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Welcome to today's Centamin Q4 and Full Year 2021 Results Call. My name is Jordan, and I'll be coordinating your call today. [Operator Instructions] I'm now going to hand over to Martin Horgan to begin. Martin, please go ahead.
Thank you very much. Good morning, everybody. I hope everybody is well, and thank you for taking the time to dial in today. I'm Martin Horgan, CEO of Centamin. On the line today, I'm joined by my colleagues, Ross Jerrard, our CFO; and Alex Barter-Carse at Corporate Comms. So hopefully, you've had a chance this morning to review our release we published at 7:00 a.m. I'm delighted to announce another solid quarter at Sukari. And with that solid quarter in Q4, that's enabled us to meet the midpoint of our 2021 guidance, both in terms of costs and ounces produced. And I think, importantly for us as well, in the context of that is that, that was also beating our internal targets around safety, as we strive to head toward a zero harm approach at the Sukari mine across all our operations. I think the year has been categorized by our delivery into our promises and that consistency that we strive for the operations to continue to deliver now and into the future. And I think that when we look at those plans for Sukari, I think, we've also considered a number of our work streams across 2021. And that's going to give us a much better understanding of the true value of our assets and also the upside potential we have at Sukari. We started out with the West Africa review that put in place plans to take us through PFS and DFS Doropo and substantially about the ABC project. And of course, we culminated the Life of Asset review for Sukari as we announced in December. That will lead to my mind not only sort of reconfirm the high-quality and long-life of Sukari, but I think it also identified a significant additional upside that we can now deliver on behalf of all our stakeholders. We started '22 with good confidence and excitement, and we're looking forward to delivering further to our road map as we grow and unlock that value from Sukari and the broader exploration portfolio that we now have both in Egypt and across West Africa. We've got some excellent near-term milestones to note coming up. We've got our financial year results and final dividend, our underground expansion study, the Doropo PFS, and our resource and reserve update based on our infill drilling and those have been great as well. And of course, we'll keep you updated as those exploration concerning both at the ore body at Sukari across the Eastern Desert and across West Africa. And with that note, I'd like to open up to any questions we've got. But please remember, our full year '21 financials will be published mid-March. So if we could keep our financial questions till then, that would be appreciated. So with that, can we now open up to questions from the floor, thank you.
[Operator Instructions] We have a question from Alan Spence of Jefferies.
Happy New Year, Martin. 2 questions. I'll take them one at a time. The first is around the lower contribution from the underground, noted that is impacted by contractors and some related travel restrictions. Have quarantine entry rules into Egypt become more stringent? Or what made this more impactful this quarter? And how has that availability been in January so far?
Happy New Year to you as well. I hope you and your family are all good. In terms of quarantine from an Egyptian perspective, no, those laws have stayed pretty stable over the last 6 to 8 months in terms of entry. And I would say that in addition to that, our second line of sort of protocols that we have at the mine site where we test everybody with our own PCR machine before being allowed back onto the site, we've also maintained those as well through the period. So there was no change in the Egyptian entry requirements. And similarly, there was no change to our own site management around COVID as well. We've maintained both of those sort of the, if you like, safety measures as we go forward. I just think that we hit, Alan, just a period of sort of a bad run of COVID, with people basically testing positive and then either not being allowed to travel or basically arriving at site being asymptomatic, being tested on site and then being pulled out on that as well. So I don't think it was a particular change in any -- we certainly will not anything that we did in terms of our protocols, we've maintained those. We just had a bit of a run whereby we had a number of key positions in terms of some of those expatriate, sort of leadership positions, we just got caught short with unlucky with COVID and having to basically isolate people. And of course, whether those key leadership expatriate positions as well, they can have an impact on that. I would say, having said that, despite the sort of the challenges that we had, because we've got a bit more flexibility in the underground now, because we've been working hard to sort of give ourselves that sort of additional sort of, if you like, sort of flexibility around how we plan and how we can react to situations at which we arrive, is that we were able to navigate that. And yes, you might note that the tonnes were down, and that was, as I say, due for those reasons stated, but we were able to pivot, move the plan around a little bit and still be able to meet that ounce profile as well. So I think, to my mind, I think that's starting to really sort of demonstrate what we're trying to get to at Sukari, which is that we have our plans, we have the short, medium and long-term plans. We've got the delivery into them. But even as and when issues occur, as would invariably in any business from time to time, is that we've got both the management response and the flexibility to react to that and ensure that we sort of move forward there on a consistent basis. So I think it was an issue that was kind of popped up. We're not alone, I think, in this issue. It happens to a lot of businesses globally, not just mining. But I'm really pleased that the guys were able to react, come up with an alternative plan and to be able to deliver those ounces and allow us to meet guidance as well. As we headed into January, no, look, I think things are back to normal. It was just a period through November and early December where we had these issues, and it's just a bit of bad look. But no, we're carrying on as normal now and started off January as we finished off December, which has moved along quite nicely.
