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Centamin keeps 2020 forecast over 500,000oz

Gold miner says it reach original 2020 goal despite virus restrictions, as it bids farewell to Josef El-Raghy
May 18, 2020

Centamin (CEY) has maintained its 2020 guidance but pulled back on some new spending to preserve cash because of the current pandemic.

IC TIP: Buy at 185p

The forecast for this year is 510,000-540,000 ounces (oz) of gold, at an all-in sustaining cost (AISC) of around $900 (£744) an oz. With gold now about $1,700/oz this will see earnings climb significantly. In 2019, underlying cash profits were $284m from an average gold price of $1,399/oz and an AISC of $943/oz.

The cash profit was 10 per cent higher than 2018 as higher costs eroded the benefit of the average $132 extra in revenue per ounce sold compared with the year before. The miner had been planning to build a solar plant to help power the Sukari mine, but this will now be suspended. 

Centamin shifted its final 2019 dividend to an interim 2020 payout so it could hand investors the 6¢ per share payout without a shareholder vote. This was paid on 15 May. 

Centamin finance chief Ross Jerrard said the company would stay focused on “cost discipline and achieving greater operational efficiency as the key margin and cash flow drivers”. The company has been at the centre of one takeover play, the failed Endeavour Mining (Can:EDV) all-share bid, and gold miners are still playing M&A musical chairs. 

New chief executive Martin Horgan comes directly from a major deal, as he left Toro Gold because Resolute Mining (RSG) bought out the company for $130m in cash and 274m shares. He has sold his Resolute shares obtained in the deal. 

The consequences of Centamin relying on one operation – Sukari – for all its income were a major loss in earnings and its share price tumbling when problems at the mine hit production two years ago. 

There is further change at the board level to come, with chairman and former chief executive Josef El-Raghy not standing for re-election at the company’s annual general meeting at the end of June. He served as chief executive, managing director, executive chairman and chairman at various points over almost 20 years, taking the company from a developer to established miner.

Broker Peel Hunt forecasts adjusted pre-tax profit will almost double this year compared with 2019, to $330m. 

CENTAMIN (CEY)   
ORD PRICE:185pMARKET VALUE:£ 2.1bn
TOUCH:180-193p12-MONTH HIGH:185pLOW: 83p
DIVIDEND YIELD:5.8%PE RATIO:29
NET ASSET VALUE:112¢NET CASH:$278m
Year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)*
201550858.44.52.94
201668726718.715.5
20176762078.412.5
20186031536.55.50
20196521737.610.0*
% change+8+13+17+45
Ex-div:30 Apr   
Payment:15 May   
£1=$1.21 *6¢ final dividend for 2019 was paid as an interim 2020 dividend