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And ask him why we bother with digging & refining Sukari's gold ;-)
The Journal of Sustainable Finance & Investment has a better idea:
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Baur recently explored this idea with a couple of his colleagues at the University of Western Australia Business School. In a 2021 paper, they proposed leaving unmined gold in the ground and letting “nature act as a natural vault and custodian legally protected by gold firms and the government.” In this scenario, investors could buy stock in gold-exploration companies that have identified underground gold but have no plans to mine it. This would give investors an alternative to purchasing shares of the aboveground gold that currently sits in bank vaults around the globe.
Would the unmined gold, which the paper calls “green gold,” actually earn money for its investors? Baur and his co-authors considered the costs of gold exploration and gold mining, and the uncertainty of the quality and amount of gold that might exist in any given underground location. They then ran an empirical analysis, and concluded that unmined gold can still be a valuable investment.
https://www.tandfonline.com/doi/abs/10.1080/20430795.2021.1974242?journalCode=tsfi20
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Found that gem in The Atlantic article on mining here:
https://www.theatlantic.com/science/archive/2022/01/gold-mines-reopening-california/621403/
A thoroughly anti-mining piece IMO . These magazine purveyors ignore the fact that everything we touch and use in our modern lives come from the extractive industries in one way or another.
The thesis they put forward is a stupid one . Mothballing a mine doesn't come without irrecoverable sustaining costs , far better to invest in a passive Gold ETF
I ceased to be an investor in Centamin after the last mining update which revealed a significant uptick in costs with no more gold...just a lower level of annual production to make the mine life at Sukari extend from 10 years to.12. I do that with my pay packet, I spend less to make my wages last longer..my wages still remain the same overall though .
Time for a reality check , starting with the known givens
AISC for 2022 will be around $1,350 and annual production around 445,000 ounces .. This gives a profit . at today's gold price, of approx $450 per ounce sold
In 2020 the profit margin was $790 on a higher level of production .
To replicate the 2020 results will require an average gold price during 2022 of approx $ 2,140 per ounce ..quite a leap of faith to achieve that ..yes it might happen , but also gold could conceivably fall to $1,600 an ounce or less
. If ( as no doubt they will ) continue ( wouldn't you with their remuneration package ), they should cease dividends immediately and focus on exploration and hope for the best . If they stopped dividend payments though, the share price would fall to 60 pence and they know it ..best to appease shareholders with a dividend and stay in a job !
So with that backdrop what can be done to maximise shareholder value ?
Very simple , distribute the $250-300 million cash in the bank back to shareholders as a special dividend ( approx 20 pence per share )
Then NO MORE EXPLORATION EXPENDITURE BEYOND THAT NECESSARY FOR DOROPO .
Next , sack the whole board ( Mr Horgan is the emperor with no clothes ) and bring in a much reduced and more focused team to manage down existing assets for cash , distributing ALL operating cash surpluses (annually ) back to shareholders in the form of dividends .. This will give shareholders a 12 year income , poss more with Doropo
Of course a viable alternative to reward shareholders more quickly will be to sell this future income stream as an annuity to any interested party now , as well as approx $600 million of physical assets , plus selling off existing mining licences
Face facts guys , Beyond Sukari and poss Doropo, Centamin has no gold ..it will have to explore to find some , which will quickly eat up remaining cash with no guarantee of reaping any reward. Furthermore ,setting up a new operation in another country will incur huge set up costs . Risk of subsequent asset seizures ??
Just think .. Anyone who has invested in Centamin at any time , for the past 15 years using a buy and hold strategy has lost money . To continue to do so will be to take out a leveraged position on future gold prices. You don't need to be a shareholder to do that
Just my candid opinion..you form yours. Good luck
Ciao !
Ignoring the rather weird rant (most of that) you make a rather flawed assumption.
In that, if gold stayed at this level, let's say $1800, then CEY would continue to make a lot of money, distributing hefty dividends to shareholders, probably remain at least at this share price level (or go higher probably), whilst simultaneously funding exploration.
At the current dividend rate you could have made over 40% after 5 years from dividends alone with no share price rise and no rises due to any exploration success/development.
There seem to be a lot of weird rants in recent months on gold miners (most of which have had II's selling out on the gold price pullback).
Rich I agree, especially as that info did not come from Centamin, but from some Aussie Greens.
Pity people do not read and comprehend more.
And what is more says he./she is not an investor .
Hi Candid,
You aren't including the capex due to be spent to ensure the sustainability of the mine for the next 12+ years.
Like trying to compare apples with pears!
Costs have gone up, and will stay up for a while, however the is to be able to produce 500k oz at c.$900 cash costs for the long term, that requires needs the capex invested which hits AISCs.
That makes Sukari a top quartile Tier 1 low cost producer globally!
Dear Mr T, $900 cash costs means much higher aisc so Candid has a point; it may not be quite as bad as he suggests but profits will likely halve unless gold shoots up which is looking increasingly unlikely if it hasn’t yet, despite soaring inflation and ultra low interest rates. The company could pay a special dividend as Candid asks, or a share buyback, but more useful would be to use the cash to keep paying us a dividend as the profits shrink so won’t be there to cover it imho. It will also need cash from this pot, or to borrow which is getting more expensive, to do the much needed new Egyptian exploration with no promise of finding anything.
Oh dear Sotolo, all that hole drilling in Egypt and no new gold. really?
Oh dear profits dropping and AISC through the roof ?
POG won't rise in 2022, possibly you know something that wholesalers aren't aware of?
Perhaps you would be better to get out whilst you can?
Why stay in this share if that's how you feel?
Despite Sotolo's fears possibly based on misguided assumptions or rumours about the Egyptian prospects and other various market issues, he is after all just guessing, because the relevant information can't, or wont be disclosed until the appropriate time due to financial regulations, but that said on what information is available Centamin seems well placed to continue to make money!
The dividend policy has'nt changed, it was confirmed in the last Q&A session and as far as anyone can tell there is no intention to change it, the amount of 2022 dividend to be announced in March 2022..
There is a shortage of physical gold and increasing lead in times at the majority of the worlds licensed gold refiners.
Basel 3 is already having an effect and will do so increasingly as 2022 progresses.
Inflation will certainly have an effect on the POG.
The effects of the new company strategy won't be instant, but will also become more apparent as they filter through over 2022 and beyond when they are reported to the market at the appropriate time.
Mr Tibbles, I didn’t say POG wouldn’t rise in 2022, I just said we need that rise to maintain profits, and it looks less likely as gold fails to be moved by large negative real interest rates and high inflation. I have no idea if gold will fall or rise, but I do know what Mr Horgan has told,us, without a gold rise profits will be lower with higher costs and lower output. It is possible the extra holes as you put it wil not only cost us more but reveal more and cheaper gold, but this certainly isn’t promised. However with the world as it is now even a lower dividend (not the next one as already promised) or paying it out of cash we already hold, makes these a hold as most other shares can and bonds are likely to decline in value and there is a possible upside here or hopefully lower fall that elsewhere. Your wishful thinking, and about life, is charming.