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Centamin trying to get its shine back

Gold miner has committed to lower production and higher spending in order to get consistency at its Sukari operation in Egypt
Centamin trying to get its shine back
  • Gold miner sees profits fall but holds onto dividend
  • Production down on last year as part of mine longevity planning
103p

Centamin’s (CEY) interim profits tumbled after the gold miner saw a drop in production and hike in prices in the first six months of the year.

In general, gold miners have struggled this year as the precious metal has come off a record high in the second half of 2020, while Centamin’s share price is down far more than most because of its production decline. 

The company operates the Sukari gold mine in Egypt, which has struggled to hit production forecasts in recent years. Despite these issues, Centamin has a strong balance sheet - “too strong?” asked RBC analyst Tyler Broda on Thursday, pointing to its inaction in the acquisition-heavy gold space - and has stuck to its dividend plan of $105m (£75.6m) for the year. 

Centamin's cash profit was down a quarter on last year at $190m but was still 9 per cent ahead of the consensus forecast, which Broda said was down to lower than expected operating and exploration costs.

Chief executive Martin Horgan said the company had made “substantial progress” in its new plans for Sukari after a ‘life of asset’ review at the end of 2020, which set long-term production guidance for Sukari at 450,000-500,000 ounces (oz). 

Centamin is one of the largest London gold miners that only operates a single mine, which has contributed to both its solid financial position and current share price weakness, as any Sukari issues mean the company will produce less gold.

Horgan said the Doropo project in Côte d’Ivoire was Centamin’s “next potential mine”, and the company will host a ‘geology’ capital markets day next month to walk investors through its “approach to unlocking value from the portfolio”. 

Consensus forecasts for the full-year adjusted earnings per share are 13¢, compared to 14¢ in 2020. 

Investors’ Chronicle has long recommended readers buy Centamin shares, given its stable financial position and more recently the strength of gold. Those factors remain, even if the situation looks dire for anyone who bought when gold was running up last year and now faces an investment that is down by more than half. Buy at 103p. 

Last IC View: Buy, 104p, 22 Mar 2021

CENTAMIN (CEY)    
ORD PRICE: 103pMARKET VALUE:$ 1.26bn
TOUCH:103-104p12-MONTH HIGH:233pLOW: 99.6p
DIVIDEND YIELD:4.9%PE RATIO:12
NET ASSET VALUE:106¢NET CASH$274m
Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
20204491936.616.00
20213671175.334.00
% change-18-39-19-33
Ex-div:02 Sep   
Payment:30 Sep   
£1 = $1.39