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Everything as i hoped for and they answered my questions that reserves and resources to be updated in H2 and the progress on Nubris drilling. I hope he explains the put option in the presentation on how it all works. Unless someone here can tell us in a couple of lines.
Protects to downside, leaves upside open
Tornado, it means they can sell 240,000 oz or just over half their output at $1900 in 12 months time and the counterparty can buy 240000 oz in 12 months at $1900. If price stays above $1900 it is worthless to us, if it falls below $1900 we can sell those ounces at that price, however far gold falls. bBeing a paper option it means we can sell gold at whatever price over the next year and then on the last day claim the difference between $1900 and the lower gold price if that is the way gold goes. The option will also rise in value as gold falls towards $1900 and could be sold early. It will not have been that expensive. However it is slightly surprising for miners to spend money hedging unless needed to enable them to continue paying losses and of course if they continue doing it is an extra cost. I wonder why Centamin thinks it worth the money or if they are really gloomy on the gold price. It is quite surprising how bad miners are at predicting the gold price though not as bad as analysts. At least it doesn’t reduce the upside other than the cost of doing it, unlike Hochschild who yesterday said they had hedged to sell around 2100/$2200, guaranteeing them this price,, a very different and more expensive view, and necessary to them with big debts.
What good newsto start the day, better days to come.
Oh thank you Siko for your support.
Hi Sotolo and good morning. I see the hedging as a risk management action and a good one. It derisks annual income and locks in profits. Perhaps my view is influenced by the fact I am now 67 and retire at the end of this month. The last thing Martin Horgan wants is for income to fall. In saying that I have no idea how much the hedging cost.
Well so far the market seems to like the figures. I'm a bit disappointed in the dividend announced as a good dividend makes me happier (I do reinvest them) -------and you can get similar percentage in savings now.
I don't really understand all the figures like some of you do, but the AISC are down compared to last quarter?
I would have liked to have seen the production figure a bit higher, so they were over half of the lower figure of guidance, but I think Q1 was the low one and production is weighted to H2?
An estimate of the end to the waste clearing is something we have been waiting for and that should save us some money and reduce costs. I would have thought that the closer we get to the completion, the more the market will like it.
I also noticed that the average price realised was $1936 which was $86 above what they had been working on, which is partly why I'm disappointed with the dividend.
Hopefully gold will stay above $1930 and even better go higher.
While it is nice to hear about updates in other areas, getting gold out of the ground at Sukari is the main thing and they should be able to go at the full 160km now and not just the 3km.
After the rough ride we have had here over the last few years, lets hop that there are more ladders and less snakes and if there are any, that they are very small ones.
I'm not getting any younger and the gold toecaps for my gardening boots would be very nice.
Hi Paul, I concur entirely with your summing up, however after the years of less than reliable and unsustainable performance of so many rungs up the ladder it will take more than one quarters improvement to convince the market that this time things are different.
Good news on the AISC, however improvements still needed in communicating news to the market and investors between quarterly announcements.
The dividend is disappointing to say the least, but then in the past it was the El Raghy family who where big fans of a more generous dividend, it seems now that the BOD are less reluctant to reward shareholders, but as you say with interest rates rising elsewhere they may well be forced to increase it t keep institutional investors interested!
So at last some good progress made, lets hope it continues!
Hi all, very pleased with these results and the market reaction to them. The hedging seems very sensible - guarantee a certain level of revenue with open upside during a period of heavy investment - Doropo in particular but also more solar, grid power etc. Just want to say to Steve, you have done us a service, because as any fule kno... Option2.
The dividend policy for H2 seems sensible especially for those seeking long term growth. The declared Dividend exceeds the Group Free Cash Flow from normal operations by $10m and represents 56% of Cashflow pre Growth Capex.
Looking deeper into the figures shows that $108m of CAPEX was incurred in H1 with another $165m forecast for H2.
Gold Production needs to increase by 5% in H2 to meet the lowest forecast and 19% to hit the upper level.
The additional $57m of CAPEX will require an additional production of 81koz of gold to fund the CAPEX from production (ie $1936 - $1228 = $702 cash produced per oz - $57m/702 = approx 81Koz)
The top end of Forecast of 480koz will give a production uplift of just 42koz so half of the additional CAPEX will come from reserves/debt at the top level and most of it at the lower end. Martin Horgan states that CEY is on track for the mid point of the production range. This suggests that significant CAPEX will be funded from reserves so any additional dividend would further deplete reserves/shareholder value.
The good news is that CAPEX is forecast to reduce significantly in 2024 with a number of projects nearing completion that will also result in cost savings.
The $1900/oz hedging cost $6.1m for 240,000oz so $25.41 per oz or %1.33 if I understand it correctly. That seems to be a relatively low cost to give an element of security.
The cost per ounce for the puts is $25 per ounce ($6M) and is set at 20,000 per month over the following 12 months. If gold fell back to $1800 average for 4 months the hedge is at breakeven.
70% of the waste stripping is resolved. The remainder completes over the following 12 months for $48M.
The company is on course to hit mid range on the production ounces between the high and lower range quoted at the present time.
Tornado. Remember near 20% inflation over last couple of years so $1900 hedge is near a $1500 hedge back then. I really wonder why they have done it reducing income by $25 an ounce. Overall miners are usually better at mining than timing the market, unless lenders or poor balance sheets force a hedge.