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Good morning, everyone, and welcome to the Centamin Q4 report. My name is Seb, and I'll be the operator for your call today. [Operator Instructions] I will now hand the floor over to Martin Horgan, CEO, to begin. Please go ahead, Martin.
Thank you very much, Seb. Good morning, everybody. I hope everybody is keeping well in these strange times. And thank you for taking the time to dial in this morning. As Seb have mentioned said, I'm Martin Horgan, CEO of Centamin. I'm joined today by Ross Jerrard, our CFO; and Alex Carse, Head of Corporate Communications. I am going to briefly go through our Q4 operational results, and then we will open for any questions. To attend today's results, I'm pleased to say that the headline production numbers were delivered in line with our updated guidance from October. We produced 68,000 ounces in the fourth quarter, and that brought 2020 production to a total for the year of 452,000 ounces.As we outlined in our Capital Markets Day back in December, the short- to medium-term priorities at Sukari have really been focused on delivering improved long-term operational flexibility, which would give us a better consistency of delivery in the future. And in line with that operational focus, of course, we continue to focus on costs and productivity gain as we look forward to the future.In terms of geology, we started to roll out both the surface exploration programs across the concession area while commencing the underground that open pit commenced comprehensive drilling campaign. As we look to better understand and further grow the resources and ultimate reserves for the operation.In terms of the open-pit mining, all mining focused on the medium- to low-grade area of Stage 5 North, and this continues to be the primary source of mill feed for 2021. The focus, of course, was really on waste mining in the West wall. This is focused on the rehabilitation in the vicinity of the area of instability that was identified in October last year, and that work continues to progress well as we seek to both depressurize the water from the -- groundwater from the West wall and unload the area from stripping from above.In the north of the open pit, we continue to do the pioneering works in Sukari Hill, and that's in preparation for mining the Cleopatra zone by open pit in the future. In the Eastern area of the pits, works continued around preparation for the commencement of capital waste mining contract. So pioneering works in this area. And Capital made good progress in terms of their mobilization of equipment and people to site that they prepare to dig in to the 120 million-tonne waste contract, which will start the first half of this year.On the underground, again, the focus is on development to provide both operational flexibility and the long-term planning as we move into Ptah and ultimately towards the Horus Zone. A good progress was made across 2020, and I'm delighted to say that the initial stage, Stage 1 of the ventilation upgrades, were completed during the quarter. And that's going to give us increased mine airflows and greater flexibility as we have today.Processing was at steady state with throughput and recoveries in line with expectations. Glad to say that fourth quarter saw the commissioning of TSF2. That was both ahead of schedule and the budget, and that's been a fantastic achievement by the operational and projects team to enable us to do that.Good progress was also made across the camp upgrades, the HV switchgear, and completing some of the feed work around the solar project. We'll continue to be vigilant around COVID and its potential impacts on the business. I think I've said previously on calls that I've been gratefully delighted with our team's response to the COVID situation, and our partners in Egypt and across West Africa as we help to navigate this difficult period. We remain focused on the issue about keeping our people safe and looking at such operations and the supply chain and stock and inventory levels.I'll now pass over to Ross.
Thanks, Martin. Q4 numbers and more importantly, the full year financial year 2020 headline numbers were delivered in line with our updated guidance released late last year. Healthy revenue generation of $150 million in Q4 resulted in USD 829 million for the year. Our 2020 cash costs of $719 per ounce was within our guided range of $740 to $790, and our all-in sustaining costs of USD 1,036 per ounce was within the range of $950 to $1,050 per ounce.Having previously indicated that Q4 would be cash flow neutral due to reduced production volumes and back-end weighted CapEx profile, we generated $3.5 million free cash for the quarter, resulting in $142 million worth of free cash generated for the year. Importantly, finishing the year with a strong balance sheet with no debt or hedging and cash and liquid assets of USD 310 million.Our full year financial results are scheduled to be published on the 11th of March, where we will give you a full analysis and breakdown of our results, including the Board's proposal for the final 2020 dividend. I'll now pass back to Martin.
