CENTAMIN is to pay an interim dividend of six US cents per share, equal to 68% of free cash flow, following a strong operating period ended June in which the gold price received by the UK-listed firm came in 27% higher at some $1,657 per ounce.
The payout represents an innovation for the firm which normally pays year-end dividends. The change was largely to provide investors with “certainty” after repelling a takeover by Endeavour Mining at the end of last year. Endeavour’s proposed takeover valued Centamin at £1.48bn – about £900m less than the company’s market capitalisation, now at £2.42bn.
Production increased 9% to 256,084 oz in the six months putting the company on track for full year guidance of 510,000 to 525,000 oz at an all-in sustaining cost (AISC) of $870 to $890/oz. The AISC for the period under review was $899/oz.
Net income to shareholders increased 280% year-on-year to $74.8m and basic earnings per share was 6.49 cents compared to 1.71c/share year-on-year. After distributing $114m to the Egyptian government, Centamin posted adjusted cash flow of $102m for the six months. Net cash and liquid assets were $367m as at June 30.
“This operational delivery has enabled us to benefit from the recent strength in the gold price,” said Martin Horgan, CEO of Centamin in a statement. The company had “navigated’ the risks associated with the Covid-19 pandemic, even though Egypt has one of the highest infection rates of the disease in Africa.
Centamin mines gold from a single asset, the Sukari gold mine, situated in Egypt’s Eastern Desert near the Red Sea.
“Combined with our disciplined cost management and unhedged, debt-free balance sheet, Centamin has generated meaningful free cash flow leading to a 50% increase in the interim dividend to 6 US cents per share,” Horgan said.
Centamin reminded shareholders that for the second half of the year, the payout would adjust for a step-change in profit share with the Egyptian government, a shareholder, from the current 45-55 split in favour of Centamin to a 50:50 share.
Centamin would incur higher capital expenditure in the current six months. It would spend a minimum of $100m of the guided full-year spend of $150m to $170m.
ASSET REVIEW
Horgan said the company was on track to publish before the end of the year an asset review of Sukari’s potential.
Account would be made of the complexity of the orebody, especially in terms of assessing the future productive potential of its underground reaches. Sukari was “a complicated orebody” with different types of mineralisation, said Horgan. A decision would be made on how to go about extracting ore from high grade thin mineralisations, for instance.
Horgan also said that whilst the company was on the lookout for acquisitions, the firm’s immediate future would be secured through organic and exploration growth. A report on likely targets would be “sitting on my desk” in the current six months, he said.
“The gold industry has a track record of not doing smart things at the top of the cycle,” Horgan said of acquisitions when asked in question time following the interim results presentation. “Finding an asset is one thing but having realistic value conversations [with the owner] is another,” he said.
