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Executives

Andy S. Davidson – Head-Business Development and Investor Relations

Andrew Pardey – Chief Operating Officer

Pierre Louw – Chief Financial Officer

Analysts

David Haughton – BMO Capital Markets

Stuart McDougall – Jennings Capital

George Topping – Stifel Nicolaus

Andrew Mikitchook – GMP Securities

Hashim Ghoniem – Naeem Holding Co.

Centamin Plc (OTCPK:CELTF) Q4 2012 Earnings Call March 27, 2013 10:00 AM ET

Operator

Thank you for standing by, and welcome to the full year results for year ended 31, December 2012 conference call. At this all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session (Operator Instructions) I will now turn the conference over to the speaker today, Andy Davidson. Please go ahead.

Andy S. Davidson

Thank you, Michelle, and hello everybody. Thanks for joining us, and firstly I think we should apologies for any confusion there was with the EST time and day light saving and I appreciate some of you who tried to dial-in an hour ago and everyone there so our apologies for that and thanks for coming back again. I am joined on the line by Andrew Pardey, our Chief Operating Officer; and Pierre Louw, our Chief Financial Officer and I’ll just kick off I think with an overview and the highlights, and then we can have the Q&A session at the end.

Apologies again to people you have heard this one already this morning on the 8 ‘o clock UK time call to stay with me.

So on the operations, the highlights for the year was, we had very clearly a strong performance in the operation, production with a 30% increase from 2011, produced 253,000 ounces and operations continues to run very well. And I think first and foremost we have to say well done and congratulations to the operating team, it is a great credit as Josef has said in his Chairman’s statement in the release today for operating, and a pretty challenging and difficult circumstances for the 2012. At time obviously we had several constructions and nevertheless the teams go through and we clearly ended the year very strongly indeed.

We not only that we did that with safety in mind and we had a marked improvement in LTIF rate during the year on 2011. Guidance for this year, we released a couple of weeks ago and 320,000 ounces indicates another year of growth on the way towards our long-term target of 450,000 ounces to 500,000 ounces in 2015. Obviously the key driver of that in the next stage and the next significant step up is going to be the delivery of the Stage 4 expansion. We still expect to complete that before the year end, that running before the year end, although as we announced again a couple of weeks ago, we did have some delays to the commissioning and we pull out some market attention essentially delays due to local suppliers and local issues within Egypt as much as anything.

CapEx balance at Stage 4 will be primarily put through this year, we spend $228 million of Stage 4 total, 325 by year-end 2012 and we expect to spend the majority of the balance of that this year.

Underground budget CapEx is $20 million this year. The operations on the financials, cash cost of production in 2012 was $659 million with international fuel prices that’s 2012 guidance of $700 million, clearly a function of the higher production ounces that we delivered in the year.

On a like-for-like basis with a subsidized fuel in, we would have been at $530 an ounce compared to $556 an ounce in 2011. So, again indicating a very good cost control and we are expecting on the 320,000 ounces guidance basis to be at a similar level of around $700 at the international fuel price level this year.

On the earnings, we had EBITDA up 10% to $233 million, PBT and earnings per share were up 2% to $199 million, an $0.183 per share respectively, total base net of an exceptional item which I will discuss in a moment. The other key item in the financial side of things was the prepayment that we made this year – in the post period or year-end period.

Prepayment in respect to profit share. It is important to know here that the year-end for the operating companies, Sukari gold mines is June 2013 and for the June 2013 period, we do not expect profit share to be due. On a recovering modeling, we are expecting profit share to be due for the year-end June 2014.

However as an initiative we have made on our own by through no sort of negotiation or push from the EMRA or government side of things. We made that prepayment in order to demonstrate goodwill prepayment of $8.2 million. It’s essentially at an advanced against future profit share that becomes due once profit sharing profit kicks in as we stay in the financial year 2014.

We may be in a position where in the middle of this calendar year, we make a similar prepayment, we’ll judge that as we go along, but the objective here is to continue to demonstrate goodwill and to essentially smooth out the profit share payments as they come in over the coming years, and ramp up towards the store level once we are full production and the cost recovery process willing to play through.

On financial balance sheet, we still have no debt, no hedging; our cash position including bullion receivables and liquid assets. By the end of 2012, with stronger and strong at $220 million, so that’s the financials on the exploration front. We continue to make progress at Sukari with the regional prospects outside of Sukari Hill deposit itself. We have a gravity survey, that we have recently completed in order to try and see some porphyry deposits below the wadi sediments. The results of that should be in the coming weeks in the second quarter and we’re looking forward to interpreting that data, and continuing to target regional prospects particularly with a view to looking for high grade stones around the Sukari Hill deposits.

