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Barrick Gold announced that it is reducing its dividend by 33% to 10 cents per share
Newmont declared a 40 cent dividend which represents a 27% cut
Both have substantially lower AISC & substantially larger cash reserves than Centamin
Are the world's two largest gold miners acting too cautious?
Should Centamin follow the trend and preserve cash - what will support its share price ? What is its lower range?
Looks inauspicious – but I’m still holding here based on this sentiment -“The repricing of short-term interest rates is putting temporary downward pressure on gold. Gold could trade sideways to lower for a few weeks as interest rates adjust”
https://www.gold-eagle.com/forecasts_predictions
Any thoughts?
The best driver of Centamin’s share price is a rise in production, if they announce an increase in production the price of gold will lose its effect on share price.
(I’d say)
Razor I think the best driver of the share price is expected profit. Even with output up a bit depends if costs rise more in this highly inflationary environment (see other miners). Also the dividend cut may affect share price more as it seems unexpected by many so may be quite substantial as they will be paying out a lower proportion of lower profits, so I am looking for the gold price to save us tho not just yet, and would love the icing of increased output combined with lower costs
Taking into account the solar savings on fuel cost ,and in house mining, with supervision from in house management, it will be interesting times.
A production increase would indeed serve two purposes ,
Investor interest and sentiment for traders .
Then unexpected rise in AU prices.
That will come ,maybe not immediatley, and the bottom may not be here yet- but in the words made famous by the FED , it is transitory. ;-)
Sotolo it was 550k Troy ounce production that took Centamin to £2 and loosing it that brought the share price back down again.
I believe.
Gold miner says area of open pit Sukari mine not safe to operate in and drops forecast production for 2020 by at least 13 per cent
Centamin cuts 2020 guidance on safety grounds
https://www.investorschronicle.co.uk/shares/2020/10/02/centamin-cuts-2020-guidance-on-safety-grounds/
In summer 2020 operations at Centamin’s Sukari mine were affected by subsidence and this put the shares under significant pressure.
https://www.sharesmagazine.co.uk/news/shares/shares-in-centamin-are-finally-move-higher-after-two-years-of-being-in-the-doldrums
Razor, I think it was the big reduction in profit, and that came even more from the massive rise in price than lesser fall in ounces, costs have doubled since the 550k days, from in the $700’s aisc, so even at 550oz with 1800 gold would now be making just $90m or so, a far cry from what we did, so I watch the costs not the ounces, tho ounces help sentiment and to lower costs a bit
Not relevant Sotolo- you can't simply make those calculation assumptions as they are wrong. Inflation is a moveable thing so you can't simply say "x" and "y" and profit is "z"... for example you need to understand all line items of costs that make up the aisc , the origin of costs and the levels of inflation on those costs, for example how much of their costs base is fuel and what % of fuel in their overall asic and what fuel is predicted to cost moving forward. the same for staff costs and so on and so on and so on. Then the costs moving forward can be used in relation to ounces mined etc And remember some costs can actually deflate
although most will simply inflate also at a massively reduced rate
Steve I am not talking about general inflation but the change in Cey aisc as in the report in 2016/17 and now, and it’s large impact on change in profit and share price in past 5/6 years
Why AISC is Meaningless and Abused by the Mining Industry!
To demonstrate that AISC is meaningless as a gauge on how much a company really generates in cash, the performance of five diverse precious metal companies have been reviewed, some with important co-product revenue (e.g. SSR Mining), some purely open pit, others with both open pit and underground operations.
50% profit share
In the case of Centamin (CEE) an adjustment was necessary. The reason is that the company is exempt from income taxes in return as part of its production sharing agreement with the Egyptian government.
The government shares 50% of the cash flow after the company had recouped its investments. It is therefore a kind of “income tax” and should therefore be accounted to make comparison with their peers that are subject to income tax, possible.
The green highlighted cell shows the total cash disbursed to the government.
https://www.cruxinvestor.com/articles/analysts-notes-week-5
Do not put too much faith into All-In-Sustaining-Cost figures as reported by mining companies. All too often the figures are not ‘all-in’ and are not ‘sustaining’ over more than a single reporting period.
We recommend you see that analysis of cash flow statements in financial statements give a vastly superior picture of the true cost of sustained mining than AISC.
The formulas is relatively simple:
(Cash from Ops after Changes in Working Capital – Cash Used for Investing Activities) / Au ounces Sold
Yes, there are flaws as the cash flow statements can give an incomplete picture as they hide tax-like outflows under “financial activities”, do not show the consideration paid in company shares and include temporary items such as restricted cash, but they give you a much better understanding of the Company.
