Centamin commits to $100m payout in each of next two years as unveils Sukari review

Sukari gold mine, operated by Egypt's Centamin

CENTAMIN today unveiled a mining and dividend return plan for the next four years in which it would guarantee a $100m minimum payout for each of the first two years, and ensure gold production of 450,000 to 500,000 ounces up to 2024.

For this year, the UK-listed firm is to pay a three cents per share final dividend, equivalent to $35m, which takes the total dividend payout for 2020 to $104m. The minimum total dividend for 2021 would be $105m, the company said.

Centamin, which mines the Sukari gold mine in Egypt, has been through difficult times over the last 18 months to two years undershooting on production, largely owing to underground and open pit mining difficulties at Sukari, the latest being risk of a wall collapse which crimped 2020’s adjusted production guidance.

Martin Horgan, CEO of Centamin since April, said an updated life of mine plan for Sukari would be published in the fourth quarter of next year following completion of a two phase life of asset review, of which the first was complete.

As part of the review, Centamin committed to all-in sustaining costs (AISC) from Sukari at less than $900/oz. This compares to a 2020 forecast of $950 to $1,050/oz as per the firm’s third quarter report. Production was guided to 445,000 oz, a 15% undershoot of 525,000 oz upper end of guidance.

“When I sat in semi-retirement at the end of last year I was excited to get the call,” he said during a conference call today. “I think we are all up for the challenge,” he added. Horgan sold Toro Gold, a company he co-founded, to Resolute Mining last year for $274m.

The company also committed to $100m in cost savings over the next two years of which $42m would be extracted this year. “These are genuine savings,” said Ross Jerrard, Centamin CFO. He forecast free cash flow by year-end of $150m. As of September 30, the company had cash and equivalents of $345m.

Asked for his view on merger and acquisition activity, Horgan said that whilst the company was “alive” to opportunities, the focus was on restoring Sukari to industry best practice. “If we get Sukari right, that is the engine that can take us to M&A,” he said.

Realistically, the company would first focus on “embedded growth” within Sukari which Horgan described as “a geologist’s dream” and “a truly world class gold asset”. In tandem, the company was assessing its West African exploration prospects.

“If there is something there, we will find it and deliver it,” he said. Centamin has explored two prospects in Côte d’Ivoire in Doporo and the ABC project as well as Batie West in Burkina Faso over which there was an unresolved negotiation with the government. An update on each of the prospects was due in the first quarter.

Centamin had also successfully lodged an exploration application for two prospects in the Egyptian part of the Arabian-Nubian Shield the full geological extent of which encompasses Saudi Arabia, Israel and Somalia.

“In the peer group, Barrick (Gold) and B2Gold are in there,” said Horgan. “It is the last of the unexplored gold regions. It is a truism, but it is elephant country,” he said of its potential. Centamin had a property that could operate as a low capital satellite of Sukari and another that could be a standalone mine.