Centamin share slumps despite signs of return to high-yielding form of 2017

Andrew Pardey, CEO, Centamin

INVESTORS were unconvinced by Centamin’s return to form that made it a high-yielding dividend share in the 2017 financial year, as the stock slid nearly 12% shortly before noon in London where it is listed.

The company reported a recovery in gold output in the third quarter which it said would put it on course for production of some 480,000 ounces of gold for the current year.

In January, the UK-listed gold miner, which operates the Sukari gold mine in Egypt, said it would pay out 100% of its free cash flow via a final dividend of 10 US cents/share, taking the total dividend to 12.5c/share, equal to $144m for the 2017 financial year. This meant it had a dividend yield of about 5.8% at the time versus a FTSE 250 average of 2.7%.

This was on the back of 544,658 oz in 2017 production, and in excess of the 540,000 oz Centamin originally guided. Centamin forecast gold production for 2018 of 580,000 oz for the current year not realising the full impact of a transitional zone through which Sukari’s open pit mine would have to mine where grades were lower.

Coupled with a disappointing performance from the underground section of the mine, Centamin realised 2018 would under-shoot expectations as early as the first quarter, but following today’s third quarter recovery – in which production came in at 117,720 oz, roughly 27% better than the second quarter – the tone has turned more positive.

“These results are a demonstrable operational improvement on Q2,” said Andrew Pardey, CEO of Centamin in an announcement. “We are extremely pleased with the operational performance from the open pit,” he said.

“We are through the transitional ore, grades are improving in line with the mine plan and will continue to through the fourth quarter. The underground improvements have been very encouraging and are continuing. Our focus remains on achieving optimal and consistent performance,” he said.

Centamin’s full third quarter numbers will be announced around November 1.