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Sukari is a Tier 1 asset. Centamin operates its sole asset, the
Sukari gold mine, in southern Egypt. The mine is a Tier 1 asset,
in our view, albeit one in a relatively high-risk jurisdiction. The
mine has a c20-year mine life with low costs.
Potential for high-return brownfield growth. Recent
exploration drilling at the Cleopatra target has outlined
potential for a second high-return underground, in our view.
That CEY has already begun a potential 1Mtpa decline there
indicates good potential for production to grow to >700koz pa.
This is not included in our base-case NAV.
Track record on dividends set to continue. CEY has been a
consistent dividend payer for some years. With the group net
cash, management has outlined a minimum cash balance that
needs to be held with FCF above this set to be paid out to
shareholders. This gives CEY a return ahead of most EMEA
• Improved operational momentum at Sukari – 2020
• Ahead of consensus dividend - Q1 2021• Production risk: Post a difficult H1, we think CEY will rebuild
trust in Sukari's ability to deliver. However, a risk is further
under-performance of the underground vs plan impacting
grades and hence ounces.
• Political risk: Whilst we think the profit share with the
Egyptian government insulates CEY from high levels of
political risk, Egypt still has the potential for a volatile
political situation to arise.
• West Africa: We see CEY as not under pressure to pull the
trigger on a new project in West Africa, but if one was
commissioned that had lower quality or returns than Sukari
then we think this would dilute the group's investment case.
• COVID-19: If the pandemic impacts Sukari's operations
either directly through an outbreak on site or indirectly
through limits to contractors and consumables then this
could lead to downgrades to earnings and the group's
Good grief. These figures are excellent! What an unbelievable myopic market. Have a look at the figure for the FED. Many of the Industrials....As Dylan used to sing, its going to be a HARD rain, and CEY is not going to have a large rain falling on it...
What a dismal market
knows not a lot, time horizon myopic...
Dropped Centamin to Hold.
Along with profit taking,was sufficient to lower the price today.
Mm's love an opportunity whether justified or not.
Its happened before and is bound to happen again.
That's life as Ester used to say.
Since close-down for maintenance will impact upon Q3 production, if we can achieve between 115 and 125 k oz I will regard this as a result. - Question for Dasut:- How much time is normally lost undertaking scheduled maintenance?
Thanks Prof for the comments very appreciated-your a true gent.
Yes, have to agree disappointed with the narrowing of the range! and hopefully as you suggested gives CEY the opportunity to outperform.
Other post-Interesting points regards west Africa and End strategy-as suggested look after core asset
thanks to all
The virus matters down south are intriguing, and seem to be lost in a fog of the government and medias (always good money to make in a crisis) own making. Lots of new infections and the latest 3 fatalities?
...the Victorian Department of Health and Human Services has confirmed that two Victorians have died from COVID-19 since yesterday. The man and woman – both aged in their 80s – died in hospital. The other was in his 90's.
It does make one think about the strategy of crippling the country for 20 years in the future.
Sun you ask? We have been immersed in fog for the last 48 hours ... and beyond that and to the south they are still immersed in viruses. I will stay with the fog!
Yellen is v worried about the next wave of fiscal support ... another concern, as the US government’s debt pile grows ever larger.
“I’m very worried about the degree of fiscal support, which we truly need to keep the recovery going. And I don’t know if that’s going to be there.” !??
The US budget deficit widened to a record-high $US864 billion ($1.2 trillion) last month due to the federal government's extraordinary response to the coronavirus pandemic, the Treasury Department said on Monday (Tuesday AEST).America spent about $US2 trillion more than it took in in tax revenue from April to June alone, and we should be reducing tax to stimulate...
Investors are wrong to celebrate the 40 per cent correction in global sharemarkets since March as widespread economic destruction and a "third wave" of infections is still possible, billionaire fund manager and Magellan chairman Hamish Douglass has warned.
Magellan, which manages $97 billion on behalf of retail and institutional investors, has moved to hold about 15 per cent of its portfolio in cash and dumped holdings in high-profile global brands as it reveals its bearish outlook on the global economy's emergence from the coronavirus crisis...and on the back of this bearish sentiment we have a majestic run on Iron Ore and Copper. Something does not add up and I suspect it wont add up much longer...
If Iron Ore stops propping up the moribund Australian Economy, then with Tourism gone, and the Universities teetering on insolvency, we could well end us as a wind swept, barren place at the end of the world!
Perhaps there is more to the fog for 2 days than I think? men
Back to my double malt, yoga and deep meditation
I am with you there.It was the old CEY mantra but then was abandoned for a couple of years at great pain for the share holders.
Any sunburn of late?
I cannot disagree with RBC .
West Africa I suspect although seemingly a good prospect was nothing more than part of a plan to allow in, END at a low SP.
By way of increasing ,dramatically ,the prospecting budget whilst taking less care of Sukari,it's core to future success.
