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Hi Dasut,
You know the business and indeed the logistics and operational side involved far better then most, as we are all aware Martin Horgan has already expressed his preferences for and explained the advantages of in-house, rather than contracting out of critical production operations.
That said and from a personal point of view may I say my that I agree entirely with your interpretation of reading between the lines which all things considered may well be a case of "Less said is more".
It seems apparent that Centamin now has a CEO who is real stickler for meticulous forward planning and the implementation of production controls and methods that provides maximised efficiencies with the flexility to easily cope in any event with spare capacity in reserve!
Once again Dasut thank you for giving us all the advantage of your professionally gained experience.
Tibbs, prior to the Capital contract Cey did all of their open pit haulage and suggest they are still doing all of their mining haulage both waste and ore, by this I mean the waste contact is outside of the existing and additional to the mining activity hence the low ore numbers. Reading between the lines the ore grades would be lower had they not moved back into phase 4 west wall.
Whilst utilisation of the fleet at the end of the waste contact isn't a decision that will need to be made soon it is possibly something that has already been discussed at the time of contract because the capital investment made by Capital for what is by the sound of it a short term contract is significant and ROI somewhat questionable.
Interesting times.
Hi Dasut,
Re the stripping and the ore : waste ratio – that the higher the proportion of ore, the more ounces are produced.
So then that considered longer haulage distances are most likely negligible considering that the upside currently remains in the existing open-pit shell and the deeper prospects in the underground.
As to what happens post the stripping campaign with Capital’s fleet it must be impossible to know at the present time, although of course Centamin may want to buy these back off Capital as Centamin do a lot of their own stripping and haulage and as you point out having a younger fleet would reduce maintenance costs etc.
Also If there are discoveries within proximity to the Sukari plant (either in the Sukari license or in their new licenses) they will surely need to have a bigger mining fleet to cope?
But it would seem sensible to assume as things stand that any decision on this fleet is some way off considering is the possibility of 3-4 years of high stripping to do?
Gold price is pumping at the moment. If it carries on like this it will be a good day for CEY and other miners tomorrow.
Good post Mrtibbles the market has just closed with Centamin’s shares up 2.06p +2.25% although most of the credit today is due to the rise in the gold price which is currently $1840. +1.39% it’s time for Centamin to shine again which I believe will finally begin to become a reality.
Long suffering aren’t we all.
From a personal perspective I have every faith in Martin Horgans integrity, commitment, professional competence and indeed dogged determination to rise to and overcome the considerable challenges placed before him in order to turn Sukari into the mine that was envisaged at the outset outset and Centamin into the company that shines out from all the others!
Kees Dekker commented on today's update
"Good to see that things are slowly turning around as per guidance!"
"At an historical dividend yield of 10% this looks now very attractive.if they maintain the level."
As Kees pointed out, Centamin is “getting there”, and that is shown by the confidence in guidance for this year being 430-460,000oz, though with higher costs because of inflation and the need for more investment (solar plant, paste plant, underground development, etc etc).
That said Centamin has already reduced significantly the volatility of production levels in the last 18 months in particular, whilst investing in Sukari’s ability to produce sustainable and low cost ounces for the next decade or so!
As we know there was no mention of dividend today, although that's normal as production updates do not disclose such matters anyway.
That said the question was asked on the Q&A call, and there is no change in dividend policy!
What the payout will look like will be decided nearer the time when Centamin announce the FY financials on 10 March.
We can as usual take Dasut's summing up of the present situation as spot on !
So lot's to feel very positive about after today's update!
Prof, Too optimistic maybe but the way I look at it Capital have been on the job for approaching 10 months and they will have already moved a considerable tonnage of waste material, already opening up areas to enable the mine to become more flexible.
So whilst this coming year we won't see all of the fruits the foundations of a far more reliable and consistent cost effective production rate should be the eventual result.
Well Mr T. I agree with a lot of that. Its seems that Martin Horgan is looking at playing a long innings, rather than a cameo roll.
He could probably have got stuck into the wall and then give some more Bull along the lines of the previous crew and got the share price up around the 135 or 140 mark before moving on to somewhere else with a golden handshake. BUT he does seem to be playing this with a straight bat. I suppose most of us long term holders will suffer this for longer and take the divis and hope that things will fall into place sooner rather than later.
