27th Feb 2008 10:26
Centamin Egypt Limited27 February 2008 Centamin Egypt Limited ("Centamin" or "the Company") Half Year Report for the Half Year Ended 31 December 2007 DIRECTORS' REPORT The Directors of Centamin Egypt Limited (the Company) herewith submit thefinancial report for the half-year ended December 31, 2007. In order to complywith the provisions of the Corporations Act 2001, the Directors' Report is asfollows: DIRECTORS The names of the Directors and officers of the company during or since the endof the half-year are: Mr Sami El-Raghy, Executive ChairmanMr Josef El-Raghy, Managing Director/CEOMr Colin Cowden, Non Executive DirectorMr Gordon B Speechly, Non Executive DirectorDr Thomas Elder, Non Executive DirectorMr H Stuart Bottomley, Non Executive Director COMPANY SECRETARY Mrs Heidi Brown PRINCIPAL ACTIVITIES The principal activity of the consolidated entity during the course of thefinancial year was the exploration for precious and base metals and the ongoingdevelopment and construction work at the Sukari Gold Project in Egypt. REVIEW OF OPERATIONS The Company recorded a consolidated operating profit for the period ofUS$5,662,037 compared with a consolidated operating profit of US$39,726 for thecorresponding period last year. The consolidated operating profit was primarilyattributable to a foreign exchange gain of US$5,927,574 (2006: (US$101,881)) andinterest revenue of US$3,290,245 (2006: US$1,059,389) resulting from theCompany's significant cash balances achieved through equity raisings completedin April 2007 and November 2007. The foreign exchange gain is attributable tothe strengthening of the Canadian Dollar against the United States Dollar duringthe period. During the half-year the principal focus has been threefold: • Continuing development and construction work at the Sukari Gold Project in Egypt; • Upgrading the Sukari Mineral Resource to 7.46 Moz Measured and Indicated, plus 3.7 Moz Inferred at a 0.5g/t cut off grade; and • Regional and near mine exploration drilling at Kurdeman and Sami South intersecting high grade and anomalous gold mineralization results respectively. On October 24, 2007, the Company announced that both the Kori Kollo processingplant and the Isparta power plant had arrived safely at the Egyptian seaport ofAlexandria and their cargoes had been discharged. The dismantling of the KoriKollo processing facility in Bolivia and the Isparta 28MW power plant in Turkeywere completed in September and both sites were closed and signed off. Truckingof the plant to the Sukari site has been completed without incident. On November 23, 2007, the Company announced that it had sold on a private basisan aggregate of 112,000,000 special warrants at a price of C$1.20 per specialwarrant for aggregate gross proceeds of C$134,400,000, which includes theexercise in full by the Underwriters of the Underwriters' option. On December28, 2007, the special warrants were automatically converted into ordinary shareson a one for one basis. The net proceeds of this equity financing are to beapplied to fund the continued development of the Sukari gold project,underground development, other exploration and general corporate purposes. The Directors consider that the Sukari Gold Project is 100% fully funded throughto gold production currently forecast to be in quarter four this calendar year.As a result of the equity raising, referred to above, the Company no longerneeds to pursue debt financing, has no debt, no hedging and at December 31, 2007had a cash balance of US$226M. In the December quarter, the Sukari Mineral Resource was upgraded to 7.46 MozMeasured and Indicated, plus 3.7 Moz Inferred at a 0.5g/t cut off grade. TheMeasured and Indicated Mineral Resource has increased by 0.62 Moz or 9% to 7.46Moz, from 6.84 Moz (September 20, 2007) showing the effectiveness of the infilldrilling programme (Table 1). Measured and Indicated resources account for 67%of total resource. The majority of the resource growth occurred within the AmunDeeps and Ra - Gazelle Zones, both testing the Hapi Zone and parallelmineralized structures. Table 1 - December 2007 Resource Calculation Measured Indicated Total Inferred (Measured + Indicated) Cut-off Mt g/t Mt g/t Mt g/t Moz Mt g/t Moz 0.5 60.10 1.41 99.87 1.48 159.96 1.45 7.46 64.0 1.8 3.7 0.7 43.01 1.73 72.25 1.81 115.26 1.78 6.61 47.6 2.2 3.3 1.0 27.66 2.22 47.20 2.33 74.86 2.29 5.52 32.9 2.8 2.9 Note to Table: Figures in table may not add correctly due to rounding Paste the following link into your web browser to download the PDF document related to this announcement: http://www.rns-pdf.londonstockexchange.com/rns/8393o_-2008-2-27.pdf Figure 1 - Resource growth at Sukari from April 1997 to December 2007 Shareholders are referred to the Company's website (www.centamin.com) forfurther details. AUDITOR'S INDEPENDENCE DECLARATION The auditor's independence declaration is included on page 3 of the half-yearfinancial report. Signed in accordance with a resolution of the directors made pursuant to s306(3)of the Corporations Act 2001. On behalf of the Directors Josef El-RaghyManaging Director/CEO Perth, February 26, 2008 Deloitte Touche TohmatsuA.B.N. 74 490 121 060 Woodside PlazaLevel 14240 St. Georges TerracePerth WA 6000GPO Box A46Perth WA 6837 Australia DX 206Tel: +61 (0) 8 9365 7000Fax: +61 (0) 8 9365 7001www.deloitte.com.au 26 Febraury 2008 Dear Board Members Centamin Egypt Limited In accordance with section 307C of the Corporations Act 2001, I am pleased toprovide the following declaration of independence to the directors of CentaminEgypt Limited. As lead audit partner for the review of the financial statements of CentaminEgypt Limited for the financial half-year ended 31 December 2007, I declare thatto the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 inrelation to the review; and (ii) any applicable code of professional conduct in relation to the review. Yours sincerely DELOITTE TOUCHE TOHMATSU KEITH JONESPartnerChartered Accountants Independent Auditor's Review Report to the members of Centamin Egypt Limited We have reviewed the accompanying half-year financial report of Centamin EgyptLimited, which comprises the balance sheet as at 31 December 2007, and theincome statement, cash flow statement, statement of changes in equity for thehalf-year ended on that date, selected explanatory notes and the directors'declaration of the consolidated entity comprising the company and the entitiesit controlled at the end of the half-year or from time to time during thehalf-year as set out on pages 6 to 22. Directors' Responsibility