The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
A bit off topic (but highly relevant to Centamin investors) my other Egypt investment - energy
An excerpt from VAALCO Energy's Q2 results :
Second quarter of 2023 realized pricing (net of royalties) was down 10% compared to the first quarter of 2023 and decreased 35% compared to the second quarter of 2022. This was driven by lower commodity pricing, higher royalty costs, as well as Egyptian sales in the second quarter that were sold domestically resulting in a $10 per BOE reduction in price achieved quarter-on-quarter. In the third quarter, the Company expects to sell an Egyptian export cargo offshore which should improve the pricing.
Foreign income taxes for Gabon and Egypt are settled by the government taking their oil in-kind.
VAALCO continues to work with the Egyptian General Petroleum Corporation on both collections and offsets and expects to have a third quarter 2023 export cargo offshore of around 500,000 barrels.
https://www.vaalco.com/investors/rns-releases
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Egypt changes the rules, makes negotiating difficult and basically takes the stance of 'my way or the highway' when it comes to extractive industries - yes it's been that way for a long time but it's getting worse as the country is increasingly strapped for cash
VAALCO's above statement 'continue to work with Egyptian General Petroleum Corporation on both collections and offsets' is polite talk for 'these b@stards are holding us over a barrel' , literally
I really don't know if the risk is still worth it (for me) when safer jurisdictions are not hard to come by
The point I was making isn't about the lawsuit at the University or the Egyptian law - but the mere fact tuition rates were doubled from last year - this is due to rampant inflation in Egypt which is much higher than many other countries
this foreign university isn't under the artificial umbrella that most other publicly or military controlled entities in Egypt operate - thus the true cost increases are necessarily passed on
to reiterate the point - Centamin faces uniquely higher cost pressures because they operate in Egypt - as a comparison both Newmont and Barrick's Q1’23 AISC were up by 13% q/q to US$1,376/oz & up 10% q/q to US$1,370/oz respectively
once price agreements with suppliers are renegotiated/renewed Centamin's AISC will rise considerably more than country's with lower inflation
An article for those who claim Egypt's currency devaluation is a boon for Centamin - read this:
August 15, 2023
LEGALEGYPTEDUCATION
Egypt - Parents of students at Coventry University’s Egypt branch have submitted an official objection to the university’s decision to increase annual tuition fees by more than 100%.
The parents say the Coventry University’s decision is illegal, as it violates Egyptian law. Article 18 of Law No. 162 of 2018 regarding the establishment and organization of branches of foreign universities and university institutions within Egypt states that tuition fees must be collected in Egyptian pounds.
The law also prohibits universities from increasing tuition fees after students have enrolled, except in percentages that were agreed upon in advance.
Moreover, Law No. 194 of the year 2020 of the Central Bank and Banking System stipulates that “dealings within Egypt shall be in Egyptian pounds.” The regulations of the Ministry of Higher Education also stipulate that the permitted annual increase in tuition fees in Egyptian pounds is 7%.
The parents also say Coventry University’s decision is unfair, as it comes at a time when the Egyptian economy is struggling. Many parents are unable to afford the increased tuition fees, and they are concerned that their children will be forced to drop out of school.
https://www.zawya.com/en/legal/regulations/parents-of-coventry-university-egypt-students-object-to-illegal-tuition-hike-vik5uwem
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Summary:
Egypt pound devaluation and rampant inflation are forcing a foreign owned school to double tuition to stay afloat. Input costs are up whether goods/services are acquired locally or abroad. The same is true for Centamin - expect AISC upward pressure
People's Daily, China
@PDChina
Argentina’s far-right outsider candidate Javier Milei, who wants to abolish the central bank and adopt the US dollar as the country’s currency, received the most primary votes for presidential candidates in the October general election, media reported on Monday.
https://twitter.com/PDChina/status/1691168310132641792
Brad Setser
@Brad_Setser
I rather doubt there will ever be a BRICs currency in any real sense. India doesn't want it. And at the end of the day the only logical way to make it work would be to have other currencies orbiting around the yuan, which Russia may do b/c it has no choice but others won't
https://twitter.com/Brad_Setser/status/1691474290833555456
When Putin came to power in 1999
$1 US = 24 Rubles
Today
$1 US = 94 Rubles
very unfortunate for the average Russian who doesn't have the wherewithal to stash savings abroad
the bank of russia claims the country's official inflation rate is 3.6% which would be an amazing feat no other country in the world has been able to achieve lately
unofficially the inflation rate in Russia is estimated to be around 60%
https://markets.businessinsider.com/news/currencies/russia-economy-inflation-60-percent-falling-ruble-steve-hanke-2023-7
- We now expect Egypt’s annual gas production to decline in 2023, as ongoing water infiltration issues at the country’s mega Zohr field weighs on output.
