RE: CEY Production29 Dec 2018 16:05
re where do you get the information on the high grading on the surface
Kees picked up a number of issues that made conclude that the best times were over in 2015.
Centamin managed to put a gloss on their results for another 18 months or so, mostly by mining less waste than planned and high-grading the open pit.
Now in 2018 it would seem that the 2015 article is surprisingly accurate and predicted the very situation in which the company and share holders find themselves now.
Another major issue is outside management control: they are now having to share the net free cash flow with the Egyptean parastatal company
The report of Kees Decker
Management has put a gloss over this in their latest 5-year production plan, artificially holding down the strip ratio and assuming continuation of underground mining at a very high level,
https://seekingalpha.com/article/3695246-centamin-get-going-good
Summary
The positive factors supporting the historical performance will soon come to an end.
Management's 5-year plan sacrifices long-term future.
Open-pit reserves need a much better gold price to be economical.
Executive Summary
This valuation is based on a cash flow model which uses the latest 5-year production plan of Centamin (LSE: CEY) (OTCPK:CELTF), combined with the long-term schedule in the 2015 feasibility study, to deplete the reserves of material destined to be treated in the Carbon-in-Leach (CIL) plant of the Sukari mine at a rate of approximately 11 million tonnes per annum. Using the gold price as per 17 November 2015 of US$1,070/oz, a net present value at a discount rate of 5% of minus US$89.2 million was arrived at, far more than the Enterprise Value of US$881.9 million for Centamin on that day.
The review of the technical and financial information comes to the following general conclusions:
• Centamin's value is essentially determined by its 50% interest in the Sukari operation.
• The mine is cash-generative even at the current gold price, allowing for return of funds to shareholders as dividends and share buy-backs as capital expenditure has dropped considerably.
• The good cash performance is due to a combination of underground production with very good margins, open-pit mining at low stripping ratios, income tax exemption and profit sharing deferred until investments having been recovered and the mine coming into operation when the gold price was at US$1,000/oz rising to above US$1,600/oz for the period mid-2011 until end-2012.
• The historical performance is as good as it gets as all the positive factors mentioned in the previous bullet point come to an end within the next few years.
• Management has put a gloss over this in their latest 5-year production plan, artificially holding down the strip ratio and assuming continuation of underground mining at a very high level, without having the mineral reserves to sustain this.
• Should this 5-year plan be implemented, the life of the operation will be curt
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