for the Half-Year Financial Report The directors of the company are responsible for the preparation and fairpresentation of the half-year financial report in accordance with AustralianAccounting Standards (including the Australian Accounting Interpretations) andthe Corporations Act 2001. This responsibility includes establishing andmaintaining internal control relevant to the preparation and fair presentationof the half-year financial report that is free from material misstatement,whether due to fraud or error; selecting and applying appropriate accountingpolicies; and making accounting estimates that are reasonable in thecircumstances. Auditor's Responsibility Our responsibility is to express a conclusion on the half-year financial reportbased on our review. We conducted our review in accordance with AuditingStandard on Review Engagements ASRE 2410 Review of an Interim Financial ReportPerformed by the Independent Auditor of the Entity, in order to state whether,on the basis of the procedures described, we have become aware of any matterthat makes us believe that the half-year financial report is not in accordancewith the Corporations Act 2001 including: giving a true and fair view of theconsolidated entity's financial position as at 31 December 2007 and itsperformance for the half-year ended on that date; and complying with AccountingStandard AASB 134 Interim Financial Reporting and the Corporations Regulations2001. As the auditor of Centamin Egypt Limited, ASRE 2410 requires that wecomply with the ethical requirements relevant to the audit of the annualfinancial report. A review of a half-year financial report consists of making enquiries, primarilyof persons responsible for financial and accounting matters, and applyinganalytical and other review procedures. A review is substantially less in scopethan an audit conducted in accordance with Australian Auditing Standards andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. Auditor's Independence Declaration In conducting our review, we have complied with the independence requirements ofthe Corporations Act 2001. Conclusion Based on our review, which is not an audit, we have not become aware of anymatter that makes us believe that the half-year financial report of CentaminEgypt Limited is not in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the consolidated entity's financialposition as at 31 December 2007 and of its performance for the half-year endedon that date; and (b) complying with Accounting Standard AASB 134 Interim Financial Reportingand the Corporations Regulations 2001. DELOITTE TOUCHE TOHMATSU KEITH JONESPartnerChartered AccountantsPerth, 26 February 2008 DIRECTORS' DECLARATION The directors declare that: a) In the directors' opinion, there are reasonable grounds to believe thatthe company will be able to pay its debts as and when they become due andpayable; and b) In the directors' opinion, the attached financial statements and notesthereto are in accordance with the Corporations Act 2001, including compliancewith accounting standards and giving a true and fair view of the financialposition and performance of the consolidated entity. Signed in accordance with a resolution of the directors made pursuant to s303(5)of the Corporations Act 2001. On behalf of the Directors Josef El-RaghyManaging Director/CEO Perth, February 26, 2008 CONDENSED CONSOLIDATED INCOME STATEMENT Half Year Ended December 31 2007 2006 US$ US$ Revenue - Note 4 3,290,245 1,059,389 Other income - Note 4 201,780 433,146 Corporate administration expenses (2,071,919) (843,357) Foreign exchange gain / (loss) 5,927,574 (101,881) Share based payments (1,381,402) (188,018) Other expenses (304,241) (319,553) Profit before income tax 5,662,037 39,726 Tax (expense) / income - - Net profit for the period 5,662,037 39,726 Earnings per share- Basic (cents per share) 0.745 0.007- Diluted (cents per share) 0.733 0.014 The above Condensed Consolidated Income Statements should be read in conjunction with the accompanying notes. CONDENSED CONSOLIDATED BALANCE SHEET December 31, 2007 June 30, 2007 US$ US$ CURRENT ASSETSCash and cash equivalents 226,117,391 136,501,015Trade and other receivables 43,840 86,893Inventories - 140,400Prepayments 768 7,407Total current assets 226,161,999 136,735,715 NON-CURRENT ASSETSPlant and equipment 11,943,285 12,067,243Exploration, evaluation and development expenditure - Note 5 117,082,165 69,915,454Total non-current assets 129,025,450 81,982,697 Total assets 355,187,449 218,718,412 CURRENT LIABILITIESTrade and other accounts payable 2,161,250 5,910,093Provisions 602,752 457,875Total current liabilities 2,764,002 6,367,968 NON-CURRENT LIABILITIESTrade and other accounts payable 150,000 150,000Total non-current liabilities 150,000 150,000 Total liabilities 2,914,002 6,517,968 NET ASSETS 352,273,447 212,200,444 EQUITYIssued Capital - Note 7 352,770,663 217,915,069Reserves 5,603,112 6,047,740Accumulated losses (6,100,328) (11,762,365) TOTAL EQUITY 352,273,447 212,200,444 The above Condensed Consolidated Balance Sheets should be read in conjunction with the accompanying notes. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Issued Accumulated Capital Reserves Options Reserve Losses Total US$ US$ US$ US$ US$ At June 30, 2006 94,219,681 2,294,794 433,192 (18,646,792) 78,300,875Profit for the period - - - 39,726 39,726Share options exercised 270,276 - - - 270,276Cost of share based payments - - 195,410 - 195,410Contributions of equity - - - - -Transfer to issued capital - - - (5,758) (5,758)At December 31, 2006 94,489,957 2,294,794 628,602 (18,612,824) 78,800,529 At June 30, 2007 217,915,069 2,294,794 3,752,946 (11,762,365) 212,200,444Profit for the period - - - 5,662,037 5,662,037Share options exercised 7,031,179 - - - 7,031,179Cost of share based payments - - 1,381,402 - 1,381,402Contributions of equity 125,998,385 - - - 125,998,385Transfer to issued capital 1,826,030 - (1,826,030) - -At December 31, 2007 352,770,663 2,294,794 3,308,317 (6,100,328) 352,273,446 The above Condensed Consolidated Statement of Changes in Equity should be readin conjunction with the accompanying notes. CONDENSED CONSOLIDATED CASH FLOW STATEMENT Half Year Ended December 31 2007 2006 US$ US$ CASH FLOWS FROM OPERATING ACTIVITIESPayments to suppliers and employees (1,881,205) (1,189,366)Payments for exploration (5,115,174) (4,388,022)Other income 201,780 -Net cash generated by/(used in) operating activities (6,794,599) (5,577,388) CASH FLOWS FROM INVESTING ACTIVITIESPayments for development (44,859,095) (7,456,472)Interest received 3,290,245 1,059,389Net cash generated by/(used in) investing activities (41,568,850) (6,397,083) CASH FLOWS FROM FINANCING ACTIVITIESProceeds from the issue of equity & conversion of options 133,029,564 270,276Project finance due diligence (926,435) -Financial activity (bank charges and realised foreign exchange gain / (loss)) (620,478) 32,613Net cash generated by/(used in) financing activities 131,482,651 302,888 Net increase / (decrease) in cash and cash equivalents 83,119,202 (11,671,582) Cash and cash equivalents at the beginning of the financial period 136,501,015 44,513,500 Effects of exchange rate changes on the balance of cash held in foreign 6,497,174 (155,686)currencies Cash and cash equivalents at the end of the financial period 226,117,391 32,686,232 The above Condensed Consolidated Cash Flow Statements should be read in conjunction with the accompanying notes. