CENTAMIN, the UK-listed gold producer, will turn its attention to potential merger and acquisition targets after stabilising its Sukari mine in Egypt.
Martin Horgan, Centamin CEO, said his board had recently discussed the type of asset it might want to acquire in an effort to reduce operational risk and improve liquidity. “We’re ready to step onto the pitch. We’re match fit, we’re ready to go but we’re going to look carefully at the opportunities that are out there,” he said in an interview last week.
Centamin was not under pressure to deal as the performance of Sukari’s open pit and underground sections had improved after failing to meet production guidance previously. In July, Centamin posted a solid second quarter, producing 110,788 ounces of gold which puts in on track for full year guidance of 430,000 to 460,000 oz.
The firm’s third quarter numbers are due to be published later this month.
Horgan, CEO since April 2020, said there was an opportunity to improve Centamin’s rating in the UK market where options for gold investors were thin on the ground following the departure of Randgold Resources which merged with Barrick in 2019.
“You’ve got Endeavour [Mining] right at the very top of the market and then it’s us and then there’s basically the smaller companies,” he said. “So I think that right now, in this particular situation, there’s an opportunity to try and get ourselves a larger, more liquid group and cement our place as a premium-listed company.”
Shares in Centamin are 3.8% weaker year-to-date which compares to Endeavour Mining, a one million ounce a year gold producer, which is just over 4% lower over the same period. Centamin is capitalised at £998m compared to Endeavour which is valued at £3.8bn.
One of the considerations in assessing potential targets is political risk given a series of coups in West Africa’s Mali, Guinea and Burkina Faso in the past two years. Horgan said however that gold shares operating in west Africa were resilient. “Mali is a failed state being ruled by Russian mercenaries and all these guys [gold miners] continue to operate almost uninterrupted and almost with no impact on their share price,” he said.
Despite this, Horgan said Centamin would be cautious. He previously expressed concern regarding the increase in jihadist attacks in places like Burkina Faso. “A few years ago there was a lot open, but now the world has become difficult,” he said in 2020.
In addition to possible M&A activity, Centamin is also assessing the Doporo project in Côte d’Ivoire. Previously described as a game-changer for Centamin, Horgan said a prefeasibility study was due out at year-end.
“On the assumption that works out, the project remains robust – which I believe it will do – then we take it into DFS [definitive feasibility study] next year. Then we will put our big boy pants on and make a decision in 2024 about whether we want to build the thing”.
Côte d’Ivoire is “one of the more investiable places” in West Africa but Doporo is located in the north, near the Burkina Faso border.
“We’re very conscious and careful around security and operational safety but [it’s been] absolutely fine so far, no issues, touch wood,” Horgan said.