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19 October 2021 Reuters CEY.L
? We retain a Buy recommendation for Centamin, as we believe that
the recent capital markets day provided clarity about the medium-
term production profile. Centamin retains a solid balance sheet and
should produce 450koz-500koz over the longer term with a
sustainable dividend of at least USD100m/year.
? Price target and rating:Price target and rating:Price target and rating:Price target and rating: Our price target, based on 1.2x NAV and
6x EBITDA, is GBp134 (down from GBp137).
? Valuation methodology:Valuation methodology:Valuation methodology:Valuation methodology: We value Centamin on an equally
weighted blend of NPV (10%) and EV/EBITDA methodologies to
generate our GBp134 price target (from GBp137).
Bloomberg CEY LN
Current price Price target
GBp 98 GBp 134 Market cap (GBP m) 1,127
19/10/2021 London Close EV (GBP m) 989
Trading volume 7,350,000
Free float 98.0%
Non-institutional shareholders Share performance
Management: 2% High 52 weeks GBp 164
Low 52 weeks GBp 90
Business description Performance relative to
Centamin is a single-asset gold producer
operating the Sukari mine in Egypt. Sukari
has been in operation since 2009 and has a
20-year mine life from today.
Cont
The main catalyst
for the shares should be the upcoming life of mine plan for Sukari that is
scheduled for 1 December. In our view, the shares remain well supported
by the balance sheet and a high minimum dividend – of USD105m – set for
the year, with a yield of 6.7% for 2021.
19 October 2021
BUY
Current price
Price target
GBp98
GBp 134
19/10/2021 London Close
Market cap (GBP m) 1,127
Reuters CEY.L
Bloomberg CEY LN
Changes made in this note
Rating: Buy (no change)
Price target: GBp 134 (137)
Estimates changes
2021E 2022E 2023E
old ? % old ? % old ? %
Sales 773 -4.8 803 0 748 0
EBITD
A
408 -9.2 404 -0.1 323 -0.2
EPS 0.17 -12.8 0.16 3.4 0.10 -0.3 Source: Berenberg estimates
Share data
Shares outstanding (m) 1,156
Enterprise value (GBP m) 989
Daily trading volume 7,350,000
Source: Thomson Reuters Datastream Y/E 31/12, USD m 2019 2020 2021E 2022E 2023E
Revenues 652 829 736 803 748 EBITDA 293 439 370 404 323
EBIT 167 313 241 281 202
Net income (adjusted) 77 157 169 194 114
EPS (reported) 0.08 0.14 0.15 0.17 0.10
EPS (adjusted)EPS (adjusted)EPS (adjusted)EPS (adjusted) 0.070.070.070.07 0.140.140.140.14 0.150.150.150.15 0.170.170.170.17 0.100.100.100.10
DPS 0.04 0.09 0.09 0.06 0.04
Dividend payout ratio 61% 66% 62% 36% 43%
Dividend yield 2.7% 5.6% 6.7% 4.4% 3.1%
Capex -93 -139 -229 -204 -181
Free cash flow 156 314 79 193 159
FCF yield 4.3% 8.1% 1.2% 6.7% 4.5%
Y/E net debt (net cash) -278 -291 -231 -255 -264
Net debt / EBITDA -0.95 -0.66 -0.62 -0.63 -0.82
Gross margin 30.2% 40.0% 35.1% 36.6% 28.7%
EBITDA margin 44.9% 52.9% 50.3% 50.3% 43.2%
EBIT margin 25.6% 37.8% 32.8% 35.1% 27.0%
ROCE 12.8% 23.7% 16.9% 18.3% 12.7%
P/E 22.7 11.8 9.4 8.2 13.9
EV/EBITDA 5.1 3.6 3.7 3.4 4.