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations, Going Concern and Accounting Policies Statement of Compliance The half-year financial report is a general purpose financial report prepared inaccordance with the Corporations Act 2001 and AASB 134 Interim FinancialReporting. Compliance with AASB 134 ensures compliance with InternationalFinancial Reporting Standard IAS 34 Interim Financial Reporting. The half-yearreport does not include notes of the type normally included in an annualfinancial report and shall be read in conjunction with the most recent annualfinancial report. Basis of Preparation The condensed consolidated financial statements have been prepared on the basisof historical cost, except for the revaluation of certain non-current assets andfinancial instruments. Cost is based on the fair values of the considerationgiven in exchange for assets. All amounts are presented in United StatesDollars, unless otherwise noted. The accounting policies and methods of computation adopted in the preparation ofthe half-year financial report are consistent with those adopted and disclosedin the company's 2007 annual financial report for the financial year ended June30, 2007. The presentation currency for the consolidated entity changed fromAustralian Dollars to United States Dollars on July 01, 2007. The significant accounting policies which have been adopted in the preparationof these condensed consolidated financial statements are: (A) CASH AND CASH EQUIVALENTS Cash comprises cash on hand and demand deposits. Cash equivalents are shortterm, highly liquid investments that are readily convertible to known amounts ofcash and which are subject to an insignificant risk of changes in value. (B) DEBT AND EQUITY INSTRUMENTS ISSUED BY THE COMPANY Debt and equity instruments are classified as either liabilities or as equity inaccordance with the substance of the contractual arrangement. (C) EMPLOYEE BENEFITS A liability is recognised for benefits accruing to employees in respect of wagesand salaries, annual leave, long service leave and sick leave when it isprobable that settlement will be required and they are capable of being measuredreliably. Liabilities recognised in respect of employee benefits expected to be settledwithin 12 months, are measured at their nominal values using the remunerationrate expected to apply at the time of settlement. Liabilities recognised inrespect of employee benefits which are not expected to be settled within 12months are measured as the present value of the estimated future cash flows tobe made by the consolidated entity in respect of services provided by employeesup to reporting date. Superannuation The Company contributes to, but does not participate in, compulsorysuperannuation funds on behalf of the Employees and Directors in respect ofsalaries and directors' fees paid. Contributions are charged against income asthey are made. (D) EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE Exploration and evaluation expenditures in relation to each separate area ofinterest are recognised as an exploration and evaluation asset in the year inwhich they are incurred where the following conditions are satisfied: i) the rights to tenure of the area of interest are current; and ii) at least one of the following conditions is also met: a) the exploration and evaluation expenditures are expected tobe recouped through successful development and exploration of the area ofinterest, or alternatively, by its sale: or b) exploration and evaluation activities in the area of interest have not atthe reporting date reached a stage which permits a reasonable assessment of theexistence or otherwise of economically recoverable reserves, and active andsignificant operations in, or in relation to, the area of interest arecontinuing. Exploration and evaluation assets are initially measured at cost and includeacquisition of rights to explore, studies, exploration drilling, trenching andsampling and associated activities. General and administrative costs are onlyincluded in the measurement of exploration and evaluation costs where they arerelated directly to operational activities in a particular area of interest. Exploration and evaluation assets are assessed for impairment when facts andcircumstances (as defined in AASB 6 "Exploration for and Evaluation of MineralResources") suggest that the carrying amount of exploration and evaluationassets may exceed its recoverable amount. The recoverable amount of theexploration and evaluation assets (or the cash-generating unit(s) to which ithas been allocated, being no larger than the relevant area of interest) isestimated to determine the extent of the impairment loss (if any). Where animpairment loss subsequently reverses, the carrying amount of the asset isincreased to the revised estimate of its recoverable amount, but only to theextent that the increased carrying amount does not exceed the carrying amountthat would have been determined had no impairment loss been recognised for theasset in previous years. Where a decision is made to proceed with development in respect of a particulararea of interest, the relevant exploration and evaluation asset is tested forimpairment, reclassified to development properties, and then amortised over thelife of the reserves associated with the area of interest once mining operationshave commenced. Development expenditure is recognised at cost less accumulated amortisation andany impairment losses. When commercial production in an area of interest hascommenced, the associated costs are amortised over the estimated economic lifeof the mine on a units of production basis. Changes in factors