Principal Risks and Uncertainties

Nature of risk

Future political, social or economic changes in the countries in which we operate may impact on the Group.

The future investment framework and business conditions in our operating locations could change with governments adopting different laws, regulations and policies that may impact on the ownership, development and operation of our mineral resources projects. Outside of our host countries we are monitoring the ongoing conflict in the Ukraine.

Mitigation measures

Government policies have developed over the past years in host countries to incentivise foreign direct investment and the development of local mining industries. Centamin deploys a proactive approach to government and stakeholder liaison and actively monitors – on an ongoing basis – legal, fiscal, regulatory and political developments in its host countries.

The terms of the Sukari Concession Agreement, (including the applicable tax regime and rights of tenure), were issued and ratified under special Law No. 222 of 1994 and can, therefore, only be amended by the passing of a further law.

Ongoing strategy

To maintain a detailed and up to date understanding of the investment framework and climate in which we operate as well as a constructive relationship with our host governments and local partners, such as EMRA. The Company undertakes to abide by the spirit and letter of the Concession Agreement as well as local laws/ Regulations in Egypt and furthermore where our exploration activities are taking place in CDI.

Risk appetite

Level: Balanced

We will not take any unnecessary risk within our control. However, we understand that inherently we have limited control over a number of external risk factors.

Nature of risk

The Groups structure includes operational and exploration licences in Egypt, CDI and BF, held through companies in Australia, Jersey and the United Kingdom. This means we are subject to various legal and regulatory requirements across all jurisdictions, relating to issues such as cross jurisdictional taxation, related party transactions, anti-bribery and corruption.

Ongoing legal, fiscal and regulatory changes may impact project permitting, tenure, taxation, exchange rates, environmental protection, labour relations, and the ability to repatriate income and capital. These measures may also impact the ability to import key supplies, export gold production and repatriate revenues.

Mitigation measures

Centamin deploys a proactive approach to government and stakeholder liaison and actively monitors – on an ongoing basis – legal, fiscal, regulatory and political developments in its host countries.

In Egypt we have the Sukari Concession Agreement which can only be changed by means of another law, so we have the right to export gold, repatriation of funds, existing tax exemption and further considerations.

In addition, the Group engages with the relevant regulatory authorities and seeks appropriate advice to ensure compliance with all relevant regulation and legislation. An example would be the global tax strategy in place which ensures all taxes are paid at an operational level and further tax requirements are met through the holding structure. Appropriate monitoring procedures are in place and we ensure that we manage legal and regulatory compliance.

Ongoing strategy

The Company will ensure that it complies with all relevant regulation and legislation including its environmental and operational commitments set out in the relevant permits/authorisations and local laws/ regulations.

Risk appetite

Level: Balanced

We will not take any unnecessary risk within our control. However, we understand that inherently we have limited control over a number of external risk factors.

Nature of risk

Centamin’s ability to operate and conduct business in host countries, may be adversely affected by current and any future dispute resolution and/or litigation proceedings. The Group is currently party to a single legal action in Egypt. The challenge to the concession agreement could affect its ability to operate the mine at Sukari in the manner in which it is currently operated and the former could adversely affect its profitability.

Mitigation measures

In order to mitigate this risk Centamin has (a) taken appropriate legal advice from reputable legal advisers and continues actively to pursue its legal rights with respect to its existing case; and (b) maintains regular contact with its Egyptian legal advisers who actively monitor developments in both court and local media for signs of any legislative or similar developments that relate to its ongoing litigation or which may otherwise threaten its operations, finances or prospects.

The potential for serious impact can be further mitigated by: Centamin’s strict adherence to local laws and agreements; the Egyptian government’s continued support on the constitutionality of Law no. 32 of 2014, which restricts the ability of third parties to challenge contractual agreements between the Egyptian government and investors such as Centamin; the investment protections and dispute resolution provisions set out in the Sukari Concession Agreement and the bilateral investment treaty between Australia (PGM’s place of incorporation) and the Arab Republic of Egypt.

Ongoing strategy

To minimise exposure to litigation and reduce the impact of actions by complying with all relevant laws and regulations and to defend and/or bring any actions necessary to protect the Company’s assets, rights and reputation.

Risk appetite

Level: Balanced

We will not take any unnecessary risk within our control. However, we understand that inherently we have limited control over a number of external risk factors.