Okay. That's great to hear. And then the second one just on production guidance for 2022. Obviously, assumes a higher run rate than Q4. When will we see that uplift? Should it be kind of an even quarterly production? Or should we think about kind of a back weighted for the next year?
When we look at the numbers as they are today, Alan, it's about 45% first half of the year and 55% second half of the year. So it is slightly back ended. It is a little bit of a back-end profile, but not massively. So still a relatively flat thing. And then even within the first quarter, Q1 is a little bit lighter than Q2 as we lead to that sort of 45%. And then as we hit the second half of the year, Q3 picked up on Q2 and Q4 picked up on Q3 as well. So broadly flat across the 2 halves, but with sort of an increasing towards the back end.
Our next question comes from Tim Huff of Peel Hunt.
Yes. Just a quick one on sales. There are a lot of moving parts during the period. But I mean, obviously, your cash at year-end was bang in line with what we were expecting. So I'm fairly neutral on the whole thing, but did note that you had the lower gold sales during the period. Just sort of tying that back in with your comment on no material impacts on COVID-19, supply chains and logistics. Was that just shipments at the end of the year? And I guess, where do your stockpiles now sit? Are they above average, are they average, or are they higher grade than before, simply because of your drawdown, the low-grade drawdown. I mean, a lot of questions in there, but I was just wondering if you could talk to that a bit, and it's just regarding the sales during the quarter.
Sure, sure. Well, maybe if I talk to the stockpiles on the physical side, and then maybe I'll hand over to Ross to have a quick chat about that. I think it was just timing the shipments, to be honest with you, as the gold left and receivables came in. But look, from a stockpile perspective, no significant change. There was a slight drawdown on the lower grade stockpiles over the fourth quarter, but in the order of a couple of hundred thousand tonnes, so nothing significant. So in effect, from a mining operations perspective, we still run the system whereby anything between 0.4 and 0.6 goes to a stockpile and then above 0.6 goes to the ROM and direct feed from the open pit, of course, the underground is a higher cutoff. So no, that sort of process didn't change. And as I say, there was a slight drawdown of a couple hundred thousand tonnes in the period on those low, we call them low grade, but the 0.4 to 0.6 and above, obviously, operating cutoff, it's also profitable, but on that basis. So no significant inventory change in the stockpiles, both the low grade, to the 0.4 to 0.6, or the ROM part in terms of building up on the ROM as well. So stockpile management was in line with previous practice and continues forward in line with historical sort of practices. But Ross, just on the timing issue around that final sales piece.
Thanks, Martin, and hi, Tim. Yes, it was just a function of timing of when that final gold pool and shipment occurs. So we obviously have a shipment once a week. And it's a timing function of when that Sunday gold pool happens and the actual shipment occurs. So yes, at the end of 2021, we had bullion on hand of about $20.3 million. And that was up in December 2020 last year, which was just under $6 million. So there's a step-up, but it was really just a function of that final pool and the shipments and when they go. So it was just like a calendar and timing issue -- or not issue, just the schedule.
Yes, just a timing delay.
Okay. Well, that's absolutely perfect. Thank you very much for both answers and well done.
Thank you very much. No problem at all.
We have no further questions on the phone line. So I'll hand back for any webcast questions.
A couple of questions online. One being, is there any update on the Sukari airborne survey?
Yes. Yes. We signed contracts just before year-end last year, both with the airborne sort of platform provider that is providing the helicopter, and also the technical group doing the actual sort of equipment and so they work as well. So that was all signed and we're busy now preparing for that work as well. So there's a few more in-country permits to pick up now as we've got the contracts signed, but they're well in process and in hand. Actual construction of helipads, prep of the logistics from Marsa Airport. So that is in full swing. So at this stage, we'd anticipate having pretty much everything ready by the end of the month. And then through February, March being able to get on with actually flying that survey as well across Sukari. So it's a good process. A little bit slow, if I'm honest with you. It's the first time it has been done in Egypt. The helicopter provider hasn't done this type of work before, though they're a highly experienced group that does a lot of work for the oil and gas sector, so really high-quality contractor. But of course, having to hold that hand a little bit through it with a very good sort of geophysical contract that we're working with. And we've worked through that now. And look, a bit of school fees paid by us to make sure that we've got it all lined up, but I think it will be excellent for us at SGN, at Sukari and on the assumption that it all moves well and we continue our recent desert exploration work. There's a fantastic tool then to take out into that remote regional work in due course as well. So those look great. Glad to have that signed and looking forward to getting on with it during this first quarter.