such as estimates of proved and probable reserves that affectunit-of-production calculations are dealt with on a prospective basis. (E) FINANCIAL ASSETS Investments are recognised and derecognised on trade date where the purchase orsale of an investment is under a contract whose terms require delivery of theinvestment within the timeframe established by the market concerned, and areinitially measured at fair value, net of transaction costs except for thosefinancial assets classified as at fair value through the profit or loss whichare initially measured at fair value Subsequent to initial recognition, investments in subsidiaries are measured atcost in the company financial statements. Other financial assets are classified into the following specified categories:financial assets 'at fair value through profit or loss', 'held to maturityinvestments', available for sale" financial assets, and 'loans and receivables'.The classification depends on the nature and purpose of the financial assets andis determined at the time of initial recognition. Effective interest method The effective interest method is a method of calculating the amortised cost of afinancial asset and of allocating interest income over the relevant period. Theeffective interest rate is the rate that exactly discounts estimate future cashreceipts through the expected life of the financial asset, or, whereappropriate, a shorter period. Interest income is recognised on an effective interest rate basis for debtinstruments other than those financial assets 'at fair value through profit andloss'. Loans and receivables Trade receivables, loans and other receivables that have fixed or determinablepayments that are not quoted in an active market are classified as 'loans andreceivables'. Loans and receivables are measured at amortised cost using theeffective interest rate method less impairment. Interest is recognised by applying the effective interest rate. Impairment of financial assets Financial assets, other than those at fair value through profit or loss, areassessed for indicators of impairment at each balance sheet date. Financialassets are impaired where there is objective evidence that as a result of one ormore events that occurred after the initial recognition of the financial assetthe estimated future cash flows of the investment have been impacted. Forfinancial assets carried at amortised cost, the amount of the impairment is thedifference between the asset's carrying amount and the present value ofestimated future cash flows, discounted at the original effective interest rate. The carrying amount of the financial asset is reduced by the impairment lossdirectly for all financial assets with the exception of trade receivables wherethe carrying amount is reduced through the use of an allowance account. When atrade receivable is uncollectible, it is written off against the allowanceaccount. Subsequent recoveries of amounts previously written off are creditedagainst the allowance account. Changes in the carrying amount of the allowanceaccount are recognised in profit or loss. With the exception of available-for-sale equity instruments, if, in a subsequentperiod, the amount of the impairment loss decreases and the decrease can berelated objectively to an event occurring after the impairment was recognised,the previously recognised impairment loss is reversed through profit or loss tothe extent the carrying amount of the investment at the date the impairment isreversed does not exceed what the amortised cost would have been had theimpairment not been recognised. In respect of available-for-sale equity instruments, any subsequent increase infair value after an impairment loss is recognised directly in equity. (F) FOREIGN CURRENCY The individual financial statements of each group entity are presented in thecurrency of the primary economic environment in which the entity operates (itsfunctional currency). For the purpose of the consolidated financial statements,the results and financial position of each entity are expressed in United StatesDollars, which is the functional currency of Centamin Egypt Limited, and thepresentation currency for the consolidated financial statements. Thepresentation currency was changed from Australian Dollars to United StatesDollars from July 01, 2007 to align the presentation currency with thefunctional currency. In preparing the financial statements of the individual entities, transactionsin currencies other than the entity's functional currency (foreign currencies)are recorded at the rates of exchange prevailing on the dates of thetransactions. At each balance sheet date, monetary items denominated in foreigncurrencies are retranslated at the rates prevailing at the balance sheet date.Non-monetary items carried at fair value that are denominated in foreigncurrencies are retranslated at the rates prevailing on the date when the fairvalue was determined. Non-monetary items that are measured in terms ofhistorical cost in a foreign currency are not retranslated. Exchange differences are recognised in profit or loss in the period in whichthey arise. On consolidation, the assets and liabilities of the Group's foreign operations(including comparatives) are translated into United States Dollars at exchangerates prevailing on the balance sheet date. Income and expense items (includingcomparatives) are translated at the average exchange rates for the period,unless exchange rates fluctuated significantly during that period, in which casethe exchange rates at the dates of the transactions are used. Exchangedifferences arising, if any, are classified as equity and transferred to theGroup's translation reserve. Such exchange differences are recognised in profitor loss in the period in which the foreign operation is disposed. (G) GOODS AND SERVICES TAX Revenues, expenses and assets are recognised net of the amount of goods andservices tax (GST), except: i. Where the amount of GST incurred is not recoverable from the taxationauthority, it is recognised as part of the cost of acquisition of an asset or aspart of an item of expense; or ii. For receivables and payables which are recognised inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority isincluded as part of receivables or payables. (H) IMPAIRMENT OF ASSETS (OTHER THAN EXPLORATION AND EVALUATION) At each reporting date, the consolidated entity reviews the carrying amounts ofits tangible and intangible assets to determine whether there is any indicationthat those assets have suffered an impairment loss. If any such