Nature of risk

In 2020, COVID-19 significantly impacted the world, presenting an unprecedented medical, economic and social challenge and the ongoing effects of this were felt through 2021 and will be beyond. Centamin has been proactive in how it manages and mitigates the impacts within its control. We have experienced no material disruption to operations, supply chain or gold shipments.

Furthermore, we recognise the macro-economic uncertainty this has created including volatility in the markets, increasing commodity costs, supply chain disruption and the impacts to our people. The scale and duration remain uncertain but we continue to monitor and are prepared to manage accordingly.

Mitigation measures

In 2020, COVID-19 significantly impacted the world, presenting an unprecedented medical, economic and social challenge and the ongoing effects of this were felt through 2021 and will be beyond. Centamin has been proactive in how it manages and mitigates the impacts within its control. We have experienced no material disruption to operations, supply chain or gold shipments.

Furthermore, we recognise the macro-economic uncertainty this has created including volatility in the markets, increasing commodity costs, supply chain disruption and the impacts to our people. The scale and duration remain uncertain but we continue to monitor and are prepared to manage accordingly.

Ongoing strategy

We recognise the potential risks of the global pandemic as a threat bringing potential risks to our people and business. Following the initial assessment of the potential risks, their impacts to our people and business we developed a dynamic action plan at a corporate and site level supported by resources focusing on our response day to day. This has continued to adapt and evolve in response to the changes both realised and projected to ensure we are in the best place to manage and respond as required.

Risk appetite

Level: Balanced

We will not take any unnecessary risk within our control. However, we understand that inherently we have limited control over a number of external risk factors.

Nature of risk

The extent of the Company’s financial performance is due in part to the price of gold, over which the Company has no influence. Revenues from gold sales are in US dollars and Centamin has exposure to costs in other currencies including Egyptian pounds, Australian dollars and sterling.

Centamin manages its exposure to gold price by keeping operating costs as low as possible and continues to consider other options where these would be viewed as beneficial for our commitment to stakeholder returns.

Mitigation measures

The Group is 100% exposed to the gold price; however, the cash costs of the Sukari Gold Mine remain within our budget which is conservatively based on the long term gold price as modelled by external advisors. This often means we can take advantage of any changes in the gold price which have been positive over the course of 2021 with a realised average price of $1800.

Ongoing strategy

The Company does not currently hedge against the price of gold or exposure to currencies. We will continue to allow for financial flexibility when budgeting and forecasting using a measured approach to the potential fluctuations in gold price.

Risk appetite

Level: Balanced

We will not take any unnecessary risk within our control. However, we understand that inherently we have limited control over a number of external risk factors.

Nature of risk

Sukari currently constitutes Centamin’s main mineral resource and sole mineral reserve, near term production and revenue. Whilst the resource base in CDI is growing, we are undertaking brownfield surface exploration within the existing concession and have secured highly prospective ground within Egypt’s Nubian Shield, we recognise until further production growth beyond Sukari is identified, the potential impact remains high and safeguarding the project is paramount to the Company. The ongoing COVID-19 pandemic has continued to ensure focus on this risk but through 2021 we have continued our approach to Co-Existing with COVID-19.

Mitigation measures

The project at Sukari has two distinct ore sources (open pit and underground), the processing plant has two separate flotation circuits and two separate power stations.

Whilst one project, the nature of the design of the plant provides adequate mitigation and reduces the relative likelihood of dependence compared to a single layer plant design. The second circuit of the process plant has been fully operational for over seven years, which shows the resilience of the project. In addition, the plant is fed by both the open pit and underground operation, providing higher and lower-grade ore to the processing plant. Operational activity and production is expected to continue at above nameplate capacity. Other mitigating factors, outside the single project at Sukari, include the continued focus on longer term growth and expansion through exploration and acquisition targets both inside and outside of Egypt.

Ongoing strategy

At Sukari, the process plant has been designed with sufficient resilience and redundancies within the operating cycle.

The exploration projects across the business provide a well-balanced project pipeline, with potential to add incremental shareholder value by increasing production across the Group as highlighted in the Strategy in Action. The recent bid round in Egypt has resulted in the Company being awarded additional exploration areas, which we are currently discussing further with the government.

Risk appetite

Level: Informed

We will have an approach that could deliver reasonable rewards, economic or otherwise, by managing risk in an informed way.