In the IPO we continue to advance our exploration stage projects there, and as for an exploration front, you will have noticed I’m sure that there has been no resources there updating in this release at this point, we are intending to give resource updates early in the second half this year, and that will be the time essentially in the year going forward, so kind of shifted that timing when we did have the resourcing reserve updates this year. So some things come on that front in early second half.

And then on to the other corporate matters, which of course occupy a lot of attention at the moment. We got two court cases on going; one in with respect to the diesel fuel oil and the removal of the subsidy from January last year, and then the attempt at the end of the last year to retrospectively as a specific claim, those items being contested and bought as is our appeal against the outside of the 30th Administrative Court ruling. We discuss those things openly of course in our press release on the Q&A, I’ll just point to you, I’m not going to discuss those in great detail, now I’m going to just point you to Note 20 of the financial statement, if you haven’t seen them already that discusses those court cases in detail.

The main points here, we continue to contest both of these cases strongly to the best of our ability, both appeals are on going, both appeals may take sometime to resolve, ultimately we believe in both cases we got a very good chance of success, and particularly with the of course with the 30th ruling against our expectation as we believe we got extremely good chance of success.

Few points again, worth noting in respect of all those – or both of those court cases. In regards to the fuel oil, diesel cases – the case we have recognized this in the results, an exceptional item $41 million, we made a full provision essentially against the prepayment we’ve been making since January 2012 last year in respect to the funds advanced to Chevron for the international fuel price. And that’s really in recognition is the challenge we will face, the practicalities of reclaiming funds for those advances made to Chevron, given the current political environment in Egypt.

Nevertheless we continue to contest the decision that was made in the court case. We have not made a provision against the legal retrospective $6 million claim that was made at the end of last year. And that’s based on a legal advice, a strong opinion we have a very good prospect for favorable ruling there.

In regards to the Administrative Court case there was about – clearly we made an update last week with regards to the ruling on March 20. That was a positive ruling in the case. It was a important step forward in the price sensitive. There was assurance by the appeal court that operations will continue during the appeal process. It wasn’t the end of the case. Cleary some people could expect that, we’ve never said anything like that.

We’ve always said that this appeal process will potentially take some time to complete and that’s still the position that we hold today.

Again, obviously last weeks ruling was a clear positive, it does provide the appeal court stamp of approval that we can continue to operate on further assurance that that will remain the case while the appeal runs it course.

Also just highlight, it is important to note, as we have announced previously that EMRA and the Ministry of Petroleum both launched appeals in parallel with us, and we therefore use that as a strong basis for assessing that we have there both supports behind that matter in particular and in general.

And so, in summary 2012 was the year we had strong production, relative guidance on announces and cash costs, despite the challenges and the several temporary stoppages in the period. Despite the unwelcomed distractions that we had during the year, we continue to operate, we continue to operate, we continue to project growth with another step up this year, and then beyond as Stage 4 is delivered. And we continue to invest in the completion of the Stage 4 before, as I said that will kick in before year-end.

So with that I wrap up, I’d like to open it up now for Q&A. Thanks very much. Hello, operator?

Question-and-Answer Session

Operator

Thank you. And I’ll begin the Q&A session. (Operator Instructions) Your first question comes from David Haughton. Please go ahead.

David Haughton – BMO Capital Markets

Andy, it’s David Haughton. Thank you for the update. I’ve got a question for you with regards to CapEx 2013, you’ve suggested that it would consistent at least $100 million for Stage 4 and perhaps $200 million for the underground, what else will you be thinking about for 2013 CapEx?

Andrew Pardey

Yeah, I’ll turn it to Pierre on the line.

Pierre Louw

I am, yes.

Andrew Pardey

All right, Pierre. Have you got that numbers, you want to take over?

Pierre Louw

Yeah, I think for the year ahead we’ve brought more or less $100 million for Stage 4, the completion of Stage 4. Similar levels to last year expression we’re looking at about $12 million to $14 million underground. We’re looking around the areas we did last year, that’s about $20 million maybe just over $20 million and sustaining capital around the level of $40 million

David Haughton – BMO Capital Markets

Okay. Thinking about the Stage 4, should we start to see some contribution of that in the fourth quarter of this year, what do you think?

Pierre Louw

We’re definitely starting to – well that’s probably a question for Andrew, he is on the line. Andrew? Are you there Andrew?

Andrew Pardey

Yeah, we still need a large pretty bag that’s – yes we’re expecting to be finishing Stage 4 in the second half of the year, both in the (inaudible) year, but we will see some competition from Stage 4.

David Haughton – BMO Capital Markets

Okay. So for the production guidance of 327 ounces we should see a better second half than the first half as a consequence of that Stage 4 contribution.