indicationexists, the recoverable amount of the asset is estimated in order to determinethe extent of the impairment loss (if any). Where the asset does not generatecash flows that are independent from other assets, the consolidated entityestimates the recoverable amount of the cash-generating unit to which the assetbelongs. Recoverable amount is the higher of fair value less costs to sell and value inuse. In assessing value in use, the estimated future cash flows are discountedto their present value using a pre-tax discount rate that reflects currentmarket assessment of the time value of money and the risks specific to the assetfor which the estimates of future flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated tobe less than its carrying amount, the carrying amount of the asset(cash-generating unit) is reduced to its recoverable amount. Each cashgenerated unit is determined on an area of interest basis. Where an impairment loss subsequently reverses, the carrying amount of the asset(cash-generating unit) is increased to the revised estimate of its recoverableamount, but only to the extent that the increased carrying amount does notexceed the carrying amount that would have been determined had no impairmentloss been recognised for the asset (cash generating unit) in prior years. (I) INVENTORIES Inventories are valued at the lower of cost and net realisable value. Costsincluding an appropriate portion of fixed and variable overhead expenses, areassigned to inventory on hand by the method appropriate to each particular classof inventory, with the majority being valued on a weighted average cost basis.Net realisable value represents the estimated selling price less all estimatedcosts of completion and costs necessary to make the sale. (J) JOINT VENTURE ARRANGEMENTS Jointly controlled assets Interests in jointly controlled assets in which the Group is a venturer (and sohas joint control) are included in the financial statements by recognising theGroup's share of jointly controlled assets (classified according to theirnature), the share of liabilities incurred (including those incurred jointlywith other venturers) and the Group's share of expenses incurred by or inrespect of each joint venture. The Group's interests in assets where the Group does not have joint control areaccounted for in accordance with the substance of the Group's interest. Wheresuch arrangements give rise to an undivided interest in the individual assetsand liabilities of the joint venture, the Group recognises its undividedinterest in each asset and liability and classifies and presents those itemsaccording to their nature. Jointly controlled operations Where the Group is a venturer (and so has joint control) in a jointly controlledoperation, the Group recognises the assets that it controls and the liabilitiesthat is incurs, along with the expenses that it incurs and the Group's share ofthe income that it earns from the sale of goods or services by the jointventure. (K) LEASED ASSETS Leased assets are classified as finance leases when the terms of the leasetransfer substantially all the risks and rewards incidental to ownership of theleased asset to the lessee. All other leases are classified as operating leases. Operating lease payments are recognised as an expense on a straight-line basisover the lease term, except where other systematic basis is more representativeof the time pattern in which economic benefits from the leased asset areconsumed. Contingent rentals arising under operating leases are recognised as anexpense in the period in which they are incurred. (L) PLANT AND EQUIPMENT Plant and equipment, and equipment under finance lease are stated at cost lessaccumulated depreciation and impairment. Plant and equipment will includecapitalised development expenditure. Cost includes expenditure that is directlyattributable to the acquisition of the item as well as the estimated cost ofabandonment. In the event that settlement of all or part of the purchaseconsideration is deferred, cost is determined by discounting the amounts payablein the future to their present value as at the date of acquisition. Depreciation is provided on plant and equipment. Depreciation of capitaliseddevelopment expenditure will be provided on a unit of production basis overrecoverable reserves, whilst on other fixed assets are calculated on a straightline basis so as to write off the cost or other re-valued amount of each assetover its expected useful life to its estimated residual value. The estimated useful lives, residual values and depreciation method are reviewedat the end of each annual reporting period. The following estimated useful lives are used in the calculation ofdepreciation: Plant & Equipment & Office Furniture - 4- 10 yearsMotor Vehicles - 2 - 8 years (M) REVENUE Revenue is measured at the fair value of the consideration received orreceivable. Interest revenue Interest revenue is accrued on a time basis, by reference to the principaloutstanding and at the effective interest rate applicable, which is the ratethat exactly discounts estimated future cash receipts through the expected lifeof the financial asset to that asset's net carrying amount. (N) PRINCIPLES OF CONSOLIDATION The consolidated financial statements are prepared by combining the financialstatements of all the entities that comprise the consolidated entity, being thecompany (the parent entity) and its subsidiaries as defined in AccountingStandard AASB 127 "Consolidated and Separate Financial Statements". Consistentaccounting policies are employed in the preparation and presentation of theconsolidated financial statements. The consolidated financial statements include the information and results ofeach subsidiary from the date on which the company obtains control and untilsuch time as the company ceases to control such entity. In preparing the consolidated financial statements, all significant intercompanybalances and transactions, and unrealised profits arising within theconsolidated entity are eliminated in full. (O) SHARE-BASED PAYMENTS Employee share options that vested before January 01, 2005 have not beenexpensed. The shares are recognised when the options are exercised and theproceeds are allocated to share capital. Equity-settled share-based payments granted after November 07, 2002 that werevested on or after January 01, 2005, are measured at fair value at the date ofgrant. Fair value is measured under the Black-Scholes option valuation model.The fair value determined at the grant date of the equity-settled share-basedpayments