Nature of risk

SGM, is 50:50 jointly owned by PGM (the Company’s wholly owned subsidiary) and EMRA, with equal board representation from both parties. The board of SGM operates by way of simple majority.

Should a dispute arise or decision-making become deadlocked and cannot otherwise be amicably resolved by way of commercial negotiations or mediation then time-consuming and costly arbitration or other dispute resolution proceedings may need to be initiated.

Mitigation measures

It is of key importance for Centamin to maintain a solid and transparent working relationship with its 50% partner, EMRA, through a strict adherence to the Sukari Concession Agreement. With the onset of profit sharing in 2019, the proper application of the cost recovery and net profit share payment provisions under the Concession Agreement, has become a key priority.

To ensure successful operation of the Sukari Gold Mine maintaining a good working relationship with EMRA, other relevant ministries and wider government is a key focus. The Group has regular meetings with officials from EMRA and invests time in liaising with relevant ministry and other governmental representatives.

Ongoing strategy

A key objective of the Company is to maintain its licence to operate in its host countries. In Egypt, this is achieved through active and ongoing co-operation, regular meetings and correspondence with EMRA, as well as making sure that the terms and conditions of the Concession Agreement and applicable laws are fully complied with. Ongoing monitoring and review of this is key and is an activity which we will continue to give the required focus to.

Risk appetite

Level: Balanced

We will not take any unnecessary risk within our control. However, we understand that inherently we have limited control over a number of external risk factors.

Nature of risk

Centamin is committed to building and operating our mines in a safe and responsible manner. To do this, we seek to build trust-based partnerships with host governments and local communities to protect our license to operate and ability to grow.

We should only advance our business interests where this protects people, fosters socio-economic development and safeguards the environment, and leaves a positive legacy for our host communities

Mitigation measures

Ensure that we are clear on the standards that are expected locally and regionally within our areas of operation.

Develop and implement investment plans that sustain broad stakeholder support and compliance with local and regional standards.

Maintain an up-to-date compliance register for each asset and routinely review our performance against these commitments and obligations.

Ongoing strategy

Acting in an ethical, responsible and transparent manner is fundamental to realising the significant business benefits gained from building trusted and constructive relationships with all our stakeholders, and to maintaining our socio-political license to operate. Strengthen our sustainability governance and management framework at all levels of the organisation, including reinforcement of our performance standards to support growth, supported by resources allocated to ensure the long-term physical, chemical and biological stability of the site - or social benefits to our host communities.

Risk appetite

Level: Balanced

We will not take any unnecessary risk within our control. However, we understand that inherently we have limited control over a number of external risk factors.

Nature of risk

Our accomplishments and success as a Company are made possible by our ability to attract and retain human capital and through the commitment of our people.

We need to support our people to develop a shared understanding of the critical behaviours and skills required for successful performance and provide them the opportunity to progress to a top-level if they possess the ability to do so. Failure to do so will result in elevated rates of turnover and knowledge loss.

Valuing diversity and promoting inclusion is an ethical imperative for a sustainable business.

Mitigation measures

Initiatives which have been introduced include: the employee development pathway, to ensure all positions are undertaken to a proficient level; supervisory and leadership training to equip employees for increased levels of technical and management responsibility; and succession planning.

Continue to reinforce awareness of our organizational values and the critical behaviours required for successful performance.

Through visible leadership, strengthen diversity and inclusion in workplace culture and practice, and set targets to increase the representation of women.

Ongoing strategy

To deliver on the principles and commitments as stated in our People policy. Visible leadership in the development of our people, diversity and inclusion. Sustained resourcing of the professional development and training initiatives.

Risk appetite

Level: Balanced

We will not take any unnecessary risk within our control. However, we understand that inherently we have limited control over a number of external risk factors.

Nature of risk

Elevated societal expectations on corporate environmental responsibility, including increased levels of stakeholder scrutiny, disclosure, regulatory requirements and industry standards.

Recent high-profile incidents have put a spotlight on the need for increased levels of corporate accountability on matters of environmental and social governance, including tailings management, heritage protection, responsible supply chain, diversity and inclusion.

The COVID-19 pandemic has also focussed attention on the wellbeing our people, social inequalities and the role which we must play in the wider communities.

