Last year's Arab Spring caught investors in companies with interests in Egypt completely by surprise, spooking many into selling out of gold miner Centamin. On reflection, that might have been a hasty decision as, on the evidence of these results, the mining company looks set to deliver on its promise of a 25 per cent increase in gold production this year to 250,000 ounces (oz).
Centamin was able to produce gold during the first half at an average cost of $584/oz (£373) and sell it at $1,649/oz. The 16 per cent rise in cash costs per ounce from a year ago reflects the ramp up in the rate of extraction as higher grade ore was processed. However, it's worth noting that these half-year results did not include the impact of a change in diesel subsidies that Centamin receives from the Egyptian government; tight budgets mean a probable end to fuel subsidies this year which could add $150/oz to Centamin's production costs. Still, despite the potential rise in costs, Centamin's management, which does not currently include a chief executive, reckons they can still fund the company's capital expenditure commitments from cash flow generated by the Sukari mine.
Broker RFC Ambrian said Centamin's costs, even at the higher rate, compared well with the $1,000/oz cost that most west African miners must absorb. The broker forecasts full-year pre-tax profits of $207m, up from $181m in 2011.
CENTAMIN (CEY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 72p | MARKET VALUE: | £793m | |
| TOUCH: | 71-72p | 12-MONTH HIGH: | 117p | LOW: 56p |
| DIVIDEND YIELD: | nil | PE RATIO: | 6 | |
| NET ASSET VALUE: | 83¢ | NET CASH: | $127m | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 167 | 111 | 10.2 | nil |
| 2012 | 184 | 93 | 8.5 | nil |
| % change | +10 | -16 | -16 | - |
| £1=$1.57 | ||||