It almost worked.
Major stock market indexes in Germany and the United Kingdom fell on Tuesday as investors awaited data on UK inflation, gross domestic product and industrial production as well as European Union industrial production figures and the German consumer price index. French markets are closed for Bastille Day.
The DAX dropped 1.80% at 7:09 am CET and the FTSE 100 declined 1.24% at 7:10 am CET.
Both the euro and the pound were flat against the dollar, changing hands for 1.13441 and 1.25525, respectively, at 7:11 am CET.
Breaking the News / VP
Analysts at RBC Capital Markets upgraded gold miner Centamin to 'outperform' from 'sector perform' on Thursday, stating that a shift in management would likely lower the risk of a move into new projects in West Africa.
RBC thinks that with focus on getting the group's Sukari project back on track, there was now less near-term risk of Centamin looking to build something from its West African exploration portfolio.
"We continue to believe the options there may struggle to stack-up vs. Sukari. Similarly, we expect M&A (acquisitions) to be on the back burner for now, no bad thing given again we see few assets that fit with Sukari," said RBC.
"Whilst we don't expect Endeavour Mining to come back with another offer for CEY near term we do think ongoing consolidation in the global gold space (such as AlacerSSR) indicates a bidder for CEY may materialise in time. Sukari is now one of the few large gold assets outside the majors."
The analysts added that both Martin Horgan's appointment as chief executive and recent board additions were positive for Centamin and stated that, after "two years of operational disappointments", the team's renewed focus will primarily be on delivering on operational targets.
Whilst the Canadian bank, which also raised its target price on the group's shares from 180.0p to 210.0p, understood that the recent departure of a second chief operating officer could be read as "concerning", it actually said a streamlining of management structure could be "a positive".
The gold-rush in the shares of Centamin has continued after the Egyptian goldminer, which is a constituent of the FTSE 250, said that production in the second quarter of the month had come in higher than expected.
Helped by the flight of money during the pandemic crisis into gold — the traditional safe haven for investors in times of trouble — Centamin shares have bucked the Covid-19 trend.
Trading at 152p before the stock market crashed during March, Centamin stock briefly dipped below £1. However, with Centamin saying its operations are little affected and the price of gold going from below $1,500 an ounce to more than $1,800 an ounce, shares in the goldminer have taken off.
Centamin capitalises on gold price rally
Second quarter trading which beat expectations across the board shows Centamin (CEY) has been able to capitalise on the higher gold price, according to Peel Hunt.
Analyst Tim Huff placed a ‘buy’ recommendation on the gold miner, setting a target price of 185p. The shares rose 2.5% to 192.6p yesterday.
Free cash flow for the second quarter of $56m trounced the broker’s own $19m estimate, driven by production which beat forecasts by 14%, while costs were also 10% lower than expected. That saw the $2.2bn company, whose principal asset is the Sukari mine in Egypt, end the quarter with $367m on its balance sheet.
2020 production guidance was narrowed to the lower half of the previously guided range, but was still in line with market consensus, Huff pointed out.
I reckon that the new mngt will have learnt from the sins of the past mngt, and will be firmly on the "under-promise, over deliver" mantra
Just my guess though
..... Ms Yellen explained that her “little club” of Fed veterans – including her next door neighbour and predecessor Ben Bernanke, and the former Fed vice chairman Don Cone, who lives two doors down – had been asked by a consultant for advice about whether the Fed would ever lend to municipal governments.
The group’s response was simple: No way. But two days later, the Fed announced it would do just that. Yellen said it was “a line I never thought the Fed would cross”.
But she warned that there are limits to the central bank’s firepower, particularly in risky pockets of financial markets such as high yield debt and emerging markets.
But her biggest concern is what will happen to the labour market in the US, where the loss of 20 million jobs hangs heavy over the potential for a recovery.
Yellen says surveys suggesting that 75 per cent of workers expect to get their pre-pandemic job back. But that means a quarter of workers are bracing for employment pain – and Ms Yellen does not expect all of those workers who expect to regain their jobs will be that lucky.
“I worry about the permanent job losses and how those people are going to get re-employed,” she says.
In Australia the Mums, dads and "locked-ins" are providing the push on the equities market, as the professionals head for the door...time to be worried..come September their could be blood in the streets ...and in the market
Thanks for clarifying the question. When I said H1 financials should be stunning I was referring to when they go into more detail on 04 Aug at the interims on the financials for the first half of this year. From today we already have a bit more detail: H1 Production 255k oz, Q2 average price of gold realised $1731, Q2 AISC of $900, (so $831 per oz profit or $415 per oz after profit share), Q2 revenue of $227M (54% up YoY ) and interestingly cash held, as at the end of June of $367M and this after paying out the May dividend. In short I would expect on 04 Aug a reiteration of just how healthy a financial position they are in and a good interim dividend to be announced for Sep. Interestingly a few years back (can't remember if 2016 or 2017) they were holding too much cash so paid out a special dividend which took the total to the year to c15c. I wonder whether we could see this again next month as they will be generating a lot more cash this quarter with POG now above $1800.
