Member Info for mrtibbles

Good morning GoldAnOil,
Really great to hear that this BB and its members has helped you to achieve some considerable success with your investment in Centamin, indeed I have never come across any other BB quite like it.
But all credit to the other very decent, well informed and supportive members of this BB for helping to create a BB of such quality.!
Keep well
Tibbs

With the very much higher spot gold price than used in the PEA, the NPV7.5 is US$246 million, or two thirds of initial capital expenditure. This is at first impression not unattractive until reviewing the cumulative net free cash flow pattern. The net free cash flow is very much backloaded and the pay-back period is 12 years when using undiscounted numbers, 14 years when using discounted values. It is unlikely Gold X will find it easy to attract third party funding on this performance.

The market clearly agrees as the diluted Enterprise value is only US$79 million. If the capital expenditure and amended operating cost are accepted as realistic, Gold X constitutes good value, especially if one is of the opinion the gold price has much upside potential. However, there are big question marks behind the capital cost used in this valuation.

For anyone of the opinion the gold price has still much upside and not concerned about the muddled strategy by Gold X management, this share has upside. It is as the company proudly announces on its website “Providing Unparalleled Leverage to a Rising Gold Price”, putting a positive spin on something very marginal and risky. Very recent share performance shows the market believes this. The market may well further rerate Gold X upwards just on the perception of the leverage to the gold price without doing the sums whether the Toroparu project has merit at all. This has earned this report the title: Riding the Leverage Story.

As an aside, this valuation shows that Wheaton stands to have a return of 17.4% on its metal purchase agreement with Gold X at current spot gold prices. This is much better than shareholders can expect, again demonstrating why royalty companies are much better investments than precious metal mining companies.

As always comments, criticism and compliments are welcome.
Kees Dekker

Hi,
You may find this note 24..04.2020 from Kees Dekker (mining annalist) of interest
One of my Followers reacted to my article on Gran Colombia Gold that he had a shareholding in the company and was particularly hopeful about Gran Colombia’s exposure to Gold X. This surprised me as Gold X’s Toroparu project in Guyana sits strategically poorly. Toroparu is a large, low grade, open pittable deposit whereas Gran Colombia operates high grade underground mines.

It made me analyse Gold X and the findings are pretty negative as the attached report will demonstrate. The valuation was not easy as the SRK reports in support of economical assessments are very poorly drafted: repetitive, missing critical information, inconsistent and full of mistakes. Most importantly the latest report with the findings of a preliminary economic assessment lacks an annual processing schedule of the very complex plan. This valuation has had to draw one up based on some pointers in the PEA report. The PEA also lacks an annual cash flow model, which could have been used to check internal consistency.

The most important flaw with the business plan I found is the lack of motivation for including a flotation plant 10 years after start of production by a carbon-in-leach (“CIL”) plant. The advantage of a flotation plant is concentrating copper into a saleable product, but this valuation shows copper to contribute less than 3% to total at-mine revenue. The indicated loss of precious metal revenue from lower overall recoveries compared to the CIL plant will far exceed this. Moreover, incorporating flotation will require intricate grade control and much stockpiling over ten years. In a tropical environment the copper sulphides in stockpiled material can be expected to oxidise, resulting in much poorer metallurgical performance than when treated fresh and loss of gold to solution before treatment. There is nowhere supporting argumentation for the route and timing.

Similarly the plan to construct a hydro-electrical plant concurrent with the flotation plant to benefit from lower power cost does not make sense. Why not include the plant from the start and further increase the rate of return on investment for this plant?

One of my worst investment advices was a positive report on Guyana Goldfield’s Aurora mine in 2016 when I accepted SRK’s resource estimation, despite many misgivings expressed in the report, and their operating cost rates. Both have proven to be very wrong. SRK does not seem to learn from its mistakes. Again it uses a similar approach to resource estimation, which is risky, albeit less so than for Aurora, and cost rates even lower than recommended for Aurora in 2016. This valuation has adjusted the cost rates to bring these more in line with declared actual costs at Aurora, but accepted the capital expenditure forecast, despite many misgivings in this respect.