Mitigation measures

Through our Sustainability Performance Framework we continue to strengthen our governance and management controls and assurance processes to meet stakeholder expectations, existing and new regulatory and industry standards, for example the RGMPs, GSITM and TCFD.

Define environmental and social criteria and triggers to support key investment decisions.

At asset-level, focused on building the capacity of our HSES specialist teams and the continual improvement of our environmental and social management system. We are improving our LOM management plans, measurement and target setting and third-party verification.

Ongoing strategy

Reinforce the implementation of our Sustainability Performance Framework and its integration into asset level management systems and practice.

Build the awareness and capacity of senior management teams to integrate environmental and social risks and opportunities into investment decision-making

Risk appetite

Level: Balanced

We will not take any unnecessary risk within our control. However, we understand that inherently we have limited control over a number of external risk factors.

Nature of risk

We recognise transition to a net zero carbon economy is expected to profoundly affect our business model over the medium and/or long-term due to factors including: the pricing of carbon emissions; availability and costing of commodities and consumables; changing market and investor sentiment.

The most significant opportunity for decarbonisation is the ability to reduce and potentially remove fossil fuel-generated electricity from gold mining’s sources of power. This is likely to require increased levels of capital investment in the short-medium term and the uptake of new technology.

Mitigation measures

A number of carbon abatement initiatives are underway. Construction has commenced on a solar PV project that will reduce our GHG emissions by 60,000 tCO2 -e per annum at Sukari; and the installation of the high production trays to our haul fleet indicates a 15 to 20% reduction in fuel consumption per tonne hauled.

Other initiatives under investigation include expansion of our existing commitment to renewables, connection to the national grid in Egypt and fuel switching to natural gas for both power generation and hybridization of our mobile fleet.

Ongoing strategy

Understanding the effects of climate-related risk on our business is important as we study in more detail and specificity the updated life of mine plan for Sukari including opportunities for decarbonisation. We will undertake a trade-off analysis for decarbonisation options.

Elaborate a climate change strategy that will set an ambitious sciencebased target for carbon reduction by 2030 and an accompanying roadmap to achieve this target.

Risk appetite

Level: Balanced

We will not take any unnecessary risk within our control. However, we understand that inherently we have limited control over a number of external risk factors.

Nature of risk

It is an inherent risk in our industry that incidents due to unsafe acts or conditions, or the failure of our equipment or infrastructure could lead to injuries or fatalities.

Remote and rostered work also has potential to impact the mental health and wellbeing of our workers – an aspect that has been heightened by the ongoing COVID-19 pandemic.

Our workforce face potential risks from hazards such as fire, explosion and electrocution, as well as risks specific to the mine site and development project. These include potential slope failures or collapse in the underground, heavy or light equipment collisions involving machinery/transport or personnel or environmental incidents such as cyanide contamination.

Continuing focus on the risks associated with mining companies’ tailings facilities also means we continue to monitor this risk, completing regular internal and external technical reviews.

Mitigation measures

Protecting the safety, health and wellbeing of employees, contractors, local communities and other stakeholders is a fundamental responsibility for Centamin. We seek continuous improvement of our safety and health management system and practices including assurance processes, with particular focus on the early identification of risks and the prevention of incidents.

We continue to reinforce our critical risk and control standards, review and test our crisis management plan, maintain Covid-19 management protocols, continue to enhance employee medical benefits and our new Tailings Storage Facility (“TSF2”) starting operation.

Reinforce the implementation of our Sustainability Performance Framework and its integration into asset level management systems and practice.

Build the awareness and capacity of senior management teams to operationalise our critical risks standards and seek conformance to ISO 45001.

Ongoing strategy

Ensuring the safety, health and wellbeing of our workforce is directly aligned with our first Value, to Protect, and is amoral imperative. This requires a focus on zero harm whilst constituting a direct investment in the productivity of the business and the physical integrity of our operations.

A safe and healthy workforce translates into an engaged, motivated and productive workforce that mitigates operational stoppages, and reduces potential incidents or harm.

Risk appetite

Level: Controlled

Controlled considers potential breaches in our policies and controls to safety, health and wellbeing. The Board invests heavily in a programme of continuous improvement in relevant practices and has an expectation to meet the highest standards.

Nature of risk

Exploration activities by their very nature are highly speculative with an inherent degree of risk. Centamin strives to make new discoveries, growth and value-creation opportunities through our exploration programme.