- In turn, this will see the country’s LNG exports marginally decline this year.
- High depletion rates at the country’s existing fields, coupled with a thin project pipeline, paints a bearish outlook for the country’s long-term gas production.
https://www.fitchsolutions.com/oil-gas/declining-gas-production-egypt-underlines-need-further-discoveries-18-07-2023
Egypt's lack of funds to import fuel is only getting worse - a wake up call to Centamin contemplating connection to Egypt's power grid
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Madbouly said that the value of the additional shipments will be between $250m to $300m. He stressed that these numbers were not available in the current budget or estimate, and therefore, it is an additional burden that the country will be able to provide under the current circumstances.
Egypt’s Prime Minister also announced that the government will be working to reduce electricity consumption in public facilities, such as street lighting and government buildings.
Madbouly also directed the Minister of Youth and Sports to play matches before sunset to reduce electricity consumption in sports facilities and stadiums.
He added that it was agreed to operate air conditioning devices at 25 degrees Celsius or more to consume electricity in the smallest possible amount.
Moreover, Egypt’s Prime Minister stated that the country will need to implement load-shedding procedures for about one to two hours daily due to high temperatures.
Madbouly said that the load shedding will be implemented in a balanced manner across the country and that it will not affect hospitals or strategic facilities.
https://www.dailynewsegypt.com/2023/07/27/egypts-prime-minister-announces-measures-to-address-power-cuts/
Apparently Egyptian expats can buy off their mandatory military service obligations by paying $5,000 in US dollars or Euros. By doing so they'll be able to 'travel to and from Egypt without fear of detainment' (not kidding)
This policy falls somewhere between a threat and a bribe. Good one Sisi!
To further complicate matters, the Egyptian military wants the $5k payments to go to the Abu Dhabi branch of the National Bank of Egypt - in Abu Dhabi! (might that be in order to bypass any legal difficulties the Military has in collecting their graft? ) Incredible.
On a side note, Egypt has had some form of military conscription in force since the 1840's - leave it to Sisi to break a 175 year tradition
https://alanasserlaw.com/2023/07/27/egypt-allows-egyptians-abroad-to-settle-their-military-service-status-for-5000/
https://www.egypttoday.com/Article/3/125897/Egypt-offers-conscription-settlement-for-Egyptians-abroad-at-5-000
"The strip ratio in the first five years of operation (2009 to 2014) was less than the LOM average. Strip ratio is forecast to increase to the LOM average (5.9:1), and in some future periods is likely to peak higher than the LOM average when waste pre-stripping is undertaken for the final three pit stages."
That's an excerpt from the year 2015 document 43-101
https://www.centamin.com/media/2317/cey_sukari_43-101-technical-report-231015_final.pdf
More recent open pit data; "The strip ratio for the quarter was 9.1:1 (waste:ore)"
That's an excerpt from Q1 2023 report https://www.centamin.com/media/2959/cey-rns_-1q23-quarterly_final_200323_website.pdf
Centamin's stock price will only recover if and when the AISC declines - and the biggest contributor is a high strip ratio. The Capital waste stripping program could never achieve this result - i.e. lower the strip ratio - therefore it simply made a lower AISC all the more impossible.
For those who mistakenly believe rushing a huge expense through would magically cause the average LOM strip ration to fall - sorry, but you're ignoring basic logic. It was just a higher cost realized earlier than originally scheduled.
In fact, nothing Centamin has published indicated to shareholders the Capital waste moving project would lower the LOM strip ratio & AISC - how could it?
Accounting for the end of mine drop off in costs the LOM ratio is currently forecast as 8:1 (see page 40) which itself is a significant upward revision than the mine plan of 2015
https://www.centamin.com/media/2877/cey-investor-presentation_141122_final.pdf
Worryingly, year 2024 looks to be the same as year 2023 around 9:1 whereas 2025 through 2029 look to be around 11:1 before improving back towards current levels - good luck making a profit the next several years! And forget about a dividend during the 11:1 period
This calls into question the whole purpose of utilizing Capital Drilling to expediate the process. The only counterargument that could be made is if a new ore body that was outside the LOM plan was the objective behind the Capital Drilling project - but that isn't the case.
Bottom Line: Unless a grand new discovery is found outside Sukari that can add ounces to the existing mill cheaply, or higher grades than forecast from the open pit or underground start to average the feed grade up, even the current share price is at risk.