Fantastic. And another one just on Stage 4 West. Now that we're back mining where we had experienced the instability in Q4 last year. Has that all been fine? Has there been any further issues between them?
No. Look, we've been operating in that area through end of Q3 into Q4 of last year. Look, I think in response to the instability in late 2020, we did a full geotechnical review of how we operate in terms of the radar system that we have in place there for real-time fit monitoring in terms of the actual sort of approach to working in areas like this. So no, look, I'm really delighted to say that we've gone back in. Obviously, the mine is taking slightly to unload the weight across the top, which we've done and now working in that area safely under the sort of new, if you like, or improved geotechnical regime in terms of monitoring that allows us to operate safely as well. So touch wood, no issues and working in Stage 4 West and actually heading back into Stage 4 East as well at this stage.
Great. And then a question on capital structure. With the share price where it is, are the Board considering share buyback?
Well, maybe I'll hand it to Ross, but I would say that I think we flagged at the Life of Asset day back in December that a review of the capital structure of the business will be underway first half of this year and really looking at how we structure the balance sheet going forward, how we think about things like debt funding certainly for Doropo, but more broadly, things like discrete capital projects at Sukari with our cost recovery model and how that looked in terms of production profile going forward in free cash flow generation, how that ties into this as well. So that whole capital piece is ongoing. And I think once we've got that work done, that will then allow us to look at what is the optimal capital structure for the business today and on a go-forward basis and the implications of what we can then do in terms of financial flexibility. So I would say that, sort of, no definitive plans at this stage except to say that in the context of a full balance sheet. So the capital structure review is underway and over the first half of this year. And I'm sure that all sorts of options will be on the table for us to consider as we look to take the business forward.
Great. One just on cost inflation here. So cost inflation has now taken hold in the industry, namely a couple of companies. But would love to get your thoughts on short-term pressures and the probability of this not being only transitory.
Sure, sure. Well, look, I'll say a short piece and hand over to Ross. But look, from my perspective, as you say, this is not a Centamin issue. This is a sector and actually a global issue. And I think there's going to be, from my personal perspective, I think there are a number of sort of inflationary sort of pressures that are short term. For example, transportation costs, seaborne freight, we've seen a peach there. Do we anticipate that, that will sort of continue for the medium to long term? I anticipate, probably not. Fuel price is an obvious one as well that we're seeing coming through, a spike in fuel price -- oil prices. We had a pretty significant uplift last year from where we started the year to where we finished. Do we anticipate another 40%, 50% up reg on the diesel price in here today? Again, probably not. So I think certainly from a Sukari perspective, we've baked in a pretty healthy amount of that in terms of the guidance going forward. But I think from here, we would expect to sort of potential small increases or even decreases around some of those assumptions roll forward. And then I would assume on a medium-term basis things returning back towards historical sort of long-term trends effectively. But Ross, I mean, you've been all over the budget process and making sure that we go out with something that is appropriate and conservative and bake in potential sort of changes as we go forward as well.
That's right, Mike. As we came out late last year with our cost, we've been suitably prudent. I think we were very open and we factored those cost increases and pressures into our numbers and forecasts. We saw inflation increase in Egypt. We've built an increase from 4% to 7% in terms of inflation with a higher fuel price and input costs. And I think it's balanced in terms of how we see that unfold. I think importantly, we've got these strict initiatives and cost reduction strategies. And there are some big projects there that we do need to move forward in order to mitigate some of the cost pressures. But I think we've adequately factored them in terms of our forecast and it's now delivering on some of those projects and making sure that we keep the pressure on.
I think I would say, Ross, and you're 100% right there that sort of you flagged probably 18 months ago, Ross, the cost-saving program across the business. So in one sense, there is an inflation we find ourselves in. But as a management team, we don't sort of sit here and tell the world, it is what it is, guys, sorry, it's across all the sector. I think, you yourself, Ross, have led an excellent piece of work in terms of looking right across the business about where we can look at sort of cost savings, cost efficiencies, productivity gains as well. So I think you've been very proactive, Ross, and the team, in looking at how can we sort of improve that cost base and certainly counter as we're moving into inflationary pressure as well. And I think, Ross, you highlighted in December that the stretch program increased in terms of the cost initiative?
That's right. So we increased our target from $100 million to $150 million cost savings. And importantly, some of those key initiatives that we identified in terms of solo truck freight, your discussion around underground; there are some meaningful cost reductions that are built into those numbers. So it's about delivering them. But yes, as you say, we're well on track. And that program is now maturing nicely. It's over 15 months into the program and everybody is on board across the group.