Andrew Pardey

Well, I think that’s correct.

David Haughton – BMO Capital Markets

Okay. And you’re continuing work with the access for the second underground decline. When do you think that you would be mining all out of that decline and what do you think the overall underground production rate could get to?

Andrew Pardey

We are still at the top decline. We are still developing that and broadening that towards the north or as we are in 800 and let me get to 100 (inaudible) while we do the first cost cut off there, maybe $200 million which we thought that is still lower than (inaudible). Now we expect to be there at about probably for the end of second quarter we expect to be about (inaudible) decline. But in the meantime, we also have the development (inaudible) and we have values or at this time guiding more as well.

David Haughton – BMO Capital Markets

Okay. So is it reasonable to expect that perhaps not in 2013, but certainly in 2014 that your underground production rate could exceed 0.5 tons per annum?

Andrew Pardey

That’s a reasonable assumption.

Pierre Louw

Okay. But perhaps more conservatism – sorry Andrew, so perhaps for conservatism just wait and see, instead of really kind of pushing it.

Andrew Pardey

That’s the result. I will stick to the prior numbers.

David Haughton – BMO Capital Markets

All right, so just thinking about the production, you had during 2012 more production than sales, do you have an expectation of additional sales in first and second quarter of 2013 as a catchup and what sort of size you would be thinking about that if any?

Pierre Louw

Yeah, definitely, we have been in associations where we had big receivable at the end of December and we have starting digging that gold off in January, February. And coming to the end of the quarter, we should not be getting that kind of receivable again and we should be back to a normal rate or that one to two shipments worth that’s in the pipeline.

David Haughton – BMO Capital Markets

About how much gold would that represent Pierre?

Pierre Louw

I would say 14,000 ounces maybe.

David Haughton – BMO Capital Markets

Okay. And just to be clear your guidance of 320,000 ounces is production rather than sales, so this additional shipment could be in addition to that level?

Pierre Louw

That’s correct even in addition to that level and now we probably would see that we have recognized the revenue, but in the cash flows obviously the money worth not in that.

David Haughton – BMO Capital Markets

Okay, that’s very good. Now Andy, you had mentioned in your preamble that the reserve uptake would be maybe midyear, can you remind me with your previous reserve calculations, did that include or exclude the fuel subsidy and what impact might that has in your recalculation?

Andy S. Davidson

Okay, this one for Andrew. Is he on the line?

Andrew Pardey

Yes, previously that fuel was subsidized fuel price. We are working on the optimization, we’re probably going to be running the fuel at the international fuel costs or it is going up by an impact in the optimization process.

David Haughton – BMO Capital Markets

Okay, well, it might be mindful as to whether that additional whatever it is $100 per ounce to $120 might be offset by higher gold price, would we expect to see any trimming of the reserves as a consequence do you think?

Andrew Pardey

I don’t think that we will.

Pierre Louw

I think that, I mean we’ve settled on that. But then we always have – what gold price are we going to use, it is the calculations that I’m sure and then I just have to be very much mitigated.

David Haughton – BMO Capital Markets

Okay. And perhaps, I am pecking up some time here, so maybe my last one, perhaps for Pierre, if you don’t mind Andy. Is thinking D&A, depreciation and amortization would we expect to see that move up in the second half of 2013 to reflect the contribution or the depreciation of Stage 4?

Pierre Louw

Those as such will be – it’s an area in Stage 4 is completed and we take that on to the acquisition step, we’ve depreciating this year. I would think though that involves, but actually only come in the latter part, it goes right in the process plan, we will look at one unit rather than the protection in the process, it’s more than mining equipment and so forth that we will start picking up during the year when that comes to mine.

David Haughton – BMO Capital Markets

Thank you very much Pierre. I’ll let some one else ask some questions now. Thank you.

Pierre Louw

Thanks, David.

Operator

Thank you. Your next question comes from the line of Andrew Mikitchook. Please go ahead.

Pierre Louw

Hi, Andrew. Are you there?

Operator

Your line is open. Andrew Mikitchook, your line is open.

Andy S. Davidson

Just may had come here (inaudible).

Operator

Would you let me to go into the next question?

Andy S. Davidson

Just move on please, yes.

Operator

Thank you. Your next question comes from the line of Stuart McDougall. Please go ahead.

Stuart McDougall – Jennings Capital

Thank you, operator. Hi, guys, just a couple of quick questions on cost side. With the Q4 mines G&A, I noticed since you’ve gone up by notable amount, 20% odd, I am wondering if there was something extraordinary like annual bonuses or something like that or should we assume that going forward?

