Centamin shares move to fresh high as 32% gold price improvement triples Q2 free cash

Sukari gold mine, operated by Egypt's Centamin

A 32% improvement in the dollar gold price helped UK-listed gold producer, Centamin, to second quarter free cash flow of $56m – a 196% year-on-year improvement.

Production for the quarter came in at 130,994 ounces taking production for the first six months of the firm’s financial year to 256,084 oz. The second quarter numbers represented a year-on-year lift of 11%.

Centamin said it had rejigged its mining sequence from underground areas such that some stoping areas were deferred to the second half of its financial year. As a result other higher grade stopes were brought forward in the second quarter. “This has meant that the underground production has been more weighted to H1 than originally planned,” the company said. All-in sustaining cash (AISC) fell 8% to $900/oz for the quarter year-on-year, down from $982/oz.

Net cash generated from operating activities was $144m, a 151% improvement year-on-year. As of June 30, cash and liquid assets was $367m after the first interim dividend distribution of $69m, paid on May 15.

Centamin mines the Sukari deposit in Egypt.

Martin Horgan, CEO of Centamin since April, said the higher production in the second quarter was a consquence of higher mill feed grades. Production was also higher than forecast for the quarter as the firm deferred some plant maintenance in order to limit third party access to the site.

The impact of the COVID-19 pandemic on Centamin’s operations had been limited. “Whilst we continue to actively manage the potential future impacts of COVID-19, we remain confident we are on track to meet guidance and have narrowed the production range to 510,000 to 525,000 oz and kept cost guidance unchanged,” said Horgan of Centamin’s full year production guidance.

Shares in Centamin gained about 2% to trade at £1.91/share in early trade on the London Stock Exchange. This represents a five-year high for the company which has seen its share price buffeted in recent years following a string of disappointing operational results which ultimately resulted in the departure of previous CEO, Andrew Pardey.

Endeavour Mining disclosed plans in December to merge with Centamin in an all-share transaction valuing the Egyptian miner at £1.48bn – about £700m less than the company’s market capitalisation today of £2.2bn.