Thanks very much, Ross. Looking forward to our guidance for 2021 remains unchanged on the Capital Markets Day back in December. That's 400,000 to 430,000 ounces of gold production. Cash costs in the range of $800 to $900 per ounce and all-in sustaining cost of between $1,150 and $1,250 per ounce. As we mentioned, it's a significant year for capital expenditure at about $225 million. And this includes projects, including the solar project; paste fill plant; as we've noted, the accelerated open pit stripping program; and obviously, increased underground development; and also a significant investment in geological drilling to pursue organic growth opportunities, both across the surface and the depth of the orebody.The Phase 2 of Sukari Life of Asset review is underway. We're assessing additional opportunities for cost savings and further operating efficiencies. Now updated life of mine plan should be ready by the end of the year. In West Africa, the strategic review of the portfolio continues, and we're looking to update during the first half of this year, both on mineral resource estimates and our future plans for individual projects.In addition to that, we continue to engage with the government of Egypt around the bid round, and we're looking forward to giving an update once we have further news in respect of the awards. And with that, I'd like to open up to questions.
[Operator Instructions] Our first question comes from Kevin Kerdoudi from Bank of America.
So you -- if I look at the costs in Q4, they were about 70% higher than Q3. You are going to start like the waste stripping in the first half. You target to produce less gold and sell less gold than in 2020, but you still have a cost guidance AISC of $1,150 to $1,250. Can you just explain how confident you are in that cost guidance and the trend in costs for recent quarters for 2021, please?
Ross, do you want to maybe take this one in terms of the cost and all-in sustaining?
Yes. Happy to, Martin. Kevin, yes, we'll be able to give you a full analysis and breakdown of the costs with the full year financial results, and we'll do a deep dive then. Let's answer your question, I'm very confident in terms of the modeling that we've done on the costs for 2021. I don't think we must look at Q4 in isolation in terms of that cost profile because, obviously, the metrics and the ounces produced with the cost profile were out of line. But in terms of that as we've modeled, and the budget that we've put together, we're very confident in terms of hitting those metrics, and that's why we've maintained our guidance ranges. But we will be doing a more fulsome and we'll go into the deep dive with the full year numbers and be able to show that to you.
Our next question comes from Raj Ray from BMO Capital Markets.
Martin, Ross and Alex, happy new year to you all. My first question is on the contractor mobilization. You did mention that you have made good progress in that, but do you see any potential risk with the world again into lockdown and with respect to getting all the blaster rigs in place and then the manpower -- required manpower?
Thanks, Raj. Happy new year to you as well. It's good to speak to you again. Look, in terms of the mobilization, no. We have a detailed schedule of equipment arrival, stretching back to sort of November last year going through to March. I'm pleased to say, we're sitting here in sort of 2/3, half the way through January. But in terms of the both trucks and excavators, for example, that has continued to roll forward on plan. The last discussion with Capital, we don't anticipate any issue with arrival of equipments for the waste stripping contract. Same applies to the blast hole. In terms of the personnel, waste -- sorry, Capital has already sort of identified and retained a number of senior key management, which is one of the stipulations that we had for approval in the contract. We wanted to understand the sort of personnel, and they would be implementing up. Obviously, people are key. So in terms of, for example, a number of the key senior individuals were already on-site during Q4 last year as well. So at this stage, they are certainly on track and possibly slightly ahead of where they needed to be, both in terms of equipment and people around that.So at this stage, no anticipated issues. Obviously, depending on what happens with COVID around -- who knows which way it's going to go. But I think given the sort of the operations, resilience over the last year, how we've dealt that gap in terms of sort of keeping the sites safe and operational is it -- not anticipating issues at this stage, Raj?
Okay. And then on your Stage 4 West Wall, you did mention that you're continuing with the depressurization. Is there a timing on when you expect to open it up for mining?