Cont
Berenberg
Q3 an incremental miss; guidance maintained
? Q3 light on lower throughput: Centamin has announced Q3 production of
103.5koz from the Sukari mine in Egypt, versus our expectation of 109koz
and consensus of 107koz. A total of 2.9Mt was mined from the open pit at
an average grade of 1.02g/t, while the company mined 201kt from the
underground mine at 4.47g/t. Grade from the open pit was above our
expectation, with higher grades drawn from the Stage 4 West area. The
waste-stripping programme is also progressing well, with both the owner-
operated and Capital-operated programmes 17% ahead of schedule. The
good performance of the open pit was offset by lower grade and volumes
from the underground mine being below our expectations. This appears to
be at least partly down to contractor underperformance, with a tendering
process for a new contractor underway. Production was incrementally
light due to lower processed tonnes – at 2.885Mt versus our expectation of
3Mt, with lower plant throughput driven by maintenance during the
period, including a mill reline. Recoveries at 88.7% were in line with our
expectation. All in sustaining costs (AISC) were USD1,266/oz (Berenberg:
USD1,1875/oz/; consensus: USD1,218/oz) and revenue for the period was
USD183m (Berenberg and consensus: USD194m).
? Trimming production expectation: We have trimmed our 2021 production
expectation – from 429koz at an AISC of USD1,183/oz, to 413koz at an AISC
of USD1,229/oz. This compares to guidance – which has been maintained
– of 400koz-430koz at an AISC of USD1,150/oz-USD1,250/oz, with
management now flagging the midpoint of the range as the likely landing
point. Capex guidance has also been maintained at USD225m, with ytd
expenditure of USD67.6m. Centamin maintains a solid balance sheet, with
no debt and USD256.1m of cash – although FCF generation remains muted
at present due to the high amount of waste being mined as part of the
catch-up stripping programme.
? Maintain a Buy, cutting price target: We maintain a Buy recommendation,
but our price target pulls back from GBp138/share to GBp134/share based
on unchanged multiples of 1.2x NAV an 6x EV/EBITDA.
Cont
Increase in cash and cash equivalents 7 (91) (70) (35)
(Increase) / decrease in borrowings 0 0 0 (70)
Repayment of finance leases 0 0 0 0
Exchange / other 0 0 0 0
(Increase) / decrease in net debt 0 0 0 0
Net cash / (debt) (start) 0 0 0 0
Net cash / (debt) (end) 291 201 132 27
Leases 0 0 0 0
Net cash / (debt) (end) including leases 291 201 132 27Centamin
19 October 2021
5
Figure 4: Balance sheet ($m)
December year-end 2020A 2021E 2022E 2023E
Goodwill 0 0 0 0
Other intangible assets 64 46 56 66
PPE 830 904 946 1,039
Trade and other LT receivables 0 0 0 0
Deferred tax asset 0 0 0 0
Investments in JVs / Associates 0 0 0 0
Retirement benefit asset 0 0 0 0
Other non-current assets 65 91 94 116
Fixed assets 959 1,041 1,096 1,221
Inventories 119 116 124 131
Trade and other receivables 18 26 27 29
Cash & cash equivalents 291 201 132 97
Financial assets 0 0 0 0
Other current assets 9 9 9 9
Current assets 437 352 292 265
Total Assets 1,396 1,393 1,388 1,486
Trade payables 64 65 65 67
Borrowings 0 0 0 70
Tax liabilities 0 0 0 0
Provisions 7 7 7 7
Other current liabilities 0 0 0 0
Current liabilities 72 72 72 144
Total assets less current liabilities 1,324 1,321 1,316 1,343
Net current assets 365 280 220 122
Long-term borrowings and finance leases 0 0 0 0
Retirement benefit obligations 0 0 0 0
Provisions 0 0 0 0
Other payables 0 0 0 0
Other non-current liabilities 33 30 30 30
Non-current liabilities 34 30 30 30
Net Assets 1,289 1,290 1,285 1,312
Total equity 1,289 1,329 1,324 1,350
Minority interests 17 8 8 8
Shareholders’ equity 1,307 1,336 1,331 1,358
Number of shares at period end (basic) (m) 1,153 1,156 1,156 1,156