Pierre Louw

It was said to be the allowance for the annual bonuses that will be and it should not be in the next few quarters. Again at the end of the year, we will see that upcoming.

Stuart McDougall – Jennings Capital

Okay, thanks for that. And secondly if you can, about the Dump Leach, can you give me some color on the allocation for the cost of the Dump Leach and I know it’s pretty much immaterial, but if you have that available, I would appreciate it.

Pierre Louw

Unfortunately Stuart, I don’t have that both hand, but I can assure you that it is really immaterial, it is only you pay for its direct cost of due to processes and the Dump Leach itself, the capital portion, really small and you may think it is the distribution of all the five things that goes on there and then the institution that’s using the reagents or chemicals that going ahead, very, very mild, unfortunately I don’t have that with me straight off. It might be something we can adjust or (inaudible).

Stuart McDougall – Jennings Capital

Okay. Fair enough, thank you very much. That’s all I have.

Andy S. Davidson

Thank you.

Operator

Thank you. Next question comes from George Topping. Please go ahead.

George Topping – Stifel Nicolaus

Great. Thanks operator. Hello, everyone, Andy perhaps, sorry I missed the start of the call, but was there any restatement of the previous nine months because we’re obviously biting that out to get the Q4 numbers, any restatement of any line items?

Pierre Louw

We have not restated the previous quarters. We have taken the number in I am assuming that you’re talking about the fuel restatement.

George Topping – Stifel Nicolaus

Yeah, restatement and…

Pierre Louw

We are taking that into the fourth quarter and basically that we have throughout the year we have published both numbers – both including MX and excluding tool.

George Topping – Stifel Nicolaus

Okay. So looking at the administration side of in the Q4 number converted $9 million which is a lot more for the G&A, so just wondering if the – sort of the restatement or anything else that I’d like to talk about?

Pierre Louw

No George. I was just answering little bit earlier I think that what David’s questions is all maybe – might have been studious, great question. In Q4, we’ve actually made provisions for bonus payments and that would always be in Q4, financial year Q1, Q3 all come back to previous lows.

George Topping – Stifel Nicolaus

I see, good, then secondly the $8 million advanced payments, how is that calculated, I know that was dealt within the London call, but the transcript is not clear?

Pierre Louw

I think it’s claims important to note that we initiated this process that the actual modeling the cost recovery model that comes behind started you sort of put together under the terms of concession agreements, is what it is, hasn’t changed. We haven’t changed any of that, and we are essentially making a goodwill gesture in advance against future payments will be made. So this is an initiative really that we instigated, it’s not a sort of point of discussion or negotiation, there has been no change, the concession agreement certainly or any inclined to do that.

So that’s important aspect to point out upfront, but I mean in terms of actually getting to it, it’s a question of deferring essentially some cost recoveries into later periods, so we that’s our own discretion provided a little bit of latitude in terms of what costs are recovered, what stages in the process over the next few years, as we build out towards the full profit sharing level.

George Topping – Stifel Nicolaus

I see, so there was no set formula that you’re following there as a percent of profits or whatever?

Pierre Louw

No, no.

George Topping – Stifel Nicolaus

The arbitrary.

Pierre Louw

It’s pretty arbitrary as I say those one sided arbitrary that we moved to simply applied some movement to those cost recoveries, and come up with that number at the end and that will done that…

George Topping – Stifel Nicolaus

All right, I apologize if you have dealt with this before, but in Note 20 concerning the court case on the mining license. The earlier, of disputed outside the three square kilometers.

George Topping – Stifel Nicolaus

Of course, if you get this more information on what infrastructure used their stuff, so whatever it is…

Andrew Pardey

Yeah. These three square kilometers, it’s something that we don’t recognize really, we don’t recognize these three kilometers, not an agreement that we have signed. There is no exploitation lease with our signature on it as it relates to three square kilometer area, and really we’ve never been officially notified as where that three square kilometers in actual fact is. So in an official sense, we don’t have that clarity, I mean as Pierre said and the mining operations and all the infrastructures they have considerably more areas, more footprints than that. It is unclear whether they are talking about the whole mine, the whole mining infrastructure or whether it’s just the deposit that the mining and in fact where that three square kilometers is to say.

What I would say is that in this whole court case if we (inaudible) for a moment and to think what the worst-case scenario might be, if we forced we lost the appeal, we went to three square kilometers, then we revert back to the situation as we hit the floor, when all this broke out, enforcing agent for any of it, for any sort of action or suspension of operations or whatever. So therefore, the enforcing agent would have to be EMRA or the government through EMRA. And those frankly there is no desire by them to change anything to offset both and you see them demonstrated by in fact they are doing very strong appeal since on the day after that we lodged out, and that was followed up in the early part of this year by a separate appeal again by the Ministry of Petroleum, so quite the opposite. The government, the ministry, the EMRA, they all want to see this operation continue as normal, and they decided to change anything or reduce any areas, re-negotiate any terms under the concession agreement.