The Fed can’t print gold Bank of America sees bullion price surge to $3000 as paper money crumbles

http://www.kxan36news.com/the-fed-cant-print-gold-bank-of-america-sees-bullion-price-surge-to-3000-as-paper-money-crumbles

At a time of weak economic growth and increased market volatility, analysts are getting more bullish on gold. According to Bank of America, the precious metal is headed 78 percent higher, to hit $3,000 per ounce in 18 months.
“As economic output contracts sharply, fiscal outlays surge, and central bank balance sheets double, fiat currencies could come under pressure. And investors will aim for gold,” the bank’s analysts said, adding that the US Federal Reserve has provided enough momentum to propel investment demand and prices higher.
They have warned that the Federal Reserve’s balance sheet as a percentage of GDP could rise 20 percent to 40 percent this year. They’ve also pointed out that the Fed “Can’t print gold.”
They said: “Beyond traditional gold supply and demand fundamentals, financial repression is back on an extraordinary scale. Rates in the US and most G10 economies will likely be at or below zero for a very long period of time as central banks attempt to push inflation back above their targets.”
Gold’s recent run began back at the end of September 2018, when the precious metal was trading at $1,465.70. Since then, it has gained 15 percent to $1,689.60. The yellow metal was trading higher on Wednesday, above $1,700 an ounce.
And the gold market has further room to run, according to Bank of America. “The trigger here could be an extension of lockdown restrictions over the next few weeks,” it said.
Economists have also noted some headwinds for the gold market such as a strong US dollar and reduced demand for physical jewellery in Asia.

Sotolo,

The 50% share (excluding 3% royalty) does not start until 1 July this year, 2020.

Thursday, 4/23/2020 14:12
GOLD PRICES set new all-time highs for Euro and British Pound investors on Thursday morning, reaching fresh 7-year highs in US Dollar terms as worsening economic data amid the global Virus Crisis' shutdowns saw world stock markets struggle to extend their rally.

With gold hitting $1720 per Troy ounce as New York trading began, latest jobless benefit claims data today said another 4 million US citizens filed for unemployment last week, taking the total since the Virus Crisis hit North America a month ago to more than 26m so far and erasing the entire recovery from the global financial crisis of 2007-2011.

"Though China's GDP shrank 6.8% in the first quarter," claims Beijing's state news agency Xinhua, "[the] unemployment rate, resident income and electricity consumption indicate a robust Chinese economy... bent, not broken."

Experts doubt those official figures however, the Financial Times reports, with economist Zhuang Bo at research agency T.S.Lombard saying the real jobless count in the world's most populous nation (and No.2 economy) "could be more than double the official number" of 23 million.

"Job positions may fall another 10-15% without policy intervention," adds Professor Lu Hai at Peking University’s Guanghua School of Management.

With Germany the largest economy in world No.2 economic bloc the Eurozone, IHS Markit's flash survey results for its output in April meantime showed another record collapse today, following March's plunge to 35 from 50 – which already signalled zero growth a month earlier – down to just 17.

Euro gold prices today rose above €1600 per ounce, setting fresh all-time highs while the 19-nation currency union's equity markets held little changed.

UK commercial banks have so far agreed fewer than half of applications for emergency funds made under the government's Coronavirus Business Interruption Loan Scheme (CBILS).

"Many small firms have told the BBC they require quick access to cash in order to survive," says the state broadcaster.

But shares in UK housebuilder Taylor Wimpey however jumped over 11.4% – now rallying by one-half from early April's 6.5-year low – after it said "remobilisation" will begin on 4 May, with the majority of its mothballed projects reopening across England and Wales but keeping "compliance with strict social distancing requirements."

The UK gold price in Pounds per ounce today broke above £1400 for the first time in history, rising more than 22.1% from New Year's Eve and outpacing the gain for US Dollar or Euro investors, up 18.3% and 13.8% respectively.

With UK government borrowing already rising by nearly one-quarter in the 12 months to end-March from the year before, Whitehall's 2020/21 deficit is likely to hit a "colossal" £260bn (US$320bn) according to one think-tank – some 12.4% of last year's total economic output.
https://www.bullionvault.com/gold-news/gold-price-042320201