is expensed on a straight-line basis over the vesting period, based onthe consolidated entity's estimate of shares that will eventually vest. (P) TAXATION Current tax Current tax is calculated by reference to the amount of income taxes payable orrecoverable in respect of the taxable profit or tax loss for the period. It iscalculated using tax rates and tax laws that have been enacted or substantivelyenacted by reporting date. Current tax for current and prior periods isrecognised as a liability (or asset) to the extent that it is unpaid (orrefundable). Deferred tax Deferred tax is accounted for using the comprehensive balance sheet liabilitymethod in respect of temporary differences arising from differences between thecarrying amount of assets and liabilities in the financial statements and thecorresponding tax base of those items. In principle, deferred tax liabilities are recognised for all taxable temporarydifferences. Deferred tax assets are recognised to the extent that it isprobable that sufficient taxable amounts will be available against whichdeductible temporary differences or unused tax losses and tax offsets can beutilised. However, deferred tax assets and liabilities are not recognised ifthe temporary differences giving rise to them arise from the initial recognitionof assets and liabilities (other than as a result of a business combination)which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxabletemporary differences arising from goodwill. Deferred tax assets and liabilities are offset when they relate to income taxeslevied by the same taxation authority and the company/consolidated entityintends to settle its current tax assets and liabilities on a net basis. Current and deferred tax for the period Current and deferred tax is recognised as an expense or income in the incomestatement, except when it relates to items credited or debited directly toequity, in which case the deferred tax is also recognised directly in equity, orwhere it arises from the initial accounting for a business combination, in whichcase it is taken into account in the determination of goodwill or excess. Tax Consolidation The Company and all its wholly-owned Australian resident entities are part of atax-consolidated group under Australian taxation law. Centamin Egypt Limited isthe head entity in the tax-consolidated group. Tax expense/income, deferred taxliabilities and deferred tax assets arising from temporary differences of themembers of the tax-consolidated group are recognised in the separate financialstatements of the members of the tax-consolidated group using the "separatetaxpayer within group" approach. Current tax liabilities and assets and deferredtax assets arising from unused tax losses and tax credits of the members of thetax-consolidated group are recognised by the company (as the head entity in thetax-consolidated group). Due to the existence of a tax funding arrangement between the entities in thetax-consolidated group, amounts are recognised as payable to or receivable bythe company and each member of the group in relation to the tax contributionamounts paid or payable between the parent entity and the other members of thetax-consolidated group in accordance with the arrangement. Where the taxcontribution amount recognised by each member of the tax-consolidated group fora particular period is different to the aggregate of the current tax liabilityor asset and any deferred tax asset arising from unused tax losses and taxcredits in respect of that period, the difference is recognised as acontribution to (or distribution to) equity participants. NOTE 2: SEGMENT REPORTING Primary reporting - Business Segments The economic entity is engaged in the business of exploration for precious andbase metals only, which is characterised as one business segment only. Secondary reporting - Geographical Segments The principal activity of the economic entity during the year was theexploration for precious and base metals in Egypt and funding is sourced fromCanada. NOTE 3: EVENTS SUBSEQUENT TO BALANCE DATE Other than as set out above there has not risen in the interval between the endof the financial year and the date of this report any item, transaction or eventof a material and unusual nature likely in the opinion of the Directors of theCompany to affect significantly the operations of the company, the results ofthose operations, or the state of affairs of the Company in subsequent financialyears. NOTE 4: REVENUE Half Year Ended December 31 2007 2006 US$ US$ (a) RevenueInterest revenue 3,290,245 1,059,389 (b) Other incomeSale of plant and equipment 199,940 433,146VAT refund 1,840 - 3,492,024 1,492,535 NOTE 5: EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE Half Year Ended December 31 2007 2006 US$ US$Exploration and evaluation phase expenditure - At Cost (a)Balance at the beginning of the period 4,627,793 33,808,721Expenditure for the period 5,178,431 6,629,648Transfer to Development phase expenditure - -Balance at the end of the period 9,806,224 40,438,369 Development expenditure - At Cost (b)Balance at the beginning of the period 65,287,661 -Expenditure for the period 41,988,280 -Transfer from Exploration and evaluation phase expenditure - -Balance at the end of the period 107,275,941 -Net book value of exploration, evaluation and development phase expenditure 117,082,165 40,438,369 (a) Included within the cost amount of exploration evaluation and development assets is $5,311,744 being the excess of consideration over the net tangible assets acquired on the acquisition of Pharaoh Gold Mines NL in January 1999. This amount has been treated as part of the cost of exploration, evaluation anddevelopment. Management believe that the recovery of these amounts willsatisfactorily be made through the exploitation of the project in due course. (b) Development of the Sukari Gold Project commenced in March 2007. Items ofdevelopment phase expenditure relevant to the project are being separatelyaccounted for as development phase expenditure. NOTE 6: CONTINGENT LIABILITIES The Directors are not aware of any contingent liabilities as at the date ofthese unaudited interim consolidated financial statements. NOTE 7: ISSUED CAPITAL Half Year Ended December 31 2007 2006 US$ US$Fully paid ordinary sharesBalance at beginning of the period 217,915,069 94,280,380 Issue of shares under Employee option plan 7,031,179 209,577Transfer from share options reserve 1,826,030 -Placements 125,998,385 - Balance at end of the period 352,770,663 94,489,957 Change to the then Corporations