Well, at the bottom line, they want to get towards the full profit sharing overtime and we are working very well with them to ensure operations continue, are ought to be remain along that path. So not just extend this three square kilometers is a bit of mute point in all of this. But as I said rather a start, it’s not an area that we would recognize or really have any definition over in a form of sense.

George Topping – Stifel Nicolaus

Good, thank you.

Andy S. Davidson

Thanks George..

Operator

Your next question comes from the line of (inaudible). Please go ahead.

Unidentified Analyst

Hi, there guys, Andy can you hear me?

Andrew Pardey

Hi, Bob, yeah, can hear you.

Unidentified Analyst

Hi, yeah. I just want to clear, of the 320,000 ounces that you guys are guiding, how much of that is Stage 4, if any?

Pierre Louw

Well, as Andrew said there is an amount that comes in towards the end of the year. [Pre-LATAM] related, that time have the actual figure in terms of what that the percentage fee where as to the answers. This is kind of a very much a tail-end effect, and it’s not hugely significant I would say.

Unidentified Analyst

Okay. So under 20,000 ounces, I could assume as far as Stage 4 being in the ballpark?

Pierre Louw

Yeah, like I said that number.

Unidentified Analyst

And just a little bit of color then on the commissioning, and I guess when within the second half, do you expect the bulk of the commission to start of course a little bit surprised, they guys didn’t just say the third quarter you can you kept it open the second half, can you give us a little bit of colors that when within the second half that work starts.

Pierre Louw

Well it is a process and we got various items that are ready to commission now such in the Power Station and the Sea Water Pipeline might be long hereafter some quite the demand won’t be very long, and now Andrew do you want to expand on that, if you’re still on the line.

Andrew Pardey

Look we’ve been quite conservative to build up the Stage 4, because we have experienced the naïve issues in the country, and so we brought the serve the distance and going and brining obviously we cannot be doing everything in our (inaudible) condition as soon as possible. This would be impacted at last year would very, very strikes in the country, outside the country for et cetera. We don’t create focus exceptions.

Unidentified Analyst

And are those issues still apply in the country in terms of strikes at the ports and some of your suppliers et cetera. Is that something that’s going to continue to happen, do you think or do you see curtailment of that in the country?

Andrew Pardey

It is difficult to say, some of the supplying ports being on strike again recently, Alexandria of course that’s fine, is expected to be conservative, and they not later on.

Pierre Louw

Yeah, another aspect about this, the few supply issue that our suppliers are facing, so it’s okay, we’re okay where we got a good steady supply of fuels operation. We are paying the full international prices obviously helps to ensure that. Subsidized fuel domestically within Egypt is in pretty tight supply at the moment, so we’re finding and we’re getting into situations where some of their suppliers are not able to bring supplies and materials that is whatever two side because the contract is to fuel for it various times. So that causes some of the small issues that causes delays.

Unidentified Analyst

Okay. Thanks for that. And on the ammonium nitrate permits in the blasting supplies that you need to deliver for the Stage 4 expansion, you mentioned in the note this morning that you need permits for that. Can you just elaborate how big that – it was a very minor issue or it could just potentially be something of a concern?

Pierre Louw

Well there is something that needs to be done, Bob I mean it’s nevertheless it is a process and we have been through that process before, so there is no indication at the moment just to testing maybe anything other than something that needs to be sorted out with relevant authorities, and we’re in that process. We have a agreement at the moment on the amounts of explosives, ammonium nitrate is very good to use daily and that needs to be increased, so I think which is flagging that we are in a process there and that’s just…

Unidentified Analyst

But with the regulators say look we’re going to wait until the appeal process is finished before we issue any new permits to you guys or have you heard anything?

Pierre Louw

No there is no hint of that.

Unidentified Analyst

Nothing like that, okay. Okay, and then last question I guess is on the $33 million net exceptional item with regards to fuel. Is that going to be spread over or is that just a one time hit in the fourth quarter or is that going to be spread over the first, second, third and fourth quarters of 2012, how that’s going to be dealt with?

Pierre Louw

Yeah, that will be for me, and that means we’ve taken in the fourth quarter, and obviously we would not like to carry any of that forward, we are waiting for the court case. So we would be dealing every quarter going forward, with the additional price we pay in the similar way until we got the court case out of the way. So we would be reporting at the end of the quarter, and we will take up to the P&L.

Unidentified Analyst

Right, okay, so okay perfect. All right thanks very much guys.