Strong start to the year
? The first half of this year is an important period for Centamin, with steady
operational delivery around guidance being required to rebuild investor
confidence. It is therefore pleasing to see a relatively strong Q1
performance across the board, with production and all-in sustaining costs
(AISC) in line with guidance for the full year. That said, Q2 production is
expected to come in c8% lower than Q1 due to reduced contribution from
the underground. Q3 is expected to make up for this, however, and we are
confident the company can achieve guidance for the year, although remain
conservative (we forecast 510koz at USD912/oz). In addition, the company
declared a 2020 first interim dividend of USD0.06/sh (USD69.4m) with a
payment date of 15 May 2020, which replaces the previously proposed 2019
final dividend of USD0.06/sh. This is a positive and should insti
confidence in Centamin’s ability to deliver a sector-leading dividend yield.
? Operating performance: During the quarter, the company produced
125koz of gold at an AISC of USD902/oz. The plant processed 3.1Mt of ore
at a feed grade of 1.5g/t, with plant utilisation at 96%. Open pit mining in
the higher-grade Stage 4 Wall enabled the open pit to deliver 2.9Mt of ore
to the mill at a feed grade of 1.38g/t. Underground mining in the quarter
focused in the Ptah zone. Improved contractor management and dilution
controls delivered a higher stoping grade during the quarter of 7.43g/t, but
total underground tonnes mined were c20% less than scheduled due to
restricted stope access at Ptah. Development grades came in at 2.16g/t.
? Outlook: Centamin remains on track for 2020 guidance of 510-540koz at
an AISC of USD890-920/oz, with production weighted to 55% in H2. To
date, Sukari operations have not been affected by COVID-19. There are
sufficient staffing resources and critical supplies for Q2; however, the
company notes that should travel restrictions be extended into H2, it is
possible that operations may be affected. Non-essential capex has been
deferred, including the Sukari solar plant, in order to minimise contractors
and other non-operating traffic on and off site. As a result, 2020 capex is
expected to be USD150m-USD170m (from USD190m).
? Model update and valuation: We adjust our model to include the Q1 results
and increase our 2020 gold price to reflect the strong safe haven demand
in the metal. The net impact is a 14% increase in our FY 2020E EPS. Our
price target, based on 6x 12-month-forward EBITDA and 1x NAV, increases
to GBp148 (from GBp137). We remain positive about Centamin given the
strong balance sheet of USD379m of cash and liquid assets and c9% 2020E
dividend yield. We maintain our Buy rating, but note that, given the strong
demand for gold exposure, shares have been a recent strong performer and
we therefore would look to add to positions on any meaningful pull back

From Add
Current Share Price 140p
Target Price 170p
Market Capitalisation £1.6bn
Shares In Issue 1,156m
RIC/BLBG CEY.L/CEY LN
Avg. Daily Volume (3M) 7,289,220

Centamin beat our Q1 estimates with 125koz of production at AISC of US$902/
oz. The beat was driven by higher tonnes and grade from the open pit and higher
grade at the underground operation. Prior guidance of a 40-60 split between H1-
H2 was moved to 45-55 while capex guidance was revised to US$170m from US
$190m as non-essential projects such as the solar plant were deferred. Overall we
view the production result as an encouraging start to the year. CEY has much to
like including a large long-life high-margin operation, US$379m of net cash, and an
attractive dividend yield (6%). If CEY can resolve the quarter to quarter and actual
vs guidance variability of production that has been an issue in recent years, we
think significant re-rating potential is there. For now, we upgrade to BUY and 170p
on a US$100/oz increase in our price deck, based on unchanged target multiples of
1.2x NAV and 8x CFPS. If CEY can deliver more consecutive quarters of consistent
production vs guidance we will consider increasing our target multiples.
? Q1 beats on grade, dividend maintained: CEY announced Q1 production of 125koz
at AISC of US$902/oz as Q1 performance was ahead of the previously guided 40/60
H1-H2 split. Our estimate was 111koz at AISC of US$1058/oz. Net cash was US$379m
to end the quarter, ahead of our US$341m estimate. Both the open pit and underground
delivered good performances with 4.2Mt at 1.1g/t mined from the OP and 154kt at 5.0g/
t which CEY noted was 27% ahead of the budget. Grade and tonnes from both the OP
and UG beat our estimates. A 6cps interim dividend (US$69.4m), to be paid in May,
has been declared which does not need shareholder approval. This is to replace the
2019 final dividend of the same amount, as the required approval procedure meant that
it could not be distributed in May due to delays in the AGM process. Conf call 12:30PM
UK time / +44 (0) 203 936 2999 / PIN: 611095. 2019 FY results will be released midMay.
? Full year guidance reiterated, but we are encouraged by the change in H1-H2
splits: Guidance of 510-540koz at AISC of US$870-920/oz was maintained but the
split was amended to 45-55 H1-H2. Guidance for Q2 is 115koz. Full year capex
guidance was lowered by US$20-40m to US$150-170m from US$190m with the
deferral of certain projects including the solar plant to minimize non-essential activity.
? Production not impacted by COVID: Precautionary health and screening measures
are in place. Rosters cycles are lengthened with on-site rest camps have been
established. The supply chain and gold sales have not been impacted. With US$379m
of net cash, we don't view liquidity as a risk.
? Model changes: slight production upgrade, higher gold price, multiples
maintained (for now): Our full year estimates are now 520koz at AISC of US$890/oz
(prev 515koz at AISC of US$911/oz) and we have reduced capex to US$170m from
US$190m. We have also increased our gold price deck by US$100/oz including US