Reported EPS (basic) ($) 0 0 0 0
Reported EPS (diluted) ($) 0 0 0 0
Underlying EPS (basic) ($) 0 0 0 0
Underlying EPS (basic) growth (%) 79 (30) (36) (4)
Underlying EPS (diluted) ($) 0 0 0 0
Underlying EPS (diluted) growth (%) 79 (30) (36) (4)
Pro-forma EPS (diluted) ($) 0 0 0 0
DPS (Ordinary) ($) 0 0 0 0
DPS (Total) ($) 0 0 0 0
Dividend growth (%) 20 (24) (64) 13
Dividend cover (x) 1 1 2 2
Source: Liberum
Figure 3: Cash flow statement ($m)
December year-end 2020A 2021E 2022E 2023E
Reported EBIT 307 209 153 149
Profit in associates 0 0 0 0
Depreciation (124) (141) (162) (183)
Amortisation 0 0 0 0
Loss / (profit) on sale of PPE 0 0 0 0
Share based payments 0 0 0 0
Increase/(Decrease) in provisions 0 0 0 0
Loss / (Gain) on business disposal 0 0 0 0
Other 0 0 0 0
Operating cash flows before movements in working capital 451 346 315 332
(Increase) / decrease in inventories (21) (23) (12) (28)
(Increase) / decrease in receivables 16 (7) (2) (1)
(Decrease) / increase in payables 7 0 0 2
(Increase) / decrease in working capital 2 (30) (13) (27)
Cash generated by operations 371 322 302 304
Tax paid (0) 0 0 0
Net cash flow from operating activities 453 315 302 304
Purchase of PPE (127) (157) (111) (196)
Purchase of other intangibles (12) (17) (10) (10)
Disposals 0 0 0 0
Net capex (139) (174) (121) (206)
Dividends from associates 0 0 0 0
Movement in short term investments 0 0 0 0
Acquisitions 7 0 0 0
(Investments) / disposals of associates 0 0 0 0
Other cash flow from investing 0 0 0 0
Net cash flow from investing activities (130) (232) (212) (286)
Net interest received / (paid) 8 3 2 1
Equity dividends paid (139) (81) (76) (41)
Share issues / (repurchases) 0 0 0 0
Lease payments 0 0 0 0
Increase / (decrease) in borrowings 0 0 0 70
Other cash flow from financing (174) (93) (84) (82)
Net cash flow from financing activities (316) (174) (160) (53)
Cont-
Calendar year
EV (CY) 20A 21E 22E 23E
Market Cap 1,591 1,591 1,591 1,591
Net Debt/(Cash) (291.3) (201.5) (131.6) (27.3)
Pension & other adj. (159.0) (102.9) (84.3) (81.9)
EV 1,140 1,286 1,375 1,481
Valuation (CY) 20A 21E 22E 23E
P/E (x) 10.1 14.5 22.5 23.4
Div Yield (%) 8.7 6.6 2.4 2.7
EV/Sales (x) 1.4 1.8 1.9 1.9
EV/EBITDA (x) 2.6 3.6 4.4 4.5
EV/EBIT (x) 3.7 6.1 9.0 10.0
FCFe Yield (%) 20.5 10.0 12.0 6.8
Price / book (x) 1.2 1.2 1.2 1.2
Financial year (December year end)
Financials (FY) 20A 21E 22E 23E
Sales 829 732 736 764
EBITDA 439 353 315 332
EBIT 307 209 153 149
EBIT Margin (%) 37.1 28.6 20.8 19.4
Net Interest 8.5 3.3 1.7 1.3
PBT 316 213 155 150
FD EPS ($) 0.1 0.1 0.1 0.1
- vs consensus (%) 0.4 0.0 0.0 0.0
DPS ($) 0.1 0.1 0.0 0.0
Leverage (FY) 20A 21E 22E 23E
Net Debt/(Cash) (291.3) (201.5) (131.6) (27.3)
Net Debt/EBITDA (x) (0.7) (0.6) (0.4) (0.1)
Net Debt/Mkt Cap (x) (0.2) (0.1) (0.1) (0.0)
Source: Liberum, Bloomberg
All numbers are on a post-IFRS 16 b
Financial model
Figure 2: Income statement ($m)
December year-end 2020A 2021E 2022E 2023E
Total sales 829 732 736 764
Sales growth (%) 27 (12) 0 4
Gross margin (%) 46 35 28 27
Cost of sales (449) (477) (528) (561)
Gross profit 379 255 207 204
Operating expenses (55) (38) (36) (36)
Administrative expenses 0 0 0 0
Share based payments 0 0 0 0
Underlying EBITDA 439 353 315 332
Depreciation (124) (141) (162) (183)
Amortisation (not acquired) 0 0 0 0
Underlying EBIT (pre JVs) 307 209 153 149
EBIT (pre JVs) margin (%) 37 29 21 19
Revenue 0 0 0 0
PBT 0 0 0 0
Tax 0 0 0 0
JV post tax profit 0 0 0 0
JV contribution 0 0 0 0
Profit on disposal 0 0 0 0
Underlying EBIT 307 209 153 149
EBIT Margin (%) 37 29 21 19
Amortisation of acquired intangibles 0 0 0 0
Exceptional / extraordinary costs (1) 0 0 0
Reported EBIT 307 209 153 149
Non-operating exceptional costs 0 0 0 0
Interest income 2 1 2 1
