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This report is prepared solely for the use of Broking Ideas of Liberum
Q2’21 production was 100koz at cash costs of US$883/oz and All-In Sustaining Costs (AISC) of US$1,290/oz (Q1’21: 104koz @ US$733/oz cash cost, US$1,091/oz AISC).
Centamin is therefore on-track to meet its full-year 2021 target of 400-430koz @ US$800-900/oz cash cost and US$1,150-1,250/oz AISC. 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.
Egyptian Bid Round exploration licence terms agreed
Earlier this month, terms were agreed over three gold exploration blocks
(incorporating 19 licences) covering 3,164km2) in Egypt’s Arabian Nubian
Shield (subject to final legal formalities, which Centamin expects to complete
in Q3 2021). Terms were agreed under the new Egyptian mining code,
following a tax, rent & royalty framework (28% tax, 5% royalty and 15% freecarried interest for the government), with the new licences independent from the Concession Agreement (CA) for Sukari. We understand that one of the blocks is around Sukari, suggesting potential to discovering satellite orebodies within trucking distance of the plant. How this would work in terms of the interaction of the CA and the new framework remains to be worked out.
More ‘waste’ proves ore; waste stripping well ahead
Open pit mining continued to focus on the low-to-medium grade Stage 5 North area. As we expected, more low-grade ore tonnes continued to be mined than scheduled in Q2 2021, due to the conversion of ‘waste’ to ore during pre-production drilling. However, the strip ratio in H1 2021 of 6.1:1 (Q2
2021: 7.4:1) was higher than the 5.2:1 we had modelled. This was due to the open pit waste-stripping programme (important for future operational flexibility) ramping up ahead of schedule, exceeding Centamin’s budget for total material mined by 7Mt (of which Centamin’s own fleet accounted for 5Mt while the contractor was 2Mt ahead of plan, we understand).
CONT-
part 2
Recoveries outperformance offsets plant maintenance
H1 2021 production amounted to 204koz, essentially in-line with our 206koz expectation. This was despite a 10-day shutdown of one of Sukari’s two SAG mills being brought forward to Q2 2021 (from Q3 2021). We understand this to be due to recoveries being better than expected by ourselves and company:we had modelled 88.0% for H1 2021, versus the realised recovery of 88.8%
(with Q2 at 89.3%).
H1 unit costs at lower end of full-year guidance range
Total cash costs and AISC came in at US$883/oz and US$1,186/oz in Q2 2021, for H1 averages of US$807/oz and US$1,186/oz – i.e., at the lower end of Centamin’s full-year guidance is for US$800-900/oz cash cost and
US$1,150-1,250/oz, respectively. We had modelled US$868/oz and US$1,216/oz, respectively.
Capex guidance maintained, but more H2-weighted
Capex spend in H1 2021 amounted to US$78.3m, but full-year capex guidance remains US$225m – i.e. 65% in H2 (previously 55%), due to certain payments being rescheduled to Q3 2021.
Balance sheet remains strong
As at 30 June 2021, Centamin had US$312m of cash and liquid assets (March 2021: US$331m), after the final dividend of US$34.5m and Sukari profit share distribution in H1 2021 of US$45.7m, with no debt and no hedging. Detailed
H1 2021 financials are to be released on 5 August 2021. Phase 2 of Sukari Life of Asset (LOA) review by end 2021
An updated structural model was completed for Sukari in Q2 2021, which will be integrated into the full geological model in Q3 2021. An updated resource estimate will underpin Phase 2 of the LOA review, which Centamin continues to expect to complete by the end of 2021.
Part 3
Figure 1: Income statement ($m)
December year-end 2020A 2021E 2022E 2023E
Total sales 829 734 732 761
Sales growth (%) 27 (11) (0) 4
Gross margin (%) 46 32 28 26
Cost of sales (449) (499) (529) (562)
Gross profit 379 235 203 199
Operating expenses (55) (36) (35) (36)
Administrative expenses 0 0 0 0
Share based payments 0 0 0 0
Underlying EBITDA 439 329 312 329
Depreciation (124) (135) (163) (184)
Amortisation (not acquired) 0 0 0 0
Underlying EBIT (pre JVs) 307 194 149 144
EBIT (pre JVs) margin (%) 37 26 20 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 307 194 149 144
EBIT Margin (%) 37 26 20 19
Amortisation of acquired intangibles 0 0 0 0
Exceptional / extraordinary costs (1) 0 0 0
Reported EBIT 307 194 149 144
Non-operating exceptional costs 0 0 0 0
Interest income 2 3 1 1
Interest costs 7 0 0 0
Pension credit / (cost) 0 0 0 0
Net Interest 8 3 1 1
Underlying PBT 316 197 150 145
Reported PBT 316 197 150 145
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 315 197 150 145
Discontinued operations (net) 0 0 0 0
Profit on disposal 0 0 0 0
Reported PAT 315 197 150 145
Share of profit attributable to minorities (159) (104) (83) (80)
Preference dividends 0 0 0 0
Minorities (159) (104) (83) (80)
Underlying net income 157 93 68 65
Reported net income 156 93 68 65
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
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) ($) 0 0 0 0
Underlying EPS (basic) growth (%) 79 (41) (27) (4)
Underlying EPS (diluted) ($) 0 0 0 0
Underlying EPS (diluted) growth (%) 79 (41) (27) (4)
Pro-forma EPS (diluted) ($) 0 0 0 0
DPS (Ordinary) ($) 0 0 0 0
DPS (Total) ($) 0 0 0 0
Dividend growth (%) 20 (25) (65) 17
Dividend cover (x)
Part 4
Figure 3: Balance sheet ($m)
December year-end 2020A 2021E 2022E 2023E
Goodwill 0 0 0 0
Other intangible assets 64 74 84 94
PPE 830 917 957 1,050
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 69 72 89
Fixed assets 959 1,060 1,113 1,233
Inventories 119 124 133 140
Trade and other receivables 18 19 21 22
Cash & cash equivalents 291 182 99 66
Financial assets 0 0 0 0
Other current assets 9 9 9 9
Current assets 437 333 262 237
Total Assets 1,396 1,393 1,375 1,470
Trade payables 64 73 74 76
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 81 81 153
Total assets less current liabilities 1,324 1,312 1,293 1,317
Net current assets 365 252 180 84
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 33 33 33
Non-current liabilities 34 34 34 34
Net Assets 1,289 1,278 1,259 1,283
Total equity 1,289 1,278 1,259 1,283
Minority interests 17 17 17 17
Shareholders’ equity 1,307 1,295 1,276 1,300
Source: Liberum
Final
Author Yuen Low
+44 (0)20 3100 2091
yuen.low@liberum.com
Market Making
Giles Johnston (Head of Trading)
+44 (0)20 3100 2203
giles.johnston@liberum.com
David O’Gram
+44 (0)20 3100 2201
david.ogram@liberum.com
Marc Wilkinson
+44 (0)20 3100 2206
marc.wilkinson@liberum.com
Thanks for finding that MrTibbles.
Those Part 3 figures just read like telephone numbers to me. Apart from Revenue, 0; which is somewhat disconcerting : )