CENTAMIN, the London-listed gold producer that mines the Sukari gold mine in Egypt, stuck to full-year guidance of 580,000 ounces for its 2018 financial year despite under-shooting in the first quarter – a performance which left analysts relatively unperturbed.
“We recall that the first quarter of 2017 was also a weak start for Centamin, but that it caught up through the rest of the year to exceed its guidance of 540,000 oz,” said Investec Securities in a note. Nonetheless, shares in Centamin were under pressure. It traded downwards some 3.8% and was last quoted at £1.47/share valuing it at £1.7bn.
On an annualised basis, full-year production would come in about 500,000 oz, some 15% below guidance. “While the company reiterated its 2018 guidance of 580,000 oz, we believe that the stock is likely to face headwinds today,” said Goldman Sachs in a report.
The cause of the lower than planned production was put down to the transitional zone of the open pit delivering lower than expected grades. “Additional grade control drilling and rescheduling has resulted in accelerated access to the higher grade open pit Stage 4 primary ore thoughput in the second quarter,” said Andrew Pardey, CEO of Centamin in the firm’s first quarter production report.
RBC Capital Markets said there were positives to extract from the numbers, however. The processing plant achieved an annualised guided throughput rate of 12.3 million tonnes “… which suggests that the installation of the fourth secondary crusher at Sukari has been successful at increasing capacity,” the bank said. It has an outperform rating on Centamin with a target price of 170 pence/share.
Centamin said in January the gold would be produced at a cash cost of $555/oz and an all-in sustaining cost of about $770/oz which would result in “… significant free cash flow for our shareholders,” said Pardey who added that: “Sukari continues to demonstrate its world class nature with long-term, large-scale and sustainable low-cost production”.
Later in the month, Centamin paid out its entire cash flow generated in 2017 via a final dividend of 10 US cents/share and taking the total dividend to 12.5c/share, equal to $144m. At a dividend yield of about 5.8%, the payout was described by Pardey as “… a significant return for any of the FTSE250 companies”, which then had an average yield of some 2.7%.