Yes. Look, so look, that has continued well. The holes have been drilled. In that sense, very limited water coming out of it. So it's not a significant water issue as far as we tell at this stage, the mining from above to unload the area that has continued as well, and that continues to progress in Q4 into Q1. In terms of when we might go back in and start to sort of mine that particular area, that is in sort of for this year and it could be sort of currently started the second half of the year, but that could well be brought forward depending on those as well. So we conservatively said that we'll finish that work during the first half of the year and be ready to go the second half of the year. But there is potential opportunity to bring that forward. But at this stage, having additional operational flexibility is key for us, and that's the focus just to get that stripping a depressurization work done.
Okay. And then on your geotechnical work, has all the drilling -- I did -- I think you have mentioned in the previous call that all the drilling has been completed, but can you give us an update on where it is and if you have any early learnings from the geotech assessment that you guys are doing?
Yes. So the actual physical hole drilling and logging was completed in December, and that data has now gone through our third-party geotech consultant working with the site-based team as well. So it's still relatively early. Obviously, there's a little pause. Our geotech export advisers are Aussie-based. And obviously, with the Christmas and New Year period and summer, it -- things did sort of quiet down a little bit there, but picking up again. So look, pleased to say the physical drilling and logging program done, and the analysis is underway at this stage. So too early for any definitive outcomes from that, but pleased to say that we're in the analysis phase now. And I would imagine over the coming weeks and few months, we'll be able to look at that and then refine our overall slope angles as they feed into the longer-term planning that we're going to do this year.
Okay. And then lastly, if I may. On the Egyptian bid round, where is the process at right now? I think in your last conversation, you had mentioned that the fiscal agreements with the government needed to be done. So is that where it is trends are coming?
Yes. So look, we've obviously -- like a number of other groups have been sort of verbally awarded or acknowledged of a successful bid. We're engaging with the government around that. We have a number of areas where we'd like to engage for further clarification and potential sort of amendment or adjustment to some terms. So that process continues. I don't believe we're any further ahead or behind any of the groups that are out there. We're all sort of working, I believe, roughly on a similar sort of time line. And I would hope, over this first quarter, that can be resolved and we can move forward from there. So yes, just working through the process with government and engaging with them, like some of the other groups as well that we're aware of.
Our next question comes from Tim Huff at Peel Hunt.
Just 2 questions. One is a follow-up on the comments that you've made regarding the stripping and depressurization on the West wall. Is that right that you guys are looking to finish up that work in the first quarter and that, therefore, gives you flexibility to either start mining in the area in the second half or even the second quarter at earliest? Is that what you were saying previously, sorry?
First half. So yes, first half is the plan to get that work done. The actual -- I guess, where we're looking at that, just a little bit more clarity, but clearly, there's an area of unloading above the area of instability. So those are vented immediately above. So that's in Stage 4 effectively west. But also, of course, we are pushing back the Stage 5 wall as well. So we're just working through now the sequencing of taking that deep -- sort of deep -- taking away off and derisking that area, but also as part of the Stage 5 pushback as well. So that work is being worked through, and first half of the year is what we've said to get that done effectively.
Okay. That's helpful. And then the other one I had was just on CapEx. Just thinking about everything you've been talking about with all the -- well, everything that's going on with Stage 5 and the West wall of Stage 4 and then all of a sudden, also with the arrival of all the equipment on site. Is it fair to -- I don't know what you guys are looking at right now, but it sounds to me like CapEx in the second half of the year is going to be heavier than the first half because early first half seems more of a continuation from Q4. And also, on top of everything is the unforecastable, which is COVID impacts on logistics constraints and all. So I was just trying to get some thinking about how you're looking at CapEx trends through the year on a quarterly basis or even a half year basis.