Whilst Egypt continues to represent a significant opportunity through brownfield exploration around the concession and highly prospective ground in Egypt’s Nubian Shield, we also recognise our potential growth projects in Côte d’Ivoire.

Mitigation measures

Before undertaking any exploration activities a risk-based approach is undertaken to filter projects considering a number of factors.

This approach has been further enhanced in 2021, and beyond, by an overhaul of the exploration and geological leadership team and a restructured approach. This will be supported by independent advice and an investment in technology.

2021 also delivered a positive preliminary economic assessment for Doropo and we commenced the pre feasibility study, which is due in 2022, we secured highly prospective ground in Egypt and doubled ABC resources.

During 2021 we invested a total of US$14M in exploration activities, with an initial US$25m budgeted for exploration expenditure in 2022.

Ongoing strategy

Ensuring we have an effective and efficient exploration programme to meet our strategic targets, long-term production and reserves goals.

Further information will be provided through 2022 in updates on the exploration activities.

Risk appetite

Level: Opportunistic

We will consider opportunities with higher levels of risk in exchange for potentially greater reward, as long as they do not conflict with our core values.

Nature of risk

Geological uncertainty is an inherent risk which any mining company faces.

Understanding of the orebody can be influenced by a number of factors which can impact on the ability to estimate the location of the ore and the potential grade expected by the mining operations.

As these estimations are used to inform the approach to our operations and the wider business strategy we need to ensure that we can make this process as accurate as possible.

Mitigation measures

The overhaul of the geological leadership team through 2021 and a restructured approach has led to a number of changes to the stewardship of the orebody and a new Sukari Orebody Stewardship Model.

Upgrades to the resource management processes and the development of more robust resource models have driven a review of the existing data alongside future analysis and the ability to set Geology targets.

These changes will contribute to an integrated approach to the mining methods which are applied and inform the mineto-mill planning.

Ongoing strategy

To achieve an accurate estimation based on geology, that informs improved mine planning and operations to deliver results. This will be supported by the near-term roadmap to +500koz pa and the robust life of mine schedule as presented in December 2021.

Risk appetite

Level: Informed

We will have an approach that could deliver reasonable rewards, economic or otherwise, by managing risk in an informed way.

Nature of risk

By their nature, mineral resources and reserves are estimates based on a range of assumptions, including geological, metallurgical, technical and economic factors. Other variables include expected costs, inflation rates, gold price, grade downgrades and production outputs.

Unplanned operational stoppages can impact our production. An inability to shift the volumes of waste required, drops in our operational capacity in mining, contractor management, supply chain disruption or ground stability are examples of potential risks.

Accurate and complete planning is pivotal to informing production estimates, grade quality and provide greater clarity to corporate/operational decision-making. We then need to deliver against our targets by analysis of our data to inform the right decisions.

Further through 2021 we have managed the impact of COVID-19 and continue to monitor these.

Mitigation measures

2021 has been a transformational year for Centamin with a focus on improving mining flexibility and delivering growth. At the end of 2020 we completed the Life of Asset Phase 1, issued 3 year guidance and commenced accelerated wastestripping. Through 2021 we commissioned TSF 2, completed the new Sukari Orebody Stewardship Model and launched the Centamin Capability Framework,

The plan should provide clarity as to the strategic direction of the mine and the desired production levels for the,short, medium and long-term to give focus to the operational elements of the mine. Alongside the overhauled geological leadership team and restructured approach to geology and orebody stewardship we have developed a comprehensive mining engineering model, enhanced our geotechnical engineering programme, increased our mining flexibility and have identified multiple initiatives to improve operating efficiency and productivity.

An example being a dedicated contract-mining solution on the East of the open pit and the owner-operator fleet utilised for ore and waste mining on the North and West.

Ongoing strategy

To achieve reliable and consistent production, whilst optimising the potential of the operation. The Company provides timely and accurate information to the market on production levels and forecasts. The mining sector continues to face operating cost inflation, including labour costs, energy costs and the natural impact of ore-grade deterioration over time. In order to deliver our disciplined growth strategy and to maintain and improve our competitive position, the Group must deliver its financial improvement targets and minimise the number of unplanned operational stoppages.

Risk appetite

Level: Informed

We will have an approach that could deliver reasonable rewards, economic or otherwise, by managing risk in an informed way.