Fully-listed Egyptian gold miner Centamin (CEY) has produced its Q2 report and the numbers read well – the only thing missing was a hint as to the size of the forthcoming interim dividend. But despite the Covid crisis, Centamin is awash with cash and everything seems to be proceeding in line with expectations. Gold production was a little ahead of schedule at 131,000 oz, partly due to higher feed grades and partly due to the deferral of plant maintenance. Of course, the maintenance will still have to be done so the full year production forecast is largely unchanged, with guidance tweaked slightly to 510,000-525,000 oz from 510,000-540,000. The higher production led to a slight fall in costs of production, with cash costs down to $625 per oz from $642 and all-in costs of $900 per oz – down very marginally from $901...
Full-year costs remain forecast at $630-680 cash costs and $870-920 all in costs per ounce. With the gold price currently sitting at around $1800 per ounce, this looks excellent going forward. There is a small fly in the ointment in that Egypt’s mining authority’s profit share increased to 50-50 from 55-45 in favour of Centamin, but at least that new figure will not change going forward – so we are told! On the plus side, the gold price was well up and Centamin achieved an average sale price for gold of $1731 (32% up year-on-year) and adjusted free cash flow over the quarter came in at plus $56 million, up 196% year on year. As for the balance sheet, we are told that as at 30 June the company had cash and liquid assets of $367 million, following payment of the last dividend (costing $69 million).
The good news on the interim dividend is that there will be one, but there was no hint as to its magnitude. However, we know that at the close of 2019 cash and liquid assets stood at $348.9 million, which left room for a dividend (originally final, but commuted to interim in light of Covid difficulties in getting the AGM sorted) of 6 US cents per share. That would suggest there is room for the same again when the company delivers its interims on August 4th. Here’s hoping…..
Reading the announcement, it is clear that Centamin is awash with cash and with the gold price still moving northwards there is plenty of scope to hike the dividend materially even with a conservative view when it comes to leaving the company financially safe from the Covid virus. I would not be surprised to see the total dividend for this year coming in at 15-20 US cents which, even at the lower figure, would leave the shares (up a smidgeon at 192p, last seen) offering a potential forward yield of 6.2%, which is not to be sneezed at. With a tailwind for gold prices well in place, there is plenty of upside to be had here and my stance is buy at up to £2 with a target raised to £2.50 even without possible bid interest returning to the scene. Roll on the interims, when we will see a more comprehensive balance sheet and income statement - and the proposed interim dividend.
Filed under: Centamin, Manolete, [email protected] Capital, Fever-Tree Drinks, DFS, CentralNic Group
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