Centamin earnings up despite a capital-intensive phase

Shares in Centamin (CEY) were marked up after the gold miner posted a 26 per cent increase in interim cash profits to $193mn (£154mn). Operating cash flows were up by a third to $172mn, reflecting an improved operational performance and favourable pricing.

A double-digit increase in revenue was underpinned by an 8 per cent rise in both gold production and sales. In all, Centamin shifted 219,354 ounces at an average realised gold price of $1,936 per ounce. The core Sukari Gold Mine in Egypt produced 220,561 ounces and remains on track to meet 2023 guidance with a midpoint target of 450,000-480,000 ounces.

The solid operational performance is again apparent in the industry’s preferred metric – the all-in sustaining cost – which fell by 15 per cent on HY 2022 to a unit equivalent $1,228 an ounce.

The company drove both underground and open pit mining volumes higher, along with its processing numbers, but grades slipped due to the scheduled inclusion of low-grade oxide and transitional ore tonnage.

On the development front, Centamin published results from the Côte d'Ivoire Doropo pre-feasibility study midway through 2023, which “demonstrated the economic robustness of the project”, according to chief executive Martin Horgan. Further drilling will be focussed on hydrology, metallurgy, and geotechnics to flesh-out the commercial viability of the project.

Gross capital expenditure came in at $108mn and is expected to hit $273mn through the full-year due to “significant reinvestment in the Sukari mine”. It is expected that capital commitments will fall markedly next year, easing pressure on free cashflow.

Centamin has purchased put options for 240,000 ounces of gold at a strike price of $1,900 – 4 per cent below the going rate, but the gold price should be supported over the medium term due to the likelihood of US dollar weakness. The shares continue to trade below book value once cash is factored into the equation. Buy.

Last IC View: Buy, 106p, 16 Mar 2023