The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Thanks for sharing this Mr T.
Some very interesting commentary and analysis. I like what I'm hearing about Doropo, and this does look like a worthwhile diversification of production, and increase in production to 700-750k per ounce pa. I think there is a lot more work to be done in Cote Ivoire, and far more opportunities, so getting a better footing in this country is an excellent move. Governments take a lot more notice of you when you are in production.
I get a good feeling that the production base in Egypt is in good hands , and they only need an exploration win, and this will fly.
Dips in the SP inspired by the FED's rantings and misplaced ideolgies are great buying opportunities, and I am in again.
best
the Gnome
Cont 2
The Long View
| Scenarios
Base Case
- LT gold and silver prices of $1,500/oz and $20.00/oz
- Improvement in UG and OP grades drive higher
production in 2021/2022
- PT Derivation: 50/50 weighting between P/NPV (1.25x)
and EV/EBITDA multiples (4.0x)
- Price Target: 175p
Upside Scenario
- Stronger gold/silver prices; peaking at $2,500/oz &
$35/oz, long-term $2,000/oz and $30/oz
- Optimisation drives cash costs lower
- Valuation discount vs peers is not fully erased until
second producing mine or geography
- PT Derivation: 50/50 weighting between P/NPV (1.25x)
and EV/EBITDA multiples (4.0x), same as base case
- Price Target: 300p
Downside Scenario
- Gold and silver prices decline to $1,250/oz and $15.00/
oz with no improvement thereafter
- Increased political concerns over Egypt lower
multiples investors are willing to pay
- Operational disruptions push cash costs higher
- PT Derivation: 50/50 weighting between P/NPV (1.0x)
and EV/EBITDA multiples (3.5x), discounts to base case
- Price Target: 60p
| Investment Thesis / Where We Differ
- Sukari is a world-class gold asset, though recent
difficult operating periods have clouded its underlying
valuation
- Clean balance sheet with no debt and cash & liquid
assets of $331m as of 1Q21
| Catalysts
- Higher metal prices
- Brownfield exploration success at Sukari further
increases reserves and resources
- High-grade discoveries through ongoing exploration in
West Africa
- Increasing shareholder returns
- Value accretive M&A
Key Takeaway
We hosted Centamin CEO Martin Horgan, CFO Ross Jerrard and Head of IR
Alex Barter-Carse for a group call with investors. Key topics of discussion were
importance of the divi, stability of the open pit and longer-term upside in the
underground. A replay of this call is available upon request. Reiterate Buy with 175p
PT.
Commitment to the Divi. With a 7% yield, the divi is a true differentiator (global peer
average: 2.3%) and hallmark of CEY's investment case. Despite the significant pickup in waste stripping in 2021 as part of a multi-year campaign, CEY has already
committed to a payout at least equal to last year. With capex decreasing and
production increasing from 2021 onwards, the FCF profile (JefE 8.3% 2022) is very
supportive for coverage of a robust yield. Even as Doropo advances (current capex
budget $275m, incl 15% contingency) there was a confident tone around the ability
to fund development capex and not impact the divi. A likely outcome discussed was
a project finance facility at the asset level for the majority of capex and cash injection
from funds already ring-fenced for development.
Stability in the Open Pit. With c90% of reserves and c75% of annual production from
the open pit, this remains the backbone of Sukari's production base. The current
20km infill drill program is focused on conversion of waste to ore within the current
pit design, predominantly for Stage 5 & 6 West and the Cleopatra zone.
Unlocking the Underground. Returning towards the 500koz per annum production
target will ultimately require a higher contribution from the underground. With mining
now in the relatively lower grade Ptah zone (vs Amun), returning to or potentially
exceeding the 500koz mark is expected to be dependent on moving deeper into
the higher grade Horus zone in several years. Mgmt is optimistic about additional
targets at depth, and we would expect the Phase 2 update (December) to focus on
the additional drilling and potential to bring in additional ounces into resources.
Cost Reductions. By year-end, CEY expects to have achieved c60% of its targeted
$100m per annum cost savings by YE23. Remaining savings will come from an expat
reduction program, processing plant optimisation and reduced power usage, among
other items.
Longer-term Ambitions. The Doropo project provides CEY with a feasible second
producing asset that would not just provide diversification but could lift conceptual
group production to 700koz by middle of the decade (recap note here). CEY is already
pushing ahead with a pre-feasibility study, expected to be completed by mid-2022,
and conceptual first production remains late 2024/early 2025.
Valuation. CEY trades on 0.6x P/NPV and 3.3x 2021 EV/EBITDA. Reiterate Buy with
PT of 175p and divi yield of 7% for TSR of 64%. We believe the key re-rating for CEY
is hitting operational targets following the adjustment of the mine plan and catch up
in waste stripping. Catalysts - 2Q21 productio