Interest costs 7 2 0 0
Pension credit / (cost) 0 0 0 0
Net Interest 8 3 2 1
Underlying PBT 316 213 155 150
Reported PBT 316 213 155 150
Underlying tax rate (%) 0 (0) 0 0
Exceptional tax rate (%) 0 0 0 0
Reported tax rate (%) 0 (0) 0 0
Underlying tax (0) 0 0 0
Exceptional tax 0 0 0 0
Reported tax (0) 0 0 0
Underlying PAT 315 213 155 150
Discontinued operations (net) 0 0 0 0
Profit on disposal 0 0 0 0
Reported PAT 315 213 155 150
Share of profit attributable to minorities (159) (103) (84) (82)
Preference dividends 0 0 0 0
Minorities (159) (103) (84) (82)
Underlying net income 157 110 71 68
Reported net income 156 110 71 68
Weighted average number of shares (basic) (m) 1,153 1,156 1,156 1,156
Weighted average number of shares (diluted) (m) 1,153 1,156 1,156 1,156
cont-
Liberium
This document is a marketing communication and has been prepared and distributed by Liberum Capital Limited. It is not independent research prepared in accordance
with legal requirements designed to promote the independence of investment research and is not subject to a prohibition on dealing ahead of the dissemination of
investment research. For Reg-AC certification, see the end of the text. Liberum does and seeks to do business with companies covered in this communication. As a
result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a
single factor in making their investment decision. 9m’21 production was 307.8koz at cash costs of
US$820/oz and All-In Sustaining Costs (AISC) of
US$1,197/oz. Centamin is therefore now aiming to achieve
the mid-point of its full-year 2021 target of 400-430koz, and
the lower half of the cash cost and AISC ranges of US$800-
900/oz and US$1,150-1,250/oz, respectively. We see this
as an important ‘result’ in that Centamin has been investing
heavily for operational reliability in order to restore market
confidence in the company’s ability to meet guidance.
FY21: production likely in-line, costs better than we hoped
Our existing forecast for FY21 production is 413koz, at cash cost of
US$833/oz and AISC of US$1,212/oz. Centamin’s achieving the mid-point of
its production guidance range would therefore put it in-line with our
production number. It is looking likely to us, however, that Centamin will
better our costs expectations.
Balance sheet remains strong
As at 30 September 2021, Centamin had US$256m of cash and liquid assets
(June 2021: US$312m), after the interim dividend of US$46.1m, with no debt
and no hedging.
Phase 2 of Sukari Life of Asset (LOA) review on 1st Dec
The long- and eagerly-awaited Phase 2 of the Sukari LOA review is to be
unveiled on Wednesday 1 December 2021. Updated reserve and resource
statements for Sukari will also be published at the time.
Cont-
Hello Paul the picture you are portraying is beginning to from.
One piece of the jigsaw is the roadshow effort. Two in the past couple of months and another scheduled for November 16th.
If Martin Horgan is as good as the little evidence we have would suggest, the POG strong and production back above (what seems to be crucial for a minor to be taken seriously) 500oz pa the share price of Centamin could pass previous all time highs.
A trillion here, a trillion there, the cupboard will never be bare.
it does not seem to matter anymore.
good luck punters.
the gnome
If you ever feel useless, just remember USA took 4 Presidents, thousands of lives, trillions of dollars and 20 years to replace Taliban with Taliban.
Anubhav Sinha
@anubhavsinha
Absolutely Paul!
Nails on the head, nails on the head!
Thank you Mr Gnome, for some great posts and info,as usual!
Rebess, I think that is part of the reason Martin Horgan seems to be moving slowly, as if something good was announced and then there was a setback, it would be more damaging than just moving forward slowly.
