RE: Loss of trust!12 Feb 2023 21:14
This is how things were Spoonington under the last management!
Nov. 19, 2015 5:00 AM ET
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 curtailed to only these five years, unless there is a major increase in the gold price.
• The table below illustrates that open-pit ore is uneconomical at current mined grade at the required strip ratio and a price of US$1,200/oz. The current good financial performance of Sukari can almost fully be attributed to underground mining.
https://seekingalpha.com/article/3695246-centamin-get-going-good
Sign In
Follow the stocks