Andy S. Davidson

Thanks Bob.

Operator

(Operator Instructions) We have a follow-up question coming from the line of David Haughton. Please go ahead.

David Haughton – BMO Capital Markets

Hi, yes thank you Andy. Can you just give us an outline as to what the next steps are for your two court cases, is it just simply a matter of waiting until you get a date in court or is this some other steps that you will be undertaking in the court case in the future.

Pierre Louw

Yes thanks, David. The Egyptian legal system is not like us and we don’t have a timetable laid down as to how these things will pan out. It’s a case of we have a hearing and then that hearing you tend to find out when the next year will be, and more often not these hearings are procedural in nature, and net effect of them is for adjournment to subsequent date, so that’s been the process we’ve had really up until the March 28 hearing, where we had a series of hearings, and I am talking that particularly with relation to the administrative court, the exploitation of these court case.

We would simply, we’re having one hearing after another, but nothing material was coming that system, and then we’ve got a situation when in early March where we were told that there will be a judgment on the March 20 and that was coming. So we’ve had a bit of heads up in terms of when something material may come out of these court cases.

In terms of the next steps, we’re back into procedural mode; I think from here, we will have the expectation of these court case the next hearing will be in June. But again, is procedural matter, where there is a technical subcommittee to the court, who sit down and consider the merits of the appeal. That committee (inaudible) deliberate, they would come back again, and then they will make a recommendation to the court. I know I’m supposing here, then the court I presume will go away and then come back again, several times.

So this is really getting behind, why we’re cautioning investors to finally may take some time, because it is a fairly bureaucratic process, that quite frankly, frustrates us as much as it frustrates our investors, because it is so simple for us platform wide issue, we call this exploitation lease signed in the original copy, and they can just we should be able to just turn out and presenting everyone finished, but unfortunately that’s not the way at the Egyptian legal system.

And then fuel court cases similar the net bearing is a procedural one, this one at the end of April. And with all these court cases, we take review with releasing to the market material information, we make an update when something material comes out of this process, we try to get poked down in these procedural elements to the process.

David Haughton – BMO Capital Markets

Well, thank you, Andy, and good luck.

Andrew Pardey

Thanks, David, cheers.

Operator

Your next question comes again from the line Andrew Mikitchook. Please go ahead.

Andrew Mikitchook – GMP Securities

Hi, I apologize for currently not knowing (inaudible) my own phone earlier, just a quick question this mining underground, and the split between development ore, and obviously higher grade actual soaps, is that more or less remain constant or once you have essentially two mining areas in operations simultaneously and more development completed eventually, would you imagine that the development ore amount would decrease, and which was a increase your head room coming out of underground, and then maybe you have lower costs hopefully.

Pierre Louw

Andrew you are there still…

Andrew Pardey

Yeah, yeah I’m here. Look so this year, I’ve stick pretty closely to the 50-50 plain development and siting piece of business, (inaudible) on advancing development, but going forward longer-term, yes we are going to set the (inaudible) staple development ore.

Andrew Mikitchook – GMP Securities

And all of them equally, it really makes sense that you might get slightly better grades and/or slightly better costs, when that happen?

Andrew Pardey

Correct, just with the staple we are concentrating on the high grade material, and the list of the low grade development ore to get out of these areas.

Andrew Mikitchook – GMP Securities

Right, okay and just last question from me, for Pierre, it might already been asked, but there are simple answer to where the $8.2 million prepayment will show up on the financial statement just so that we’ll have an idea what to expect?

Pierre Louw

Because it’s a prepayment for the time being we treated as such and prepayment and will be carried on the balance sheet, and so we do get in a situation of cost recovery. The profit share at least when we will take that amount that would be payable to via now.

Andrew Mikitchook – GMP Securities

Okay. So for this year, may be just the un-accrued line, either separate or included with other payables on the balance sheet?

Pierre Louw

We’re sitting on the balance sheet correctly.

Andrew Mikitchook – GMP Securities

Thank you very much and well thanks.

Pierre Louw

Thank you Andrew.

Operator

Thank you. Your next question comes from (inaudible), please go ahead.

Unidentified Analyst

Hello, hi guys. Thank you for the call. I just have a quick question regarding your expansion plans in the product. I mean, I wouldn’t expect any determination coming from the expansions which are in locations in the reserve number coming up this year?

Pierre Louw

Hi, Hisham, sorry I am unclear on the question that you’re asking, further expansions at Sukari or…

Unidentified Analyst

Yeah, further expansion of Sukari, I mean you are looking at the uphill as well right, I was wondering I mean what’s the status on that on the expansion, I mean on the – do you expect any additions in reserve coming from the other hills other than Sukari?