Law abolished the authorised capital and parvalue concept in relation to share capital from July 01, 1998. Therefore, theCompany does not have a limited amount of authorised capital and issued sharesdo not have a par value. Fully Paid Ordinary Shares Half Year Ended December 31, 2007 Number US$Balance at beginning of the period 755,734,232 217,915,069 Employee share option plan 7,424,931 7,031,179Transfer from share options reserve - 1,826,030Placements 112,000,000 125,998,385 Balance at end of the period 875,159,163 352,770,663 Fully paid ordinary shares carry one vote per share and carry the right todividends. Share options granted under the employee share option plan In accordance with the provisions of the employee share option plans, as atDecember 31, 2007, executives and employees have options over 11,102,500ordinary shares. The expiry dates of the granted options are detailed in Note10. Share options granted under the employee share option plan carry no rightsto dividends and no voting rights. Further details of the employee share optionplan are contained in Note 10 to the financial statements. Share warrants on issue As part of the Canadian listing process undertaken during the financial year onthe Toronto Stock Exchange (TSX) the Company was required to issue to itsnominated share broker share warrants as part of the arrangement. Share warrantsare identical in nature to share options however they are differentiated as suchbecause the latter in Canada typically relates to options issued to employeesunder employee share plans. As at December 31, 2007 there were 4,007,260 brokerwarrants on issue over and equivalent number of ordinary shares (all of whichare vested). Further details of the share warrants are contained in Note 10 tothe financial statements. NOTE 8: RELATED PARTY TRANSACTIONS The related party transactions for the six months ended December 31, 2007 aresummarised below: - Salaries, superannuation contributions, consulting andDirectors fees paid to Directors during the six months ended December 31, 2007amounted to A$687,040 (December 31, 2006: A$505,053). - Mr S El-Raghy and Mr J El-Raghy are Directors andshareholders of El-Raghy Kriewaldt Pty Ltd ("ELK"), which provides officepremises to the Company in Australia. All dealings with ELK are in the ordinarycourse of business and on normal terms and conditions. Rent paid to ELK duringthe six months ended December 31, 2007 amounted to A$30,916 (December 31, 2006:A$27,142). - Mr S El-Raghy provides office premises to the Company inAlexandria, Egypt. All dealings are in the ordinary course of business and onnormal terms and conditions. Rent paid during the six months ended December 31,2007 amounted to GBP 3,900 (December 31, 2006: GBP 3,900). - Mr C Cowden, a non-executive director, is also a directorand shareholder of Cowden Limited, which provides insurance broking services tothe Company. All dealings with Cowden Limited are in the ordinary course ofbusiness and on normal terms and conditions. Amounts paid to Cowden Limited forinsurances during the six months ended December 31, 2007 amounted to A$199,908(December 31, 2006: A$110,195) of which A$27,692 was retained by Cowden Limitedas Brokerage (December 31, 2006: A$15,561). - Mr Brian Speechly, a non-executive director, is also adirector and shareholder of Speechly Mining Pty Ltd, a mining consultancycompany. Invoices received for payment during the six months ended December 31,2007 amounted to A$91,881 (December 31, 2006: A$0) The amount of US$150,000 appearing in non-current liabilities of the unauditedinterim consolidated balance sheet as at December 31, 2007 represents anunsecured loan payable 14 days after commencement of commercial production atthe Sukari project to Egyptian Mineral Commodities, a company which Mr SEl-Raghy has a financial interest in. This transaction was entered into by theCompany on September 27, 2001. NOTE 9: EARNINGS PER SHARE Basic earnings per share are calculated using the weighted average number ofshares outstanding. Diluted earnings per share are calculated using the treasurystock method. In order to determine diluted earnings per share, the treasurystock method assumes that any proceeds from the exercise of dilutive stockoptions and warrants would be used to repurchase common shares at the averagemarket price during the period, with the incremental number of shares beingincluded in the denominator of the diluted earnings per share calculation. Thediluted earnings per share calculation exclude any potential conversion ofoptions and warrants that would increase earnings per share. The weighted average number of ordinary shares used in the calculation of basicearnings per share is 759,650,488 (December 31, 2006: 578,830,706). The weightedaverage number of ordinary shares used in the calculation of diluted earningsper share is 772,852,988 (December 31, 2006: 585,702,826). The earnings used inthe calculation of basic and diluted earnings per share are US$5,662,037(December 31, 2006: US$39,726). NOTE 10: SHARE BASED PAYMENTS The consolidated entity has an Employee Share Option Plan in place forexecutives and employees. Options are issued to key management personnel under the Employee Option Plan2006 (previously the Employee Option Plan 2002) as part of their remuneration.Options are offered to key management personnel at the discretion of theDirectors, having regard, among other things, to the length of service with theconsolidated entity, the past and potential contribution of the person to theconsolidated entity and in some cases, performance. Each employee share option converts into one ordinary share of the Company onexercise. The options carry neither rights to dividends nor voting rights.Options vest over a period of 12 months, with 50% vesting and exercisable aftersix months and the other 50% vesting and exercisable after 12 months of issue.All options are issued with a term of three years. At the discretion of theDirectors part or all of the options issued to an executive or employee may besubject to performance based hurdles. No performance based hurdles have beenapplied for issues granted to date. In addition options (Series 8) were issued to the Company's share broker inCanada as a gratitude payment for professional services provided during thelisting process on the Toronto Stock Exchange in January 2007. Details of thoseoptions were: • Exercisable any time within 2 years of grant date. The following reconciles the outstanding share options granted under theEmployee Share Option Plan, and other share