Centamin beats on profits despite cost hikes

Gold miners face similar pressures as everyday people: costs rising but earnings staying the same. Centamin (CEY) has the positive of beating expectations on its first-half cash profits, however. For the first half, the Egypt-focused miner reported a cash profit of $153mn (£126mn), a quarter higher than broker Liberum’s forecast. 

In a sign of gold weakness despite global market turbulence, this figure was 19 per cent below last year.

Production and cost guidance for the year was reiterated, but the company said the all-in sustaining cost (AISC), which includes capital expenditure, would be “at the upper end” of the forecast $1,275-$1,425 an ounce (oz). AISC in the first half was $1,446 an oz and production was 203,898oz. Chief executive Martin Horgan said a new solar plant would cut energy costs in the second half and flagged “an elevated level of capex” in the first half, adding to the AISC figure. 

The company’s balance sheet offers some questions for investors: the sizeable cash position of $127mn with no debt means there is plenty of dry powder. But this cash is already down $83mn since the end of 2021, on the back of less cash generation and spending on the solar plant and the new tailings storage facility. Coming later this year are a study on the company’s Doropo project in Cote d’Ivoire, offering new spending decisions, and a capital structure review.

Liberum forecasts an Ebitda rebound next year ($296mn to $337mn) and hefty improvement in the margin, from 15 per cent this year to 22 per cent in 2023. We remain positive for similar reasons. Buy. 

Last IC View: Buy, 91p, 16 Mar 2022