Pierre Louw

Andrew you can take that one.

Andrew Pardey

Sorry can you repeat that question.

Pierre Louw

Hisham there was asking regarding the other prospects in the Sukari license and potential for additions, increments in the reserves?

Andrew Pardey

Okay. Well look at the explorations we’ve been doing as well as focusing on Sukari in depth. We have also got the map focusing on some of the smaller prospects within around 70 kilometers of the processing plant. Looking for high grade material that we can use supplement feed into the Sukari plant. So that is one of the focuses, which have never really had before, but now what they are doing this year.

Unidentified Analyst

Okay. My question is due to what kind of timeline obviously, is it going to impact the results numbers which are going to come or is it going to be something this year?

Andrew Pardey

This time, I think it will be there is a training program that is ongoing. There are maybe two or maybe three prospects we believe drilled over the last in the six months, nine months or so and one of them in particular seems to be offering good potential to add some incremental high grade material to the mill in the shortest time. So yeah, surely we have been drilling there and they will go into the resources as bank and the mine plant schedule. So it’s kind of a – this is where we are in operational frame of mind now where exploration sort of strategy around Sukari is really targeted at higher grade zones that could essentially displace some of the open pit low grade material in the near term, because we’re not going to be doing another major plant expansion in the near term. So it is still going to be a event grade in the near-term, so that’s where the existing underground expansion and continued resources and reserve expansion from underground comes into play and also some of these other prospects come into play as far.

Unidentified Analyst

Andrew, thank you. And my second – the other question probably unrelated is I mean probably after session I mean what kind of – what’s the plan on dividends and et cetera regarding the shareholder?

Andrew Pardey

Well, dividends I think we have stated for a long now maybe not publicly but certainly it typically raise the question that that it is something that the company wants to consider in two quarter or the right time. Obviously we think closer with regards to profit share and the advances that we’ve made and that sort of helps in that respect prospect and so far as we were – we’re never intending to stop paying dividend to shareholders before we get into profit share with the government and we do expect that it would have been (inaudible). So we’re getting closer on that front and then also see the other think as we need to make sure Stage 4 is well and truly in and then just focus the investment is out of the way and we’ve commissioned that the operation clearly will be getting what would be through that process over the course of this year. So I will say, yes, the dividend question is something that over the course of this year both will be considering more really than that in this stage.

Unidentified Analyst

Okay. Thank you.

Andrew Pardey

Thank you, Jim.

Operator

The next question comes from (inaudible), please go ahead.

Unidentified Analyst

Hi good afternoon. I was actually it was more of a question or it’s just the answer that with dividend, so we’re going to just (inaudible) this answer. Thank you

Andrew Pardey

Thanks, that’s great.

Operator

Thank you. (Operator Instructions) Your next question comes from Stuart McDougall. Please go ahead.

Stuart McDougall – Jennings Capital

Thank you. Guys, with the recovery improvement in Q4 is that something we should expect going forward now?

Andy S. Davidson

Andrew? Andrew are you there?

Andrew Pardey

Yeah. I’m sorry. Stuart, can you repeat the question please?

Stuart McDougall – Jennings Capital

Just on the recovery side, should we be looking for the 87%, 88% range in 2013 onwards?

Andrew Pardey

Well, that’s certainly what we’re trying to achieve. We’ve been doing a lot of work in tat area to try and maintain those levels. We’re going to have the (inaudible) and regeneration skill coming off in favor of the year as well, and the mine rate itself will be increased, there will be a lot more going improvement, it’s going to be perhaps only out of the top. (Inaudible) both recovery we can maintain those levels.

Stuart McDougall – Jennings Capital

Okay, thank you very much.

Andy S. Davidson

Thanks, Stuart.

Operator

We have no further questions at this time (Operator Instructions). Your next question comes from the line of (inaudible). Please go ahead.

Unidentified Analyst

Hello Andy, many congratulations on a very good year for the company, it’s difficult to encounter in Egypt, I’m just trying to come on to this appeal court hearing that’s going to be held on the 19 of June, I wonder if you can just explain why you think this will just be procedural meeting and not a decision making meeting?

Andy S. Davidson

Hi, Barry and thanks for the question and thanks for the comments as well. We can tell by our legal advisors and this is not a legal point, this is a opinion, this is the factor of the matter what happens next, but it is now that the this sort of appeal process problem is underway, we had this ruling based on our application to suspend the judgment, all the papers have been launched across the notices have been served et cetera, et cetera, we’re now moving to the stage where the court considers the merits of the appeal, and as the first stage in that process, the much of that is really to the typical sub committee of the core to sit down and deliver rates over the various arguments put forward and the original judgment. And then well, over a period of time, we only know that first fitting before that maybe a number of them, but they will eventually come up with a recommendation to the core. So that’s why I say it’s procedural, we can’t expect any – they are not a decision making body, they are an advisory body, so we will not get a decision out of that process.