Sure. Sure. Well, I'll maybe leave Ross talk in a second. But look, of the -- shall we say -- so obviously, we got our sustaining capital in terms of things like engine rebuilds and just ongoing development work and so on. So that would be consistent through the year when we then look at some of the bigger items. So for example, the capital waste mining, clearly, they're going to ramp up through the first half of the year and get moving through the second half of the year. So yes, you could argue that, that would be quite clearly as the capital waste stripping area. That would, of course, be second half weighted.Things like the solar plant through the year, that will be a fairly even burn older thoughts and early-stage earthwork site prep equipment purchasing and installation. So again, sort of -- relatively, sort of evenly spread through the year, paste fill plant in a similar sort of way as well. So I think there are a couple of items that will be more back-ended, specifically capital and the waste mining contract spring to mind. But the other stuff, obviously, is possibly more sort of evenly distributed through the year.Ross, from your perspective, I mean, looking at that sort of ongoing normal run rate of sustaining CapEx.
That's exactly right, Martin. So we've got circa $90 million that's evenly spread. The profile for this year is $225 million. Of that -- the gap, there's $80 million, which you have already pointed out in terms of the capital drilling, the solar, the CRF, those will all be weighted to the second half of the year. So there's a big chunk that will sit and reside in H2.
Our next question comes from Nour Sherif at Arqaam Capital.
Yes. So one...[Technical Difficulty]
Hello. That's gone, Seb. [indiscernible] anybody else.
Sorry, Nour, we can't seem to hear your line. Could you please try again?Unfortunately, we're not getting anything from your line, Nour. So if you could possibly redial and we'll move on to the next question for now.So the next question is from Alan Spence at Jefferies.
I've got a few questions. I'll take them one by one. The first one regarding production, we're partway through Q1 now. I think previously, you talked about a staged recovery through the year. But can you give us a bit of a sense on how you see Q1 shaping up at this point and if that's maybe too early to just kind of if you could talk around sequential improvements in grades?
Sure, sure. Well, look, 3 weeks in. I'm pleased to say no issues so far, Alan. Delighted to say that by the 19th, we remain on track, which is always a good start to the year. No, look, look, I think as we said earlier, Stage 5 North remains the sort of main production area for us, and obviously that was sort of the lower- to medium-grade zone. So in terms of operational flexibility, we don't have a huge number of areas where we can go through from the open pit. And obviously, it is that sort of medium sort of there to lower-grade material as well and the sort of the consistent sort of onset issues. But the consistent thing we're finding, of course, is that some of the ore -- sorry, some of the waste has been recategorized into low-grade material, which is still a lot of grade control. No real changes as we stated to Stage 5, but we do see some of that waste being classified as low-grade material as well. So that has persisted into Stage 5 as we anticipated it would do. Otherwise, steady as she goes and ready ahead with no surprises that applies, which is great as far as I'm concerned and just moving on that basis. So no surprises in the open pit. Underground, again, real focus on development, getting operational flexibility into the operation of having multiple working areas available while pushing that capital infrastructure to get across into Ptah and open it down to Horus as well. So yes, nothing particularly to report at this stage.
Okay. And then sticking with Q1 but then turning to kind of the waste stripping, you mentioned kind of that ramp-up from Capital in H1. So is it just a fair assumption that Q1 strip ratio is going to fall below that kind of full year average that you presented in December?
Yes. Look, to be honest with you, Alan, what we've done is in terms of the Eastern Hills area where capital will be operating over the fourth quarter and through the first quarter of this year, we've actually done a lot of sort of the pioneering works that kind of sort of small fiddly work to get access roads into established benches and so on and so forth. And that work is -- it can be slow, obviously, obviously using smaller kits, trickier terrain and so on. But I'm pleased to say that we've made some good progress on our most pioneering works. And what we really hope, of course, is that by the time capital are ready to roll effectively, that we've got an opened up area, benches available, they can hit that quite hard as well. So I think we'll continuing certainly on the Eastern Hills to sort of do our own shipping, but also helping to prep to do capital the best start we can. And Sukari Hill to the north of Stage 5 North here, again, sort of slow progress to get that pioneering out there to open up that as a bench and start to bring that down as well. So while there's a focus on stripping, it doesn't always equate immediately. There's a lot of volume, additional parity work we've done. Once that's done, of course, and we've got those stages established, then we can hit that quite hard as well. And on the East -- sorry, on the Western wall, that just continues, as we mentioned before, around the Stage 5 pushback and the Stage 4 unloading as well. So yes, remains the key focus for us will be for this year as we look to get that pit back where we want it to be and give us that flexibility.
