Berenberg 29-03-2023 Buy4 Apr 2023 14:57
Route back to 500koz the focus
? What to watch out for in Q1: For Centamin, we expect Q1 production of
101koz at an all-in sustaining cost (AISC) of USD1,512/oz from the Sukari
gold mine in Egypt. We expect revenues of USD192m and capex of USD71m.
Centamin does not report full financials on a quarterly basis. We expect
production to be H2 weighted, in line with company commentary, and for
the year expect total production of 461koz at an AISC of USD1,349/oz. The
company will likely also provide updates on the Doropo project in Côte
d’Ivoire and also on its various initiatives at the Sukari mine to take
production back to c500koz pa + and lower costs to below USD1,200/oz.
? Expansion projects the key: The company is currently undertaking three
key projects. The first is the Doropo project in Côte d’Ivoire. A pre-feasibility
study (PFS) on the project is expected in June. We currently value the project
at USD278m, with annual production of 150kozpa at an AISC of USD904/oz
and initial capex of USD273m. Secondly, the company is progressing a new
life-of-mine plan for Sukari that should detail the expansion of the
underground which is expected to reach 1.5mtpa; this will require
development of portals into the pit, and, alongside smaller projects such as
dump leach and gravity circuit, will allow the company to reach its goal of
increasing production from the asset to back above 500kozpa. With costs
reducing also, this will, we think, result in costs moving down to cUSD1,100-
1,200/oz. Finally, we would look for commentary on the company’s eastern
desert exploration (EDX) programme in Egypt, where it is seeking to
discover new deposits that would be able to form standalone deposits. We
would expect commentary on fiscal terms for exploitation of these resources
to also be a near-term catalyst. We would also look for any updates on
smaller, higher-grade new deposits within truckable distance of Sukari.
? Model changes and valuation: We update our model for our revised price
deck; our price target increases to GBp144 per share. The stock is trading on
1.06x NAV and 3.5x FY 2023E EBITDA. Centamin will, over the next couple
of years, meaningfully lower costs and increase production, enabling a
meaningful FCF increase, while also progressing attractive greenfield
growth projects, such as Doropo. We remain Buy-rated and would add on
current, unmerited, weakness.
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