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Just had a mail into my inbox at 1615 from Hargreaves Lansdown with ideas to benefit from rising gold. They recommend 2 shares: Barrick and Centamin. Text ref Centamin as follows:
Centamin is another gold miner, but with a much more concentrated portfolio than a global giant like Barrick, it offers something different.
Operations focus on the Sukari mine in Egypt, with another couple of sites at varying stages of development. A concentrated portfolio adds risk. We'd argue the added risk paves the way for greater upside potential. Nonetheless, if anything happens to the site in Egypt, there's little in the way of backup.
Production at the Sukari mine has been in decline for several years. But 2022 marked an end to that trend, production's expected to return to around 500,000 ounces from 2024, slightly ahead of some estimates. Reserves have been improving and an updated expansion plan is expected in the second half.
Diversification away from the Sukari mine is underway, with progress being made at the Doropo project in Côte d'Ivoire. The latest project study is due for completion in the first half of this year, which could act as a near-term catalyst. The business is on strong foundations, with cash on the balance sheet and zero debt. But as with all mining projects, risks are high.
Like Barrick, costs have been on the rise, putting pressure on margins. The effects are being reduced to some extent by a $150m cost-saving programme due to be delivered by the end of the year. Progress so far has been encouraging, with $116m in savings delivered as at the end of the last financial year.
Its concentrated portfolio makes Centamin a higher-risk option than some of its larger peers. That’s reflected in a less demanding valuation, which we see as offering upside. Though, there’s no guarantee.
Hi Goldgnome,
I thought it was bed time down under!
I would love to see those figures. Put the $2200 together with a slight over performance on the AISC range that I mention in my previous post and we would be getting $1000 an oz over costs. Now wouldn't that be nice.
Yours dreaming,
Prof
Hi Paul,
I am afraid that I have limited figures to hand. The guidance for AISC for this FY is $1250-1400. Q1 AISC was $1348 for a production of 105,875oz so already well below the top end of the guidance range. All else being equal AISC will fall as oz produced increases as the non marginal costs of production are spread over a larger volume of ozs. That should therefore drive AISC down over the rest of the year. All else however is not equal and I expect a number of the other initiatives that CEY has underway to drive down AISC to have some effect this year (you mention the grid connection although of little/ limited impact this FY I suspect) and also some of the one off costs as they seek to get the mine back in shape to cease or reduce (you mention waste removal which we should see the 'extraordinary' element slip away although some is business as usual. As such I would be disappointed to see AISC above the mid-point of the range and would hope to see it somewhere between the bottom end of $1,250 and the midpoint of $1,325.
A large part of this guesstimate and perhaps too much is hope. I do suspect that CEY have given a range that they are comfortable being able to deliver even with bad inflation and a few curve balls as Horgan does seem to like to play it safe (fine by me!). If that inflation is not as bad as last year and there are no serious curve balls then that also gives me an expectation that we could come in within the figures I mention above of $1250-$1325.
Ultimately however we will only know in retrospect.
Best wishes,
Prof
Hi Goldgnome,
Thanks for sharing. Well if that happened CEY would be clearing $800-900 over AISC. Even our share price would have to react to that!
Best wishes,
Prof
Thanks Dasut, that is a helpful explanation.
Best wishes,
Prof
Just managed to buy 10,000 more shares at just under 106 on opening. Did not expect that with both gold knocking back on 1999 and this morning's RNS. Would expect to see a reasonable move up today - we shall see!
Best wishes,
Prof
Hi Tony,
I agree - boringly predictable seems to be Horgan's hallmark which I am quite happy with.
I liked : 'Q1 cash costs of US$937/oz produced and all-in sustaining costs ("AISC") of US$1,348/oz sold' as if they can do that with the Q1 lower production of just under 106k oz then is should fall when they deliver the higher production that will get us to 450-480koz for the year. Gold sold at an average of over 1900 for the quarter which means CEY are clearing over $550 an oz. For April so far I suspect the average price of gold is over $2000 so (big ifs coming here) if that holds for the rest of the year and AISC comes in at mid-point of guided range i.e. $1325 then CEY are clearing $675 per ounce. That would be taking us back to the days when Tibbs, if I remember correctly referred to Centamin as 'a demented cash machine spitting out the cash'.
