EGYPTIAN gold miner Centamin reported a heavy fall in its 205 profit but paid just over $33m in dividends – $2.94 per share in the total dividend – and said it had earmarked a 7% increase in gold production from its flagship Sukari mine.
Production for 2015 came in at 439,072 ounces, some 16% higher than in 2014. Fourth quarter output, however, at some 117,644 oz was in line with its targeted annualised production of between 450,000 to 500,000 oz, the company said. It had targeted production of 470,000 oz in 2016 and 500,000 oz in 2017.
“Sukari’s performance during 2015 continues to bode well for the potential of the operation to generate significant free cash flow over the coming years,” said Andrew Pardey, CEO of Centamin since the beginning of 2015.
“The plant is now operating at 10% above nameplate capacity which represents the achievement of our base case forecast rate,” he added.
Commenting on prospects, Pardey said the company had targeted organic growth at Sukari, estimated to have a 20-year life of mine, whilst pumping some $25m into exploration in West Africa’s Burkina Faso and Cote d’Ivoire. The company would also continue to monitor potential corporate activity.
“Whilst disciplined and sustainable growth on our existing projects remains a key focus, we continue to evaluate opportunities to grow through the acquisition of projects which offer the potential for the company to deliver on its strategic objectives,” said Josef El-Raghy, Centamin’s chairman.
Shares in Centamin were largely unmoved in early London trade. The company 77% return over the last 12 months, a strong performance as it continued to reverse the heavy share price collapses of 2011 and 2012 following the Arab Spring political developments.
Investec Securities said in a report that Cetamin’s earnings appeared to be “on the light side”, but added that the cash position “keeps getting stronger”. Cash on hand increased to $230.7m as of December 31, 2015 from $162.8m a year earlier.
“The objective, as always, is to generate substantial free cash flow even under challenging gold price assumptions,” said Pardey. “We intend to return 15% -30% of this cash flow to our shareholders, in line with our dividend policy, and to allocate the remainder towards our medium and long- term objective of organic growth aimed at realising incremental shareholder value and returns,” he added.
“While it has obvious capacity to pay higher dividends than it is currently doing, it is keeping its powder dry,” said Investec.
One wrinkle is litigation in two court cases including a 2012 court order from a third party that seeks to annul Sukari’s mining contract with the Egyptian government.
A 2014 law restricts the capacity of third parties to challenge concession agreements between private companies and the government, but the matter has been sent to the country’s constitutional court where it is under review.
“After a series of delays and adjournments, the Concession Agreement appeal has now been set down for judgment on 24 May 2016,” said El-Raghy. “If the judgment is a final judgment, the Company expects it will be in its favour,” he added.
