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its just completely bobbins to me that gold is doing the complete inverse of what it is supposed to be doing in this high inflation environment. This should have been bad news, and yet we have a huge jump in the POG and silver.
It was me by the way that asked the fuel hedging question at the Investors Q&A. it seriously frustrates me that this was never pursued as an option, and was brushed off as a nothing burger question at the time.
Being in the industry that Centamin are, and with many people interested in Gold as a hedge against inflation (a role ironically it is not currently fulfilling), It should have been as obvious to them as to me that Fuel and Oil costs were going to fly in the near future (think from memory Oil price was somewhere in the region of $40-60/barrel when I posed that question).
I am a Gold bull, but I can see the POG testing the 1600s in the near term, at that price and with our overheads, our profit margin will be at or possible less than Zero!
Gift Horse Opportunity coming out of the negative oil price crash to hedge fuel costs for at least a year or two, that we completely blew.
NonCrypto - This was the stock that originally got me into investing. I originally bought in 2018 somewhere around the 100-110 mark before the 220 run and sold that out at around 200ish thinking I was a genius (made a decent but not huge profit). When it dropped to 135 I thought I was a genius again buying the dip (this time with a significantly larger allocation size). I'm now stuck here with an averaged down size of 128.1 and seriously contemplating taking the Bath on it and calling quits.
I have learned many lessons along the way RE: actually valuing a stock other than P/E ratios and how a Gold mine actually operates, what grades are good, what problems can affect SP etc; but the biggest lessons are
"don't mistake brains for a bull market", and "never ever invest in something you do not understand or have done decent Due diligence into even if it looks attractive from basic metrics"
Give the above some thought before throwing your cash at something. Tornado Tonys do not allocate 100% of your portfolio to one asset will come in enormously helpful too, just about 4 years late for me lol
It is probably worth making the distinction that the fuel cost WAS $23m, as after my question at the last shareholders meeting we know that Centamin don't and had no plans to fuel hedge (slightly annoying personally as this was entirely foreseeable even without the Ukraine situation).
The Fuel costs could be much higher now, as should be the savings from the solar plant, but we could still be net worse off than before in terms of AISC for production.
I hadn't even thought of that one Razor, although an equally concerning question.
With regards to your faith that they've considered it all Tony, I wouldn't count on it. The first solar project I worked on (MEP Engineer) was in Saudi for a Hospital development. 10MW installed capacity, everyone thought meticulously about how it would be integrated with the grid, battery storage and backup, life safety backup for if it failed etc. In total it cost about £15m at the time (can't remember the exact figure and I've moved on since then).
Nobody thought about maintenance and cleaning. 1 year in they couldn't work out why they were getting >50% generating from the installed capacity. Turned out the panels were not being cleaned regularly, and from memory around half of them ended up getting replaced at cost!
Fine for rich Saudi billionaires who £10m is a drop in the ocean to, not so fine for us expecting a 16% reduction in fuel costs and for whom although not bank breaking, worst case scenario $37m is not a small number.
One question I didn't ask as I thought it was probably not relevant to a life of mine review, was about the planned maintenance of the solar plant.
With Sukari being located in the Nubian Desert those panels are going to require daily maintenance to remove dust and ensure that they are operating at their optimum efficiency. if you look it up mainstream figures suggest you lose 1-2% a day from this, but I know from practice it can be anywhere between 1-10%, and if they aren't cleaned when required the dust bakes on and has to be removed via more intensive means. Add in dust storms which can abrade the panel surfaces and cause irreparable damage and you have a bit of a problem.
A problem at Sukari is that all of the (process) water to the mine is salinated, which cannot be used for solar panel cleaning (1. because its not suitable for the panels, and 2. because even if it was, the salt then dries to the panels defeating the object of it in the first place).
With this in mind, what is their cleaning and maintenance strategy for these panels. if it hasn't been thought about as nobody involved in the process (other than the people selling you the stuff) is in the know, we could have a $37m ornament (which sadly I find is what most of these projects end up as).
There are products out there that can negate (but not remove water usage no matter what they say https://www.nomaddesertsolar.com/the-desert-solar-challenge.html). I just hope these have been considered.
as for de-salinating water to use on these, it would be a net energy defecit to do so if using our own power.
I think the latter "increasing financial flexibility" comes from the end of the conference where M.Horgan was talking about taking on debt to finance expansion for the first time (not sure how I actually feel about this).
No clear answer on the progress of the West African assets, but I was personally a bit more re assured about the plan for sustained Sukari production at or above 500kOz/year going forwards (although it is the first time I've dialled into one of these).
My main concern going forwards is fuel costs which I can see exploding globally and the AISC (especially with the guidance at the top end of $1425/oz!). If there is any significant drop in the POG, or the POG does not keep up with inflation, those margins are going to get pretty thin.
Yes I was the mug with the poorly worded hedging question.
I'd never heard of Quartz ridge until you pulled this up Cowichan.
It absolutely boggles the mind that in a location so close to Sukari and thus extraction costs could be mitigated in comparison to a completely new mine, that grades of 21.4g/t and 16.4g/t (the former from a relatively short drill and well on its way to 'bonanza grade') that these locations have just been put on the back burner.
I have ZERO expertise in how an underground mine's cost expenditure works in regards to extracting non profit producing material, and over what timescale it takes to move x/meters forwards, but I can't imagine with grades like the above that it would be unprofitable to extend the underground section of Sukari to this area?
bit late to the party, but previous message from AUSON
"SOTOLO, Do you happen to know if there was any fuel hedging this year ?"
Kudos to that question, preferably around the -$40 mark? that would be good for AISC!
With inflation really kicking off worldwide, it would seem imprudent not to be hedging fuel costs, especially as its looking like oil is probably going to test its previous $100+/bl high from near the 08 crash.
I suppose that view depends on whether you believe they are doing it for the common good, or furthering a crisis for their own gain/profit margins. They can't vaccinate poorer countries (no money in it), but there is a relentless push to vaccinate everyone in the wealthier countries regardless of whether it is of benefit to them or not (Why are they trying to vaccinate all under 20s with no scientific or medical benefit to them if not cash or otherwise ulterior motives?).
I think we often forget (Previous Centamin management, and the Nepotism in the Egyptian Government being a shining example) that corruption is everywhere, and being a Fortune 500, FTSE200 Company or otherwise does not mean that people won't either look the other way, or cover up inconvenient facts for financial and political gain.
When money is involved, the spotlight is not always enough to illuminate the shadows.
a cheery note for my first post.