During the last 12 months. 200 million shares!
Many of these companies like Blackrock, abrdn, Schroders, Vanguard, etc had held for over ten years - through thick and thin - collectively owning 524,413,488 shares
So then, to collectively sell 200,000,000 Centamin shares in such a short period of time is THE strongest sell signal an investor will ever witness and the biggest indication CEO Horgan actions' have not won their confidence -
On Centamin , and you're right - they have sold out
while Centamin's website still lists its MAJOR holder data as thus :
#1 VanEck Inc 111,244,970 shares 9.62%
#2 BlackRock 75,482,689 shares 6.53%
#3 abrdn plc 59,896,169 shares 5.18%
#4 Dimensional Fund Advisors 57,019,844 shares 4.93%
#5 The Vanguard Group, Inc 52,983,780 shares 4.58%
#6 Schroders 45,208,584 shares 3.91%
#7 Ninety One 43,647,274 shares 3.77%
#8 Aberforth Partners 41,332,214 shares 3.57%
#9 Wellington Mgt 39,703,129 shares 3.43%
#10 Hargreaves Lansdown PLC 39,227,049 shares 3.39%
Marketscreener lists Centamin's MAJOR shareholder data as thus :
#1 Van Eck 110,273,580 shares 9.519%
#2 Dimensional Fund Advisors 47,425,970 shares 4.094%
#3 The Vanguard Group 41,000,780 shares 3.539%
#4 Hargreaves Lansdown 3.386%
#5 Aberforth Partners 38,141,675 shares 3.293%
#6 Norges Bank 2.811%
#7 Schroder Investment Management 31,157,324 shares 2.690%
#8 Ninety One UK Ltd. 27,128,540 shares 2.342%
#9 BlackRock 18,356,831 shares 1.585%
#10 Abrdn 18,275,264 shares 1.578%
https://www.marketscreener.com/quote/stock/CENTAMIN-PLC-9730915/company/
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Thus unless Marketscreener data is bad , which it probably isn't ( note: Centamin's website data hasn't changed in a long, long while) Centamin's MAJOR shareholders have sold down massively -
Blackrock SOLD 57 million shares
Abrdn SOLD 41 million shares
Vanguard SOLD 12 million shares
Dimensional SOLD 10 million shares
Schroders SOLD 14 million shares
Ninety One SOLD 16 million shares
Wellington SOLD a minimum of 21 million cuz they're no longer in the top ten
Yes, VanEck and a few others are holding steady - but to present this current weak share price as a buying opportunity , and then pointing to the larger players as proof - is not accurate, in fact it's just the opposite
Aug. 6, 2023, 5:54 a.m. ET
Egypt's tutors rose to fame by accurately predicting questions, whether through experience or by greasing government palms. These days, a star tutor can draw 400 or more students per class, and the most sought-after tutors earn enough to drive Porsches.
Before the coronavirus pandemic popularized online classes, such tutors often rented theaters, mosques or halls to fit an audience of thousands for final pre-exam cramming sessions, said Maged Hosny, an industry veteran who opened some of Cairo’s first centers.
The most popular teachers drill facts and figures into their students with jokes and mnemonic songs they make up themselves. Others build their brands using self-published textbooks and notebooks with their names and faces emblazoned on every page. On Facebook, their fans argue heatedly about the best teachers.
She abandoned Egypt’s chronically overcrowded and underfunded schools midway through middle school, joining millions of other students in private tutoring, where the same teachers who were paid too little at school to bother teaching could make multiples of their day-job salaries on exam-prep classes.
Small wonder, then, that the centers compete to hire top tutors. Even doctors have been known to switch to tutoring to make more money.
The only qualification that matters is how many students they can attract.
“What I’d make in a month at my school, I could make in a day here,” said Mohamed Galal, 35, an Excellent-Oxford math tutor who also teaches at a nearby private school. “And it’s not just the money. You also get the status, the respect.”
The tutoring industry in Egypt has become a big business by filling the void left by public schools, once the bedrock of middle-class advancement. The government’s mismanagement of the economy has shriveled Egypt’s once-robust middle class, analysts say, dragging families toward poverty not only through repeated economic crises and subsidy cuts, but, increasingly, by the cost of supposedly free services like health care and education.
Juggling a booming population, a sluggish economy and extravagant building projects, Egypt has long spent well below the constitutional minimum of 4 percent of gross domestic product on education, even as students skid far down the global educational rankings.
For-profit tutoring centers are where Egyptian families try to outrun their country’s decline. Lessons are the only way to secure better futures for their children, many believe, even if it means sacrificing meat, fruit and vegetables amid 35 percent inflation.
