realisable value, stockpiles, exploration and evaluation assets etc.).

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 administrative expenses, royalties, depreciation and amortisation. Management uses this measure internally to better assess performance trends for the Company as a whole. The Company believes 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. The Company believes 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, an industry body, published a Guidance Note on '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 and 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 is expected that companies may choose to use the updated guidance from 1 January 2019 or on commencement of their financial year if later. The Group will apply the updated guidance from 1 January 2019.