Unidentified Analyst

Okay. So you are expecting the technical committee to produce the recommendations?

Andrew Pardey

Well, we are expecting them to sit and to start considering them. So when that process ends, we turn them.

Unidentified Analyst

Okay. Next one, but this of course on the cash derivatives, could you just tell us where the cash is, which clients you are using in which countries?

Andrew Pardey

So, this one for Pierre I think.

Pierre Louw

Our cash balances for the Centamin Group is basically held in through the Australian companies in certain bank accounts. With the STM specific funds being held in Egypt and that is useful funding this stage for projects as well as the operational expenses every month. The bulk of the money obviously because that is Centamin Group money, it is held offshore or held in Australia, but.

Andrew Pardey

Middle East bank?

Unidentified Analyst

All bankers.

Andrew Pardey

Yeah. We need to really disclose, I think…

Pierre Louw

I think these are very material questions these days.

Unidentified Analyst

Okay. Is it major reputable bank?

Pierre Louw

Okay. Well, there are lot of those around, that’s proved not to be so reputable, when feasible (inaudible).

Andrew Pardey

I think that could you mind these, we have had mainly helping three different banks at this point.

Unidentified Analyst

Okay. Well, I don’t know is it possible if I communicate with you privately, you can actually give the names of the banks?

Andrew Pardey

I’ll shed some advice on that, no problem.

Unidentified Analyst

Okay, all right. Thanks for the updates.

Andrew Pardey

Thank you. Next one?

Operator

The next question comes from Hashim Ghoniem. Please go ahead.

Hashim Ghoniem – Naeem Holding Co.

Hi, good afternoon guys. Excellent quarter, great numbers, I just had a question for Andy concerning the court case. Now my understanding was that the case was presented in front of the technical panel last year on May 22 of 2012, and they gave in their opinion on June 19 of 2012 without even having a signed contract and they stated that the Administrative Court does not have the right to jurisdiction to invalidate the exploitation license. So now that after the appeal and after the appeal from EMRA on your side and Ministry of Petroleum, and these referred to the same technical panel again, shouldn’t the outcome be known?

Pierre Louw

Hashim thanks for that. I don’t think it’s the same technical panel, but I may be wrong in that respect. But you’re right, I mean the original, going back to 2012 May-June, and into September when we had the opinion expressed that the court really did not have jurisdictions in this case. That was our understanding that’s where we would end up in the October 30 ruling last year.

Hashim Ghoniem – Naeem Holding Co.

Exactly.

Pierre Louw

And it’s one of the reasons why we were taken back by the site of the court potentially overruled that and made a ruling anyway and then refit on to the subjects we are ruling itself, but by the time, certainly the argument that the court, the administrative court in the special instant did not have the jurisdiction to hear the case. It’s one of the trust of our appeal. Obviously, the main point of the appeal is regarding the documentation or the trial we have these exploration lease time due to the original copy, but we are also making that argument that the core did not have jurisdictions here and that’s relating to the concession agreement which is an article of rule that administrative core is essentially a core concerned with matters regarding contracts and our argument is that it doesn’t have the (inaudible) and that was certainly supported by the technical committee of the court itself leading hands of (inaudible) so, yes, supporting what’s really in the favor.

Hashim Ghoniem – Naeem Holding Co.

Okay. One other point, it was first presented to the court on May 22, 2012 and then they came up with their decision on June 19, so basically took one month. Do you expect the same process to go on, because the (inaudible) also June 19 and next hearing should take one month or should it take several?

Andrew Pardey

I would tend to say, enjoying paroles, I mean, we’re looking on other lawyer and I haven’t specifically asked them this question in relation to comparing one set of hearings with another, but my own gut feeling with the reason to logically assume whether it should take same amount of time extended to substantially different arguments and cases, one to potentially take longer than the other or shorter than the other. We are dealing within the appeal that’s you got three parties appealing us, EMRA, Ministry of Petroleum, and one original complainant. So I don’t know the answer to the question is the short answer.

Hashim Ghoniem – Naeem Holding Co.

Okay, thank you. Thanks very much.

Andy S. Davidson

Thank you.

Operator

We have no further questions at this time. Please continue.

Andy S. Davidson

Well, as there are no further questions, then I just want to thank everybody for being on the call and thanks for the time and attention and see you all next time. Thank you.

Operator

Thank you. That concludes the conference for today. Thank you all for participating. You may now disconnect.

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