“Sometimes what we eat today depends on whether I have class tomorrow. If I have two classes tomorrow, for example, then we’re eating koshary today,” said Zeinab Moawad, 18, a public school student at Excellent-Oxford, referring to the cheapest of Egyptian dishes.
https://www.nytimes.com/2023/08/06/world/middleeast/egypt-public-schools-tutoring.html
- Higher interest income on a larger cash balance further drove much of the gain
- Berkshire's cash mountain now $147.4 billion - up from $128.6 billion at yearend
- total firm debt now $84 billion. (against $147.4 billion firm cash, net cash is $63.4B)
- Berkshire is earning over $7B/year in interest income on its T-bill holdings, up for nearly nothing two years ago. Interest expense on debt outstanding is less than $4B pre-tax
- railroad is noticeably weak with revenues down 11.6% on 11.1% lower volumes
- trucking taking share from rail on lower spot rates. Industrial, agriculture, coal volumes all down. Chemicals, plastics, lumber shipments all weak. Higher interest rates are hammering residential construction
- Berkshire's top 8 publicly traded company shareholdings make up 86% of all its publicly traded shareholdings - notably Apple makes up nearly 50% alone
1) Apple: 48%
2) Bank of America: 9%
3) American Express: 7%
4) Coca-Cola: 7%
5) Chevron: 6%
6) Occidental Petroleum: 4%
7) Kraft Heinz: 3%
8) Moody’s: 2%
My Thoughts:
The most successful investors didn't play by the commonly held investment rule of high diversification, at least not until their fortunes were amassed, and even then to outperform the market benchmark they were able to pick a winner and ride that winner to great highs (Apple!). Still, Buffet managed to get out of some too soon and miss others completely ( Amazon! )
Cowichan posts:
Buying power of one dollar over 90 years:
1933: $1.00
1943: $0.75
1953: $0.49
1963: $0.42
1973: $0.29
1983: $0.13
1993: $0.09
2003: $0.07
2023: $0.04
MrBond replies:
I don’t know where Cowichan is buying his dollars, but they still cost $1.00 for me
Believe it or not this article appeared in Egypt's elbarima news Aug 2, 2023 (here's some highlights - keep in mind Mulla is the main go-between with the EMRA & Centamin)
Despite his tolerant features and his “jovial” smile, which indicates a good heart and complete calmness, he is quick to anger, does not accept repeated mistakes, decisive in his practical dealings
Organized to the point that he gets angry if he finds anything that is not in its proper place and location. He sanctifies married life and helps his wife in arranging the house. With “Ahmed”, his only son, a father and friend, he has the ability to deal with his children by being kind to them.
During his tenure at the Foreign Trade Prosecution at the General Petroleum Corporation Mulla was able to reach very satisfactory understandings with major international companies that supply petroleum products and crude oil
Mulla also worked to attend international mining conferences to attract the largest mining companies in the world including Barrick, B2 Gold, and others
The law regulating the activities of the gas market the most important achievements of the era of Mulla, which will be followed by the transformation of Egypt into an international regional center for energy trading, increase in revenues and improvement of the economic situation
Mulla was able during 7 years to achieve that had not been achieved for more than 25 years, to transform the Egyptian oil sector
He sanctifies married life and the satisfaction of his parents and their prayers, the secret of his success in his work. His favorite food is “moussaka”
Mulla is born in the sign of Gemini, and the people of this sign can see two completely different personalities in them, which he expresses by saying: “As much as I am nervous when I calmly guide the one I got intolerant of, and when I yell, my voice remains loud
This kind-hearted personality was reflected in his relationship with his wife: “I am one of the men who loves the house, not just the kitchen."
His father is the ambassador, the heroic fighter, the righteous son of Egypt, Ahmed Abdel Qader Al-Mulla, who used to work as the consul of Egypt in Palestine, and it was fate that one of his periods of diplomatic work in Jerusalem in 1967 was the war period, so he remained steadfast in his position, neither retreating nor retreating in the face of death and the Israeli army
The article goes on here https://elbarima.com/%d8%a7%d9%84%d9%88%d8%ac%d9%87-%d8%a7%d9%84%d8%a3%d8%ae%d8%b1-%d9%84%d9%80%d9%88%d8%b2%d9%8a%d8%b1-%d8%a7%d9%84%d8%a8%d8%aa%d8%b1%d9%88%d9%84-%d8%b7%d8%a7%d8%b1%d9%82-%d8%a7%d9%84%d9%85%d9%84/
My takeaways:
1) WTF
2) Didn't know Mulla was once head of foreign trade prosecution, probably means Centamin doesn't want to f*ck with him
3) All in all sounds like a plea from Mulla to stay in his role (or a thank you very much, now goodbye) depending on who submitted the article for print
I talk about Centamin and the country in which it operates.