I do think he is keeping something back so he can show progression over the next few quarters. Even if more gold was mined than expected in the final quarter, I dont think that it would be announced yet. When the final figures come in I'd expect them to be a little over the mid point of guidance. That way , the figures would not be bad, but would leave room for improvement in future quarters.
We dont actually know what is going on, only what we are told, and that is what we have gone off in the past. Siko (decent chap) reporting someone saying "Good times are coming" and Mr Tibbles "man on the train" saying how good things were, were not based on insider knowledge, but what they were led to believe.
It appears Martin Horgan is doing the spade work now to get a good basis for future production at lower costs, which should lead to increased dividends and a rising share price.
I agree Rebess but those ba*****s have mostly gone ,the only suspect left could plead ignorance and good links within EMRA.
I would think he has been sidelined now.
I do not expect December announcement to alter much as long as it is not negative.
January and onwards is more likely possitive with probable improvement in AU price. Basel repercussions.
Very fair and valid Summing up Somnamna!
Been frustrating at times to say the least for us trusting share holders !
I agree with Gnome about the restoration of trust as a requirement for the market to take Centamin more seriously. - When the antics of the directors included deliberate sabotage, which in itself is a direct and deliberate attack against its own shareholders, the breaking of 'Trust' to that degree takes some getting over and some forgetting. It not only robbed them, but also neutralised the outstanding fundamentals of having serious money in the bank, unhedged and without debt, one of only a handful of miners in that position. It suddenly didn't mean much anymore. The market is still very wary and still needs convincing. There's only one way to do that and we all know what it is. However, the merest hint of further shenanigans and Centamin will, once again, suffer the long slide back down the snake. IMO
Hyperinflation will keep prices down or stagnant for a while
Thanks Goldgnome.
Those figure clearly show inflation on a grand scale of Fiat currency especially the $.
But with some dodgy statisticians massaging reported inflation figures the real loss of buying power,,everything continues ,the working classes take the brunt.
On Channel4 this morning 8:30 — 9:30
Yep- we will never know before appears, acquisition of cey is a distinct possibility once seen again as a 500k plus miner or on a consistent path to one esp at this price.
End of Fiscal Year Debt (in billions, rounded) Debt-to-GDP Ratio Major Events by Presidential Term
1937 $36 39% Third New Deal
1938 $37 42% Dust Bowl ended
1939 $40 51% Depression ended
1940 $43 49% FDR increased spending & raised taxes
1941 $49 44% U.S. entered WWII
1942 $72 48% Defense tripled
1943 $137 70%
1944 $201 91% Bretton Woods
1945 $259 114% WWII ended
1946 $269 119% Truman's 1st term budgets & recession
1947 $258 103% Cold War
1948 $252 92% Recession
1949 $253 93% Recession
1950 $257 86% Korean War boosted growth and debt
1951 $255 74%
1952 $259 71%
1953 $266 68% Recession when war ended
1954 $271 69% Eisenhower's budgets & Recession
1955 $274 64%
1956 $273 61%
1957 $271 57% Recession
1958 $276 58% Eisenhower's 2nd term & recession
1959 $285 55% Fed raised rates
1960 $286 54% Recession
1961 $289 52% Bay of Pigs
1962 $298 50% JFK budgets & Cuban missile crisis
1963 $306 48% U.S. aids Vietnam, JFK killed
1964 $312 46% LBJ's budgets & war on poverty
1965 $317 43% U.S. entered Vietnam War
1966 $320 40%
1967 $326 40%
1968 $348 39%
1969 $354 36% Nixon took office
1970 $371 35% Recession
1971 $398 35% Wage-price controls
1972 $427 34% Stagflation
1973 $458 33% Nixon ended gold standard & OPEC oil embargo
1974 $475 31% Watergate & budget process created
1975 $533 32% Vietnam War ended
1976 $620 33% Stagflation
1977 $699 34% Stagflation
1978 $772 33% Carter budgets & recession
1979 $827 32%
1980 $908 32% Volcker raised fed rate to 20%
1981 $998 31% Reagan tax cut
1982 $1,142 34% Reagan increased spending
1983 $1,377 37% Jobless rate 10.8%
1984 $1,572 38% Increased defense spending
1985 $1,823 41%
1986 $2,125 46% Reagan lowered taxes
1987 $2,350 48% Market crash
1988 $2,602 50% Fed raised rates
1989 $2,857 51% S&L Crisis
1990 $3,233 54% First Iraq War
1991 $3,665 58% Recession
1992 $4,065 61%
1993 $4,411 63% Omnibus Budget Act
1994 $4,693 64% Clinton budgets
1995 $4,974 64%
1996 $5,225 64% Welfare reform
1997 $5,413 63%
1998 $5,526 60% LTCM crisis & recession
1999 $5,656 58% Glass-Steagall repealed
2000 $5,674 55% Budget surplus
2001 $5,807 55% 9/11 attacks & EGTRRA
2002 $6,228 57% War on Terror
2003 $6,783 59% JGTRRA & Iraq War
2004 $7,379 60% Iraq War
2005 $7,933 61% Bankruptcy Act & Katrina.