The fact that AISC figures produced by mining companies is highly selective explains why even “low AISC” companies somehow never make enough net free cash to pay dividends. Not only that but many of these ‘highly profitable’ companies find themselves having to come back to the equity markets over and over again, to refinance.
We recommend that you do yourself a favour and in future do the analysis. Again, it is the cash from operations after changes in Working Capital, minus the cash used for investing activities, and all of that divided by the ounces of gold sold.
Make sure to check that there are no exceptional items included and see whether the company can genuinely claim a proportion of the capital expenditure was spent on a project that will truly increase production in the medium to long term. The amount of cash spent on this particular project can be found in the financial statements under a table in the notes called Property, Plant and Equipment and deducted from Cash Used for Investing Activities in the formula.
Of course but that's ages ago now and all the market is interested in is the future - eg solar plant and other cost savings with far better cost control and completion of the wall slip! Plus current predictions on
future costs is key by CEY
This may or may not be the case- but what is pretty much all of the case- AISC reported goes up
and SP goes down and vice versa- all others being equal
Sotolo, Razors, SteveJ, you're all right in my view....
Rising SP depends on a market sentiment that production will rise, AISC will fall, GP is strong and ultimately as Sotolo says, profits are going to rise and keep on rising.
At the minute we're slightly in limbo ahead of a quiet Q1 but Q2 results should set things moving again.
Yes 3bear- it's great that we have lots of contributors with differing nuances. Next set of US data on inflation etc will move things too
Sotolo, Razors, SteveJ, 3Bear et al, all good points as far as production from the existing Sukhari mine is concerned but for me a big factor that could bump start the share price is to get a wiggle on with developing the 160km2 and the new concession. Dare I say it even JV with other companies to accelerate development of the new concession.
,
Hi Somnamma,
Possibly they have regarded the Centamin dividend reduction as an excuse or opportunity to reduce theirs without getting too much flack from shareholders?
Really can't see Cey cutting the divi any more, unless something dire happened!
I hope they dont cut the divi any more Mr T. Also, with a bit of luck, Im hoping after the next one, that the divis will increase to a decent level, similar (or better!) than ones in the past, but without the dodgy practises that went on at that time.
As Ive said before, things could hav been done more smoothly and the total amount of dividends over the years would be the same, but the company and the share price would be in a better position, because things would have been done properly.
Some of that excess money in the past could have been spent on the "Heap" and opening things up ready for getting more gold out. We probably would have had a more consistant dividend.
You and me know they story so no need to go over it again.
It would be nice to start opening up areas alongside Sukari .
And here is a question for the mining experts.
If you have gotten most or all of the gold out of a pit and moved on to an adjacent area, can you back fill into the pit and would that cut costs???
Hi Paul,
Your question and idea in principle seems to make very good sense because if feasible it would reduce haulage distance and times,also reducing plant wear and tear and diesel consumption even possibly help to make the surrounding area more stable?
I will see if I can find out more!
In the meantime you may care to see this link which although not connected with Centamin shows the importance of properly regulated mining tand industry the world over!
https://secure.avaaz.org/campaign/en/stop_war_on_water_uk_12/?crtqjhb
Tibbs
Hi Paul,
Put your question to someone who knows the industry well, see answer below-
"This is always done when circumstances allow. It is however not practical if you have one pit that is mined such that it follows the deposit to the bottom in a steep fashion.
Where it can be done is when there are a number of pits that are mined sequentially.
A good example is what Orezone plans to do.
Alternatively, if you have a single pit that stretches over a long distance and there are areas that no longer need deepening, those can be filled as long as there is no risk of that material spilling over in the pit where you are working"
Gosh Tibbs what cheering news and I do hope you prove right, 5 years the annual calendar year dividend was over 10p, last year around 6p, I see it falling to around 4p ie by 33%, hope I am wrong as I always do and the optimists read it better but I somehow doubt it on this when profits will be lower and they say they will no longer pay all or more of the profits as dividends but reinvest a hunk which is worrisome to me, best regards Jeremiah
Premyslaw Radomski who seems to call gold better than most (I find Gary Wagner second) called this turn up right on the button again last week. Unfortunately he said it would end around $1870 a couple of days ago, when gold was a bit lower, and the would come the big drop; I do hope he is wrong but he rarely seems to be.
Well he was wrong then. so he will probably be wrong again too
Gold can only go up or down so pointless listening to predictions from people as there are 1,000s of them out there so the likelihood of many being correct is high on a 50/50 bet... only worth reading of exact figure to hit with rationale is posted and when- nearly all of them when they stage at say 1800 gold price it will go up to say 1850 then down and it goes to 1830 simply still claim to to right just slightly off - it's all pointless unless you believe in the rationale- most cover themselves with waffle though and are utterly pointless, lick hungry charlatans