Yes. Yes, absolutely. It's about being proactive. It's about getting on the front foot of these things and see how we can respond to the business.
Yes. Yes.
Our culture of continuous improvement.
I could not have fully said it myself.
Sorry, too easy. So with shareholder returns at the center of the strategy, what are your thoughts on the full year '21 dividend?
No change. And I think, fair to say, Ross, unless -- obviously, still to be discussed at the Board level. But at this stage and all the discussions we've had internally is that no change. Ross, I think you'd agree.
That's right. So subject to Board approvals and discussions. But yes, I would reiterate, we confirm the commitment towards that distribution, and it's all on track and status quo. So barring anything country, I think it's very much '21 dividend as stated.
Okay. Can you provide us with an update on how the solar plant construction is progressing?
Sure, sure, absolutely. Contractors mobilized it late last year. Work is well underway now and we've got our local contractor. Obviously, we've got an offshore and onshore contractor. The local contractor is now busy in the installation phase and actually sort of quite a significant amount of work being done at this stage in terms of post-installation and arrival of the panels themselves and equipment at site. So now progressing very nicely and remains on track to delivery mid-2022. So yes, look delighted with the way that's gone and just moving forward as per plan. A pretty boring update really, Alex, it's on plan and on track, which is good. We like boring when it comes to these things.
Exactly right. And is there any update on discussions around the Batie West asset?
Yes. Look, I think it's fair to say that we remain in active discussion both with government and a number of potential third parties. Look, I think for us, what we've got to do is, obviously, we've got to look after Centamin and the Centamin stakeholders, but also recognize our responsibility to both the project, the local stakeholders around the project and the government of Burkina. So in terms of trying to find an outcome for the project to take it forward, we are very promising of our responsibilities to the project and the government of Burkina Faso. So we remain in active dialogue with the government itself through the minister and also with a number of potential parties as well. So a slightly slower going than we would have anticipated, but the process continues. Engagement and dialogue continues and looking forward to be able to potentially update that as we move forward as we try and find the best solution for all parties.
And finally, although I've said this before and some have come through is, can you speak a little bit more on the satellite drilling around Sukari and potential timelines there?
Within the Concession itself or the EDX, the external stuff?
No, within the Concession.
So Concession-wise, we laid out a 10,000-meter program. And I believe that, that program has now been completed in terms of the actual physical drilling of those targets, I think 6 targets with a 10,000-meter RC program. So that work was completed over the end of last year, start of this month. And now waiting for assays to come back. So we would expect to start seeing results flowing through from assay during this first quarter as well. So we'll be looking to update. And then more broadly, as we mentioned before, the heliborne survey should be underway and largely executed during this quarter as well. So that will give us another data set over the Concession area. And actually, we're doing some follow-up soils into newly identified areas, again, all within the Concession to be done with some further target generation as well. So obviously, the ore body gets plenty of sort of news flow around the excitement we've got there with the resource reserve growth, per ounce grade and so on. And that really is the focus, but not to say that we're neglecting the broader Concession. And as I say, waiting for those 10,000 meters of drilling results to come through, additional soils work that's underway as we speak to identify new potential drill targets, and that airborne survey as well. So yes, lots happening actually on the surface work. And I think over this first quarter and second quarter, we'll be able to update people more broadly as to where that's going and where that's taking us.
Wonderful. Thank you. That's all from the online questions.
Perfect.
[Operator Instructions] We have no further questions on the phone lines.
Perfect. Well, look, I'd just like to say thank you to everybody for taking the time to join us this morning. I think it was a really good year in 2021, a year of delivery at the asset across our plans in West Africa and that exploration. As I say, I think it's underlined what we always believed to be the quality of Sukari. We've been able to demonstrate that now, but also in demonstrating that quality, identifying that pretty exciting upside that we've got both of the ore body itself and the production that we can get from that. I think the broader Egyptian exploration ground puts us in a great position of having the only producing gold mine in the middle of a very exciting emerging exploration jurisdiction and some demonstrable progress in West Africa as we had some of that PFS at Doropo as well. So a really, really busy year. I think the team has done fantastic work at Centamin to deliver all this. It was still a period of relative change after the change in management, but I think the team came through. And I think it sets us up very nicely for 2022 in what we can deliver. So I'm hugely excited about where we can go now. I'm looking forward to updating you to these catalysts as we roll into 2022 around the exploration, around the underground expansion, full year dividend and so on. And looking across into the sort of future revision of the next situation of the Life of Mine as we go forward as well. So thank you for the time for listening today. As ever, we remain available to take follow-up questions and calls. Feel free to contact Alex, myself, or Ross. And wish you all the very best for 2022. Thanks very much, and have a good day.
This concludes today's call. Thank you for joining. You may now disconnect your lines.