With regard to H2 Production well guidance for full year go 510-525k would mean 255-235k oz. Notwithstanding their explanation of delayed maintenance from Q2 to Q3 being behind a massive outperformance in Q2 I can't help but feel management are desperate to keep expectation down so they can excel. I was disappointed to hear 510-540k become 510-525k and still like to think they might well exceed this.
What do you reckon?
Looks like a good start to the new management team, if not a very exciting start. I note the reference to dilution coming under better control for the underground operation, and it reads as they will be in a good position to continue this performance all beit at greater tonnes and less grade in the u/g op.
John "Howard" Bills joined the Company in Q2 as Group Exploration Manager, and this is an excellent move. I think the company has been a bit rudderless in its exploration efforts and to have someone who
1. has been a discoverer
2. has 40 years experience in West Africa
3. has been part of a development team that put the discovery into operation in West Africa
I think it bodes well for turning the West Africa resources into real assets for the company, if not a mine in the next 2-3 years. It is obvious their main hopes are pinned to the assets in Cote I'Voire, and it noticeable that the 3-4 m ounces on Burkina Faso failed to get a mention (again).
By my reckoning there must be about 7-10 m ounces of refractory gold (includes some from the adjacent Hounde belt) in the southern part of gold, and surely that's enough to get some traction/action? Extracting gold from refractory ore has and is being done
Just needs a fresh set of eyes and some innovative thinking?
Tip Update: Buy at 192p
Our previous tip
We said BUY at 119p on 09 Dec 2019
Tip performance to date
By Alex Hamer
Centamin (CEY) has reported its best quarter since 2018. Higher production and lower costs, combined with the high gold price, took adjusted free cash flow up to $102m (£81m) for the first half - almost triple last year’s figure.
While the interim dividend payment will be announced next month, Centamin’s policy is 30 per cent net cash flow and chief executive Martin Horgan said that the board would look at taking the pay-out level above that.
The production boost came from hitting a higher-grade section in Sukari’s underground mine, which was meant to be reached in the second half of the year. Gold output was flat from the open pit part of the mine.
Mr Horgan said the company had M&A options on the table, but with gold at $1,800 an ounce (oz), it is a sellers’ market. Centamin also has expansion options through its two West African projects, Doropo and ABC. The company has recently brought on a former colleague of Mr Horgan’s from Toro Gold, who is conducting a geological and engineering review of the projects. New mineral resource estimates are expected from both by the end of the year, and will make their development prospects clearer.
Centamin is debt-free, has stabilised production at Sukari and now has cash to play with. The internal or external growth decision could affect the company's performance for decades to come, so they are right not just to snap up the first project that comes along. Buy.
Last IC View: Buy, 185p, 18 May 2020
You mentioned that H1 interims should be stunning.
I was wondering what forecast you think will be achieved for the next quarter/ounces? I am not sure if this will be covered in the August period. Looks like we are a head on 40/60 split initially covered by cey
Glad to hear you take on it and reassured by how confident you feel.
Let us hope that it is a delayed reaction and we see a good rise over the next few days/ weeks. Provided gold stays good then between that, then the H1 interims then the month or so wait to ex-dividend then we could be in for some good times ahead.
Starting to feel £3 is a real possibility at some point in the next 18months. Then again if gold falls back then £1.50 is also a possible. Got to love CEY.
Prof spent the day travelling so my first opportunity to scan the half year report and to be honest with the so so or as you say mute response to the increase in SP I thought the report must have been somewhat disappointing, however far from it given the rest of the world suffering economically here we read a very good report with above target achievements. So maybe the market needs a bit of time to actually digest what has been reported and disregard the ( brackets) and understand the achievements.
OK the achievements explained as being because of delayed maintenance/service which did make me shudder a little so hope they put this right in 3 rd quarter when production should be helped by increase in underground results.
Money in the bank by the end of Sep then!
Sorry but I don't quite get the question. Can you clarify please?
Hello Professor Great post, mentioning the dividend reminded me of a post I did a couple of weeks ago covering the possible payment and qualifying dates so if you don’t mind I’ll take the opportunity to repost in case anyone’s interested.
Bol ty again for your contribution’s
Onward and upward!
Interim dividend timetable
This was the interim dividend qualifying and payment dates for 2019, I imagine the 2020 dates will be similar.
EX-DIV DATE: 29 August 2019
RECORD DATE: 30 August 2019
LAST DAY FOR CURRENCY ELECTIONS: 6 September 2019
FX RATE DATE: 9 September 2019
PAYMENT DATE: 27 September 2019
H1 what do you think 140/50, 000 ounces?