Best wishes,
Prof
HIGHLIGHTS
Operational performance delivered in line with the mine plan
· The lost time injury frequency rate ("LTIFR") for the three months to 31 March 2023 ("Q1") was 0.31 per one million hours worked, reflecting one lost time injury. The total recordable injury frequency rate ("TRIFR") was 2.77 per one million hours worked
· Q1 gold production from the Sukari Gold Mine ("Sukari") was 105,875 ounces ("oz")
· Q1 revenue of US$205 million, an 18% increase from Q1 2022, generated from gold sales of 107,661 oz at an average realised gold price of US$1,902/oz sold
· Q1 cash costs of US$937/oz produced and all-in sustaining costs ("AISC") of US$1,348/oz sold
· Q1 capital expenditure of US$54 million including the final stages of the underground paste-fill plant construction ahead of commissioning in Q2, and
· Robust balance sheet with cash and liquid assets of US$155 million, as at 31 March 2023 and US$150 million undrawn revolving credit facility.
MARTIN HORGAN, CEO, commented: "These results reflect a good start to the year, with the Sukari team delivering another consistent performance in line with our operational plan, as well as making great progress on our key capital projects. Our mining operations continue to benefit from both increased flexibility in the open pit, as a result of the accelerated waste-mining strategy and operational productivity gains, as well as improved productivity and performance from the underground mine, following the transition to owner mining in 2022.
We reiterate our 2023 guidance and look forward to reporting later in the year on several additional projects which will deliver growth and underpin returns. These include connecting Sukari to the grid which will reduce carbon emissions and save costs, publishing an optimised Sukari life of mine plan, commencing drill testing on our Egyptian Eastern Desert blocks and completing the PFS at our advanced Doropo Project in Côte d'Ivoire."
Morning Sotolo,
One often finds kindness and support in the least likely of places.
Sorry to hear about the medical issues and good luck to you and yours.
Very best wishes,
Prof
Hi Tibbs,
I very much agree. This has always been one of the best boards for member civility and input.
Best wishes,
Prof
Seis,
The ticking isn't even that slowly now!
Best wishes,
Prof
Hi Steve,
Interesting to hear that Bushy is on here now; he is the one poster that I have green boxed as a result of how he has been posting on the Jubilee page -I am far from alone in my filtering of him. My recommendation would be for you to do the same and certainly not engage with him.
I really hope that he doesn't disrupt the very civil and balanced Centamin page as he has done elsewhere.
Best wishes,
Prof
Hi Tony,
I would expect it to move even higher if gold can stay at this kind of level for long enough that the assumption in valuing CEY is that this is the new normal rather than a spike.
At this gold level we are looking at clearing c$600 over AISC, in fact all else being equal you would expect AISC to fall next year assuming CEY manage to deliver the step up to 500koz per year that they promise. Horgan so far has broadly delivered on the oz increases he has promised year on year.
At 500k oz even assuming no lowering of AISC but assuming gold holds then we get $300M profit per annum. From memory EMRA gets 52.5% so there is 47.5% left i.e. $142.5M which is c£115M. With 1,56M shares in circulation that equates to 10p per share. It is then a case pick you p/e. At 10 you get the current share price, at 15 you get £1.50.
There is a general downer on CEY at the moment that I think is overdone, unless you belief the current price of gold is a short term spike.
Best wishes,
Prof
Thanks Quiggers.
Prof
Hi Quiggers,
That is one of the most helpful pieces of analysis that I have seen on these pages. Thank you.
I like the fact that you have been so conservative with Rhodium. Why have you gone the other way and gone so positive on Palladium please?
Best wishes,
Prof
Thanks Artrader. Rhodium is the big unknown at the moment!
Hi Arttrader,
Why do you say 'Q4 with news will be amazing' in your post of 21 Mar please?
Thanks Prof
Hi Sotolo,
Raxfactor kindly posted the following link on the SLP page.
https://mailchi.mp/metalsfocus/precious-metals-weekly-5386878?e=bf06856695
which suggests that the fundamental remain strong. Where do you see Rhodium short and medium term?
Is there a level of Rhodium at which you would be tempted to bail, assuming other metals stay at current prices?
Thanks,
Prof
Hi Arttrader,
Thanks for sharing your thoughts. I noticed someone else, or maybe it was you, had previously mentioned the likely big sales adjustment come the quarterlies. I forgot to post that this morning but that is another factor that is holding me back. Do think the market has this priced in or will we see likely see a fall when it become explicit?
Best wishes,
Prof