Okay. And last one is just on the TSF, that second one that competed there. How many years will it last you?
Good question. It's designed for life of mine on open pit, so yes. So that is the intended capacity. We do have the -- I understand, additional vent to raise that as we need it further beyond that. But that is designed for balance of life of mine. So we're actually very pleased to say that we started pumping the first material into that back in December. And given the sort of the work done to get that site prepped, installed, lined and ready to go in the 12 months is a fantastic effort, obviously, notwithstanding sort of COVID in the background as well. So that allows us to give us that additional operational flexibility on TSF2, and we can finish off with TSF1 and then we can start sort of closure and rehabilitation planning around TSF1 over the balance of this year as well.
[Operator Instructions] We have a question from Nour Sherif from Arqaam Capital again.
Hello, yes, this is Nour. Can you hear me out?
Yes, yes. Please, please, go ahead.
Yes, great. Okay. So just one question for me, if I may. Can you shed some light on the reason behind the drop in the underground grade in Q4? And what should we expect in 2021?
Yes. Thanks, Nour. Yes, look, as we mentioned, we took the decision in terms of sort of setting ourselves up to the medium to long term. So obviously, there was a real focus on development during the period both in terms of infrastructure development, but also stoping development. We were developing across Ptah, a number of areas. And therefore, those -- the development grade is associated with developing in Ptah are lower and that brought in. So in terms of the sort of the mix of all, we saw some more development ore coming through. It is a background lower grade than we've seen in a month previously, and that obviously dragged that down effectively. So it really is just a function of pushing that development to give ourselves an operational flexibility as we go forward. I think as we said in the December Capital Markets Day is that as we look forward, Ptah is going to be increasingly become the primary source of ore. That does sit around that sort of 4, 5, 6 ground material. But obviously, in the medium to longer term, pushing down towards Horus, top of Horus, is that we're hoping and expecting that those grades will return back in line sort of towards those and run levels as we head down those as well. So yes, dropping grade, increased development in ore as well, lower grades associated with that, bring the overall grade down. But as I say, within the longer-term strategy are opening up additional stopes to give us better flexibility.
Our next question is from Metehan Mete from Waha Capital.
I was just wondering something. I guess like you are guiding for the second half of 2021 to be reaching back in terms of like a production to all levels of slightly higher base production. And with that in mind, I'm wondering where do you see the all-in sustaining costs in the second half and also like 2022 onwards.
Thanks for that. Well, look, I think I would point back to our Capital Markets Day presentation to back in -- back on the 2nd of December. And I think, hopefully, we did lay out our forecast for both -- excuse me, just give me one second, I'm going to cough, sorry. Sorry about that, [indiscernible] throat there. Yes, to point back to the Capital Markets Day as developed as evidence in December on the future guidance. So look, I think at this stage, no change to that look forward on both production and costs. And as we've mentioned, that would see us obviously moving back towards sort of the historical levels of towards high 400, 500 as the drive forward. So there's no real update to that at this stage. Obviously, we've got the life of mine plan coming out towards the end of the year. And I think that will be the next opportunity where we have to sit down and map out a combination of future sort of production levels, but also long-term sort of trends in terms of both cash and all-in sustaining costs, hopefully benefiting from those additional cost initiatives and productivity gains that we're looking to layer in as well.
Sure, yes. But like if we go back to the old production levels, I mean shouldn't we see also the AISC falling back to like 900s? I mean your earlier guidance for 2020 was like 870 to 900 [indiscernible] for the AISC issuance. Can we go back there instead of saying like 1,200 levels?