based payment arrangements, at thebeginning and end of the financial year: Half Year Ended December 31, 2007 Number of options Balance at beginning of the period (a) 13,490,000Granted during the period (b) 250,000Forfeited during the period -Exercised during the period (c) 2,637,500Expired during the period -Balance at the end of the period (d) 11,102,500Exercisable at the end of the period 7,030,000 a) Balance at the start of the period Fair value at Expiry / Exercise price grant date Options series Number Grant date Exercise Date A$ A$ Series 3 395,000 04 Feb 05 04 Feb 08 0.2804 0.1357Series 4 200,000 17 Feb 05 17 Feb 08 0.2804 0.1435Series 5 1,700,000 31 Oct 05 31 Oct 10 0.3500 0.1753Series 6 1,500,000 08 Dec 05 08 Dec 08 0.4355 0.1495Series 7 250,000 30 Aug 06 30 Aug 09 0.6566 0.2785Series 8 2,000,000 10 Jan 07 10 Jan 09 0.8000 0.2393Series 9 3,615,000 31 Jan 07 31 Jan 10 0.7106 0.3518Series 10 2,330,000 24 May 07 24 May 10 1.0500 0.4661Series 11 1,500,000 25 Jun 07 25 Jun 10 1.1636 0.3210 13,490,000 b) Issued during the period Fair value at Expiry / Exercise price grant date Options series Number Grant date Exercise Date A$ A$ Series 12 250,000 15 Oct 07 15 Oct 10 1.4034 0.4002 250,000 c) Exercised during the period Options series Number Exercise Date Share price at exercised exercise date A$Series 3 20,000 25 Oct 07 1.4350 50,000 07 Nov 07 1.5000 25,000 08 Nov 07 1.5750Series 4 50,000 18 Jul 07 1.2800 50,000 09 Nov 07 1.5700Series 5 30,000 22 Oct 07 1.4200Series 7 10,000 08 Aug 07 1.275 15,000 12 Sep 07 1.210 10,000 24 Sep 07 1.390 35,000 27 Sep 07 1.330Series 8 1,000,000 19 Oct 07 1.4000 1,000,000 20 Nov 07 1.4200Series 9 20,000 02 Oct 07 1.3700 25,000 08 Oct 07 1.3350 55,000 10 Oct 07 1.3400 25,000 19 Oct 07 1.4000 25,000 22 Oct 07 1.4200 15,000 23 Oct 07 1.4400 15,000 07 Nov 07 1.5000 37,500 08 Nov 07 1.5750 15,000 12 Nov 07 1.5200 10,000 16 Nov 07 1.4650 100,000 17 Nov 07 1.4650 2,637,500 d) Balance at the end of the period Exercise Fair value at Expiry / price grant date Options series Number Grant date Exercise Date A$ A$ Series 3 300,000 04 Feb 05 04 Feb 08 0.2804 0.1357Series 4 100,000 17 Feb 05 17 Feb 08 0.2804 0.1435Series 5 1,670,000 31 Oct 05 31 Oct 10 0.3500 0.1753Series 6 1,500,000 08 Dec 05 08 Dec 08 0.4355 0.1495Series 7 250,000 30 Aug 06 30 Aug 09 0.6566 0.2785Series 9 3,202,500 31 Jan 07 31 Jan 10 0.7106 0.3518Series 10 2,330,000 24 May 07 24 May 10 1.0500 0.4661Series 11 1,500,000 25 Jun 07 25 Jun 10 1.1636 0.3210Series 12 250,000 15 Oct 07 15 Oct 10 1.4034 0.4002 11,102,500 NOTE 11: SHARE WARRANTS a) Balance at the start of the period The following share warrants were in existence during the current reportingperiod:- Fair value at Warrants series Number Grant date Expiry Date Exercise price grant date C$ A$ Series 1 3,751,431 05 Apr 07 05 Apr 09 0.8600 0.3011Series 2 4,429,678 13 Apr 07 11 Apr 09 0.8600 0.2743Series 3 613,582 20 Apr 07 20 Apr 09 0.8600 0.2868 8,794,691 b) Exercised during the period Share price Warrants series Number at exercise exercised Exercise Date date A$ Series 1 1,000,000 28 Nov 07 1.4050 500,000 03 Dec 07 1.3800 500,000 07 Dec 07 1.3600 1,000,000 10 Dec 07 1.3900 751,431 13 Dec 07 1.3600Series 2 1,036,000 18 Dec 07 1.2800 4,787,431 c) Balance at the end of the period Exercise Fair value at Expiry / price grant date Options series Number Grant date Exercise Date A$ A$ Series 2 3,393,678 13 Apr 07 11 Apr 09 0.8600 0.2743Series 3 613,582 20 Apr 07 20 Apr 09 0.8600 0.2868 4,007,260 Following a general meeting of the Company's shareholders held on 10 January2008 a resolution was passed to approve the issue of 5,600,000 share warrantswith an exercise price of C$1.29 each and an expiry date of 23 November 2009. Share warrants are specific to the Company's listing on the Toronto StockExchange (TSX) and retain the same characteristics as share options but arereferred to separately under the TSX listing rules. NOTE 12: Impact of reconciliation between Australian accounting standards andCanadian GAAP There are no material differences between the Income Statements, Balance Sheets,Statement of Changes in Equity and Cash Flow Statements presented underAustralian accounting standards and Canadian GAAP. The Company would be required under Canadian GAAP to adopt the provisions ofSections 3855 (Financial Instruments - Recognition and Measurement), 3861(Financial Instruments - Disclosure and Presentation) and 1530 (ComprehensiveIncome) from July 01, 2007 which address the classification, recognition andmeasurement of financial instruments in the financial statements and theinclusion of other comprehensive income. These new standards require that theCompany identifies all financial instruments and accounts for these financialinstruments at their fair value. Costs associated at the recognition date withthese financial standards can be either immediately expensed or offset againstthe fair value of the financial instruments. The Company has elected to expense all costs associated with the acquisition offinancial instruments. Financial assets are classified as one of the followinggroupings: loans and receivables, assets held to maturity, available for salefinancial assets or assets held for trading. Changes in the fair value ofavailable for sale financial assets are taken to equity and reported in the newStatement of Comprehensive Income, until the financial asset is eitherderecognized or impaired, where it is then accounted for in the Statement ofOperations. Changes in the fair value of assets held for trading are reflectedin the Statement of Operations. Assets held to maturity and loans andreceivables are measured at amortised cost. Financial liabilities are classifiedas either trading or at amortised costs. Comparative periods have not beenadjusted to reflect the implementation of these new standards. In addition to recognising the unrealized fair value changes in available forsale financial assets in the Statement of Comprehensive Income, unrealized gainsand losses on translating financial statements of self sustaining foreignoperations, unrealized gains and losses on foreign currency translationassociated with hedges, donations from non-owners and appraisal creditincreases are also recognized in the new statement. As the company does not presently hold any financial instruments for whichamounts would be required to be recognised in a Statement of ComprehensiveIncome, this statement has not been presented in this report. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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