The extra costs because more waste was moved , we cannot really complain about as the sooner the waste is shifted the sooner more normal operations can resume. Also as it is costed on tonnes moved, its not like someone is upping a price for a job just that they are ahead of schedule.
You never know, they might hit a rich seam or a giant nugget and then things will seem a bit more jolly.
Hi Tony,
Sorry presume I was not clear. Meant AISC is horrible next year (2022) and was referring to thereafter when I wrote 'reasonable' (2023-onwards).
Does that make sense?
Best wishes,
Prof
Prof correction the AISC is higher for 2022. (Although very much in line with the real inflation rate with a USD falling in value). We just have to wait for the gold price to reflect that AISC change along with the costs in all of the sectors and services listed on the stock markets.
Dasut,
'When they get back to mining Sukari rather than restructuring Sukari'.
Beautifully put and in my mind the cornerstone of the investment case in CEY.
Yes we know that the previous regime maximised the today at the expense of investment for tomorrow.
Yes we know the current regime is addressing that.
Yes we know it is expensive to do that.
Yes we know CEY are ahead of plan with the restructuring.
Yes we know CEY have aspirations to get back to 500k oz per year.
We know next year will have horrible AISC as a result of the restructure and that if gold falls substantially we will be generating little or no positive cash-flow.
To me the outlook for gold, with inflation where it is, is excellent and I would expect it to move up not down. As such I am another one who will sit here and draw the dividend, keeping my fingers crossed that they can afford to keep it close to current levels, and wait for the restructure to be complete. We should then have a mine with great reserves, a company with no debt and an infrastructure that will enable sustainable mining at c500 oz per year with reasonable AISC.
Hope I am not being too optimistic.
Best wishes to all,
Prof
Hi Tibbs
As always a concise and cohesive post covering issue and views posted here. It would appear that my Rose tinted specs are somewhat supported by Peel Hunt and Berenburg on their broker ratings this morning. Berenburg uplift especially after their earlier lesser rating in December.
Bob
Thankyou Dasut, your concise thoughts are of immense help to us more mining naïve investors.
Am I wrongly assessing that given a base fixed costs for the gold mining industry Centamin has more positive than negative position going forward. I do have a habit of wearing rose tinted specs but
1) Rising wage inflation benefitted by Centamin home bred mining education programme.
2) Exponentially rising energy costs offset by solar and battery storage . Crude Jan 2021 53 dollars a barrel ,as of this morning WTI crude 88 dollars a barrel. Futures off the scale.
3)Benefits as you say from plant freed for production from the waste stripping exercise in 2022.
Happy to be shot down by others expertise.
Bob
Capital will own them as suggest Centamin are just paying a hire rate of so many dollars per tonne moved, which will be the reason why mention was made to additional costs due to contractor being ahead, so more tonnes moved.
Hi Dasut,
What more could we expect really, as much as some might like to imagine miracles, as you rightly point out the burying of the heads in the Sukari sand couldn't go on forever, although it was curtailed rather abruptly by the unexpected crack in the pit wall, although in many respects that was preferable to the alternative of a catastrophic open pit wall collapse which had the potential to bring about a far greater collapse of the share price and possibly even the ruination of the company.
It seems that the pit wall crack was in many ways fortuitous and indeed a preferable occurrence because it hastened the unavoidable admission of the several years worth of neglect to instigate sound mining practice at Sukari !
At least now the new management have a credible program in operation to put things right and restore safe and sustainable future output at Sukari.
From what you and other former and indeed current mining professionals have explained the present Sukari operational strategy is really the only sensible and viable option.
I am as disappointed as any other long term holder about the now apparent sharp practice, corner cutting, even deliberate spoofing to share holders by the previous bunch of carpet baggers, there is little doubt they had our legs up and its always hard to swallow when one has been conned!
So I see no quick fix, but a steady and sustainable one, which I understand in some area's is already ahead of schedule regarding waste clearance which should provide much improved operational flexibility and accessibility potentially higher grade ore.
It's hardly surprising that AISC are where they are , although at least we know these will reduce with the benefits accrued from cost saving efficiencies already being instigated.