Sorry, sorry. Yes. Look, look, absolutely. I think, again, as we mapped out in December, the view that we have for the operation long term is to be producing somewhere between 450,000 and 500,000 ounces per annum with a sort of a focus on value over volume, not ounces for ounces, those quality ounces at a higher margin. And naturally, if we do that, sort of looking to that sort of work all-in sustaining, as you've mentioned there, sort of sub 1,000 effective as well. So the vision for us is to push that sort of production back towards those historical levels, a focus on value. And that will, as you say, a combination of increased volume production. But also the cost initiatives and productivity gains, we'll see that all-in sustaining and cash costs move back towards those levels. But that's right, yes. And the vision to that, of course, is sort of stepping back towards that over '21, '22 and '23 early across the balance of the decade.
[Operator Instructions] We have one last question from Hugo Bravery from UBS.
I've just got a couple of questions. One follow-up on Alan's comment on the TSF2. You said it's designed for life of mine on the current pit. Does the Cleopatra view kind of open pit affect this detrimentally? Is this going to bring down the life of mine for the TSF2?
No, no, no. I think we've got capacity at this stage for that. And look, the current capacity is designed as is. And then, obviously, we have -- well, obviously, we do have an ability to raise the embankment and the funding around that, and we could get extra capacity in that as well. So at this stage, it's designed as is and we do have additional flexibility to increase that should the resource reserve increase. Now if we were to find the satellite deposits in our concession or more broadly in the regional that came in, then obviously we'd have to look at that if it was a significant volume of tonnage. But that would be a nice headache to have down the track effectively. So current sort of open pit underground, we've got sufficient capacity in TSF2. But in a wonderful event that we found a significant additional ore source that extended that, then we'd be looking at a third facility. But at that point, we've added a number of millions of ounces to the reserve base. I don't think anyone's going to be too particularly bold about that as an issue.
Great. Perfect. And then just my second question is on the Egyptian bid round, providing that it all goes through okay. Are you still planning to -- your aim is to provide satellite feed for the current Sukari plant. And if so, have you thought about how the agreement terms will work as that's a separate tenement to the Sukari tenement?
Sure. Sure. Look, first prize for us on a capital basis would be to find something that we can bring into the existing infrastructure. So obviously, not having to build another processing plant or a significant part of infrastructure. If we can find a resource -- or sorry, a reserve, I should say, that we can bring into the mill, then that's obviously the lowest CapEx, best cost benefit analysis for us. So obviously, that would be first prize. But look, if we can find a stand-alone operation that doesn't make sense to bring to Sukari, but stand-alone, but that also would be a fantastic result. So that exploration is what it is. We will find what we find, and we'll make a plan from there. But obviously, we'd be delighted with these or those scenarios. In terms of -- you're right, it's an interesting point around if we found something under a new concession agreement, if you like, using the new code but wanted to bring that into the existing infrastructure, how would you square that circle? And that's a conversation we're having with government around how that might work. And quite simply, from my perspective, that always sort of the default for Occam's razor. What's the simplest best sort of way to approach that, both from a regulatory and fiscal basis. But also, operationally, if you're bringing and announcing from a satellite deposit on a news terms concession, how does that ounce gets sort of treated? Is it the concession agreement, profit share? Is it the new tax rent royalty? Does that ounce displace an existing ounce and so on in the current concession? So you can imagine that, that could be quite a complex situation. And I'd personally sort of prefer to default to sort of an Occam's razor approach about how satellite feed is treated in the existing infrastructure. But obviously, ongoing discussions with government in the year, in the happy event that we're able to find satellite, how that might be treated. But it's a good point. It's well picked up. It's something we've certainly been thinking about and been discussing with the government.
As we have no further questions on the call, I will hand it back to Martin and Ross to wrap up.
Thanks very much, Seb. Well, thank you, everybody, for taking the time to dial in. I really appreciate listening in today, I'd say, just to reach out. Hope everybody is safe and well. Look, if there's any further questions or comments that you'd like to sort of get in touch with, please feel free to get hold of Alex or myself and Ross. We look forward to talking to you again next quarter and hopefully, continuing to deliver into the plans that we've laid out there as we can deliver quarter-on-quarter results. So thank you, everybody. I wish you all a very good day, and we'll speak to you again soon. Thanks. Bye for now.
This concludes today's call. Thank you all very much for dialing in. You may now disconnect your lines.