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Centamin trading weakly even as profits soar

Gold miner's share price has fallen by half in six months over production issues, while strong gold prices have driven its cash profits up by half on 2019
Centamin trading weakly even as profits soar
  • Centamin announces 3¢ final 2020 dividend and plans to at least match it in 2021
  • Production down but profits up for 2020 on favourable pricing

Centamin (CEY) proved the benefits and shortcoming of buying gold miners over gold in 2020, handing shareholders back over $100m (£72m) but also trading at half the market capitalisation it had in September, when gold was at $2,000 (£1,443) an ounce (oz). 

The Egyptian miner saw its cash profits climb 54 per cent in 2020 thanks to the one-quarter higher realised price for gold for the year. The company will pay a 3¢ final dividend, compared to the 6¢ final pay-out for 2019 that became a first interim 2020 dividend due to Covid-19 uncertainty. 

The weak share price is related to the decision to stop production in one area of the Sukari mine’s pit last year because of safety concerns. This meant production was 5 per cent lower than the year before, at 452,320oz. 

Centamin clearly needs another mine, given the regular production hiccups at Sukari. It says another discovery on the same site could be a possibility, while its holdings in West Africa have promise too. New geological team leadership is a sign the company is taking this seriously. Buy. 

Last IC View: Buy, 123p, 4 Dec 2020

CENTAMIN (CEY)    
ORD PRICE:104pMARKET VALUE:£ 1.20bn
TOUCH:103.7-104p12-MONTH HIGH:233pLOW: 98p
DIVIDEND YIELD:6.2%PE RATIO:11
NET ASSET VALUE:113¢NET CASH:$291m
Year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)*
201668726718.715.5
20176762078.3812.5
20186031536.505.50
20196521737.5910.0*
202082931513.59.00
% change+27+82+78-10
Ex-div:20 May   
Payment:15 Jun   
£1 = $1.39 *6¢ final dividend for 2019 was paid as an interim 2020 dividend