Centamin Q1 gold output slides 20%, but sticks to 2017 guidance

Andrew Pardey, CEO, Centamin

CENTAMIN plc, a UK-listed company that mines gold from its single operation Sukari in Egypt, kept production guidance unchanged for its 2017 financial year despite lower first quarter grades.

Andrew Pardey, CEO of Centamin, said in an announcement today the company remained on course to meet gold output guidance of 540,000 ounces at a cash operating cost of $580 per ounce and all-in sustaining costs (AISC) of $790/oz.

This compares to cash costs of $734/oz and AISC of $887/oz in the first quarter which the company put down to a planned cut in grade from the Sukari open pit of 0.72 grams per tonne – a 15% decline quarter-on-quarter. Sukari underground grade was also lower in the quarter.

The outcome was a one fifth fall in gold production to 109,187 oz compared to the fourth quarter production, and 13% lower compared to the corresponding quarter of the previous financial year.

“Whilst the weaker update is not a positive, guidance has been maintained and overall the company continues to perform well, generate ample free cash and deliver on expectations,” said Investec Securities.

Said Pardey: “Despite lower production rates Sukari generated $58m of cash from operations during the quarter. During the second quarter, we expect to see open pit ore grades increase towards the reserve average as the cutback in the east wall of the pit is further progressed”.

Centamin ended the quarter with cash and liquids (bullion on hand, gold sales receivables) of $290m – a $137.2m decline in the quarter. However, the company paid a 13.5 US cents per share final dividend for its 2016 financial year, described by Investec as “stellar”, and taking the full dividend payout to 15c/share, equal to 70% of free cash flow.

Given its single asset vulnerability, Centamin is working on resource expansion at Sukari – with a resource and reserve update planned for the next three months – whilst exploring for gold prospects in north-eastern Côte d’Ivoire and Burkina Faso.