RATING BUY
TICKER CEY LN
PRICE 138.40p^
PRICE TARGET (PT) 175.00p
MARKET CAP £1.6B / $2.0B

Centamin
Strong Start to 2020
21 April 2020
Key Takeaway
Q1 gold production of 125koz was +6% ahead of cons with strong contribution from
the open pit. Solid output also led to cost performance with cash costs/AISC on
average -6% below cons. CEY reiterated FY20 guidance for production, cash costs
and AISC and trimmed non-essential capex (total budget -16%) to reduce traffic at
site. The "first interim divi" of 6 cents replaces the 2019 final divi, expediting payment
and reaffirming commitment to shareholder returns.
Solid Q1 Production. CEY reported Q1 gold production of 125koz, +6% and +12%
of cons and JefE respectively. While underground grades came in slightly below
expectations, strong performance in the open pit (both tonnes and grade) was the
primary drive of the better than expected gold production. The improved production
also translated to better performance with cash costs of $659/oz and AISC of $902/
oz on average -6% below cons. As of 31 Mar, CEY had $379m of cash and liquid
assets and no debt. Please see Exhibit 1 below for variance table.
No COVID-19 Impact Yet. To date, the measures implemented by CEY have helped
mititgate potential disruptions due to COVID-19. There have been no recorded cases
on site nor any impact on the suppy chain. Non-essential capex is being temporarily
deferred, with contractors and traffic on site being reduced as a further measure of
risk prevention. The 2020 capex budget is now $150-170m (prev: $190m).
Guidance Reiterated. CEY reiterated 2020 production guidance of 510-540koz (JefE:
523koz) and now expect a HoH split of 45/55 (prev 40/60). Q2 production is guided
to 115koz (-8% QoQ), reflecting lower underground output. Cost guidance for cash
costs of $630-680/oz (JefE: $674/oz) and AISC of $870-920/oz (JefE: $924/oz) were also reiterated.

From a reliable source-

Centamin have a flexible contract with EGPC, which has a set diesel price on a quarter by quarter basis. It is also based on the international price - to some extent!

There is a lot of chatter in the market about the impact of fuel pricing on cash costs - the model Centamin uses is a cost of c.$0.60 per litre

So I would suspect the only direction real diesel pricing would be down in my view!

Ishii99 & TopTrade,
Firstly thank yo for asking these questions, you are no doubt not the only ones who needed some guidance on this issue.
I would also like thank all the other forum members who took the time to help you both on this thread, this is really fantastic and a return to just what has made this forum so unique from all the others, informative, supportive and a friendly place to chat during the good and the difficult times!
http://www.dividend.com/dividend-education/everything-investors-need-to-know-about-ex-dividend-dates/

https://www.bullionvault.com/gold-news/gold-price-oil-042120202

Did you ask any questions at the phone in or listen to the presentation afterwards?
I'm not making excuses, but there re rules on facts disclosure at certain times on the financial calender and this is why some questions may not be answered at certain times.
Was there anything particular that you wanted an answer on?

Fair comment Rebess!

Institutional investors buying today, (details on the Centamin website), also gold on the rise again.

From a reliable source-
I am not sure if there will be much in Q1 re West Africa...announcement will be really getting into production and Sukari mainly as well as what CEY are doing re COVID-19.

There will be a call/webcast tomorrow - details will be on the release, so all share holders are welcome to join in!

Seems you are right Cowichan, I am reliably informed that physical gold bullion once it enters never leaves China.

If his past record is anything to go by Youssef Al-Rajhi, General Manager of Centamin seems to have just done his own thing as far as speaking to the Eygptoian press, whatever the time on the financial calendar.
As we know he got it hopelessly wrong in 2018, lets hope he has learnt from that!
I did run the article via reliable acquaintance and although they could.not comment on the actual production figures, they commented that the main inaccuracy was that 50% profit share excluding the 3% royalty doe not kick in until 1st July.
See my previous post)
So I suppose we can only hope that the other facts are not too far out!