You simply talk about me.
Do you not see the irony?
If you don't have anything to add about the company, good or bad, fine. But to launch a personal attack against my credibility, opine about my personal vendetta, or my apparent dislike for Egypt - just grow up. Or better yet, grow a pair.
I'm available should you want to come out of the anonymous cloak you bravely talk behind.
https://www.linkedin.com/in/don-lawson-98619370/
Siko,
Sorry you feel like a victim.
I pointed out Egypt's 1991 history because - as I said earlier - the current 20.25% interest rate set by the CBE was only reached once before and that during an extreme crisis. It is very relevant to me as Centamin is not the only company I can pick to invest in Egypt.
Bottom Line - facts are facts - if you have something to correct or set the record straight on my posts, go ahead. At this point I'm pretty impervious to verbal abuse and attacks on my character.
Was during the Gulf War Crisis. Further reading:
Economic Impact of the Crisis in Egypt
Marsha Pripstein Posusney In: 168 (January/February 1991)
Egypt was facing a severe foreign exchange shortage when the Gulf crisis broke out. Its debt arrears were piling up and it was finding it more and more difficult to obtain new loans. The Gulf crisis threatens to make this situation even worse. Here’s how:
on the brink of economic collapse, and risk major political disruptions. Accordingly, the US and other Western nations and the conservative Gulf monarchies have rallied to Egypt’s aid. This rescue has taken these forms:
Direct Aid and New Loans France will provide $50 million in emergency funds and a $143 million concessional loan. Germany will grant $135 million to finance imports and a concessional loan of $159 million, and will release $365 million in project loans that had been blocked due to Egypt’s arrears in debt service. Increased aid has also been announced by Denmark, Canada, Japan and Italy. The US has not directly increased aid but has upped the cash portion of the aid package from the US Agency for International Development. Grants are also coming in from Gulf countries and the Kuwaiti government in exile. The Gulf Cooperation Council is preparing some $1-2 billion a year. Egypt has reportedly already received $1.5 billion from Saudi Arabia and $600 million from the UAE.
International Monetary Fund Deal After years of pushing Egypt to implement reforms that would make life more difficult for the poor, the IMF, at Washington’s behest, may now be willing to give Egypt a standby agreement on more favorable terms. The Fund, along with the World Bank, is actively lobbying Western nations to increase direct aid to Egypt.
Debt Forgiveness The Bush administration has won Congressional support for its proposal to cancel Egypt’s $7 billion military debt to the US. The Gulf states have reportedly canceled debts worth $7 to $9 billion.
An IMF accord will pave the way for a Paris Club deal with other creditor states worth around $7-8 billion. But what has happened represents a fundamental shift in the components of the external accounts in a way that makes Egypt less reliant on its own resources and more dependent on foreign aid. Worker remittances flowing into Egypt’s “hidden economy” were accessible to members of the lower classes, even in rural areas. Most of the funds made available as crisis relief will accrue to the state, where political and economic elites get first crack at them.
https://merip.org/1991/01/economic-impact-of-the-crisis-in-egypt/
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The last statement about elites skimming off the top of aid packages is particularly resonate in the current Sisi regime. So what has changed? Egypt is bankrupt again and needing a rescue package asap. Only thing different is this time it hasn't taken a war to ruin Egypt's economy, just a military dictator named Sisi
Hi mrtibbles,
I couldn't imagine a more iron clad contract than what currently exists between Centamin and Egypt - yet I point out the fact that it is possible with that last example. Personally, I worry more about political and fiscal instability causing disruptions with procurement of materials (explosives) and who knows what else (equipment)
Being a single source miner is a b*tch - the vulnerability ought to have been addressed years and years ago.
CAIRO, Aug 3 (Reuters) - The Central Bank of Egypt raised overnight interest rates by 100 basis points on Thursday in a surprise move, saying it sought to contain inflationary pressures and anchor inflation expectations.
The lending rate was increased to 20.25% and the deposit rate to 19.25%, the bank's Monetary Policy Committee said in a statement.
Fifteen of 16 analysts polled by Reuters this week had expected the bank to leave rates unchanged
https://www.reuters.com/markets/rates-bonds/egypts-central-bank-raises-interest-rates-by-100-bps-2023-08-03/
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I'm sure it's nothing to worry about...