Today's report wasn't full of baloney, but seems honest and illustrates there is lot's gong on and all being well lot's more good news to come!
DASUT will the trucks be owned by Centamin or Capital at the end of the stripping contract?
Bobliz35 It is almost impossible to say where Centamin sit when compared with other gold mining companies given that Centamin are going through so much change, so much investment. This means extraordinary costs that won't be typical to other mines. Comparisons will be more realistic when they get back to mining Sukari rather than restructuring Sukari.
There are so many scenarios to look at once the waste contract project finishes as I would suggest the then strip ratio should reduce significantly down to say 5 or 6 to 1 which is half of where it was last year. So straight line costs mean no more dollars per tonne outgoings to waste contractor. More ore to waste reduces costs and increases ounces. This is just the basics as could be increased costs due to longer haul distances but who knows if this is true and where the grades will be. Will there be more influence from underground with higher grades?
One thing that is interesting is at the end of the waste contract there will still be a young fleet of very high quality machines available. Can these be contracted to mining ore at a similar cost per tonne, an interesting scenario as it will certainly be in the best interest of the contractor to use them locally. The cost of decommissioning and transporting out of Egypt would be considerable.
Sorry a long winded answer to your question but very interesting long term opportunities at Sukari and the surrounding areas plus the bonus of resources in West Africa.
Hi Swampmonster,
I'm with you, as a long term investor I was dreading Horgan dressing up this mornings update to please, at the best, current fickle and non credible analysts and short term market dippers.Credibiity needs to be built layer by layer and to my mind this steady as she goes approach is exactly the strategy to build confidence in the large Institutional holders.
To my inexperienced eye the middle achieved on previous guidance hints that there may be some cards being held up sleeves . Just my feeling .
Somewhere the more experienced members here forecast some figures of Capex against AISC reductions on energy costs going forward. Can someone point me in the right direction to review
those again. In view of the massive spike in world wide energy costs are Centamin ahead of the field in this direction. Are they reflected in any forecast AISC figures. Not lazy just deferring to better able minds on this one.
Regards to all
Happy bunny Bob
I've been more than happy to top up, substantially this morning, on a nice "boring" update with a decent outlook. There are very, very few precious metals miners offering predictability and very many miners who'd be thrilled to put out an RNS as unremarkable as this one.
Sotolo You are right to be cautious and yes the figures are disappointing with strip ratios through the roof due to an extraordinary waste management and major cut back and restructure of the mine plan to expose ore. Would the waste management have been better handled in the years past most definitely but if they had then targets wouldn't have been hit and you would not have had the opportunity to sell shares at or above £2.
We have choices to make ride the storm or cut and run I personally will ride the storm because what I am hearing from current management makes sense to me and am so glad that we got the new team on board when we did. I hate to think where we would be if the difficult decisions hadn't have been made and they continued ploughing on with head in the ground production line type mentality.
Halfpenny, of course historically long term gold has risen in line with inflation, but over the last year of inflation increasing, to this months whopping 7.5%, gold has fallen - an annual -10% in real terms so far, and hasn’t been a hedge at all. Could be because of worry if inflation is temporary, worry about nominal interest rates rising, competition from Bitcoin, or gold is just waiting catching us out as she goes, or investors just don’t like it, who knows…but if the trend is your friend it is a bit gloomy, added to unimpressive figures as Mrs Market points out
Inflation which will highly likely turn to stagflation..
Or a gold rich seam find which is likely considering the licensed areas of exploration. Does anybody with an ounce of sense really believe pog will go down with the real inflation the world is and will experience for the foreseeable future?
exactly, but will the boss pay up next year, and that is what the market questions, are these just more away days or real skills that will make proper money? On a more encouraging note RPI is 7.5% today so Cey would have to climb to 250p to get back to where it was at the top in real terms, so nearly 300% so quite a lot of these ghastly figures must be in the price, tho when if ever the investment yields this kind of growth is a bit doubtful, only exploding gold can do that imho
Again Sotolo an unfair example as the AISC increasing is being spent on increasing reserves and resources and replacing diesel with solar energy and so forth. Its a bit like you earned less but were better trained with new skills and you took more time out to improve own mental and physical health and the boss is able to up pay next year.