2006 $8,507 61% Bernanke chaired Fed
2007 $9,008 62% Bank crisis
2008 $10,025 68% Bank bailout & QE
2009 $11,910 82% Bailout cost $250B ARRA added $242B
2010 $13,562 90% ARRA added $400B, payroll tax holiday ended, Obama Tax cuts, ACA, Simpson-Bowles
2011 $14,790 95% Debt crisis, recession and tax cuts reduced revenue
2012 $16,066 99% Fiscal cliff
2013 $16,738 99% Sequester, government shutdown
2014 $17,824 101% QE ended, debt ceiling crisis
2015 $18,151 100% Oil prices fell
2016 $19,573 105% Brexit
2017 $20,245 104% Congress raised the debt ceiling
2018 $21,516 105% Trump tax cuts
2019 $22,719 107% Trade wars
2020 $27,748 129% COVID
I agree, but the answer is not fully developed. If the new mngt can reinstall trust into the investor community, this will be a step up. Previous guys destroyed it, and trust once gone, can be hard to recapture, but this is the journey.
Also very important to watch the exploration expenditures for mine, brown and greenfields. They have invested in this heavily now, and the team to manage this plus the mngt systems looks far more convincing than previously. In fact I do not think they had much of a system in this area at all, just a few shots in the dark and a thumb suck. The presentations have been far more articulate, clearer on process, strong on hurdles and the investors can see and feel the management. This is so far in front of the other mining companies around the world, it is a breath of fresh air.
If from their more measured and managed approach to exploration, they make discoveries in the mine and brownfields, or 2 or 3, this will create some tail winds for the SP/some value add.
I think they have enough in the organic growth pipeline, and the money to follow this that they do not have to jump onto making an acqusition to grow. The reverse maynot be true...they maybe acquired ...
best
the gnome
President Biden’s proposed $1.8 trillion American Families Plan on top of his $2.3 trillion American Jobs Plan and his $1.9 trillion American Rescue Plan together make the biggest increase in government spending since the big Roosevelt increases. Like the Roosevelt New Deal, the Biden plan is a bold move to radically reform and redistribute wealth and opportunities and to stimulate the economy.
This is one of the better interviews with Dalio, mentions gold, and the asset switches
https://www.youtube.com/watch?v=CVWAxZU89Ys
750 currencies have sprung into existence since 1700 from various governments...do you know how many have survived?
Very worth reading the below
https://www.linkedin.com/pulse/biden-tax-spend-plan-big-cycle-swing-ray-dalio/
best
the gnome.
With the benefit of kind and erudite posts by Rebess, Cowichan, Sotolo and many others too many to mention and of course the guiding hand of Mr Tibbles, my thoughts with regard to CEY SP is it is clearly a function of:
a) gold price
b) production i.e. ounces of gold,
c) total costs (AISC + CAPEX)
It may also carry some benefit of "gold" in the ground.
So unless there is a major movement on a) b) or C) and bar any short term major buys or disposals the SP will languish were it is. We clearly need positive news on any or all to move the SP upwards.
I have followed CEY and been invested, as opposed to traded, for a number of years and seen plenty of ups downs, questionable management performance and skullduggery, so it is refreshing to have Martin Horgan and his team at the wheel but despite excellent work done so far they need to deliver increased production in terms of ounces of gold be it Sukari, Doropo or the new leases. The above to a large extent is stating the obvious it has taken me 10+ years to realize.