Centamin Plc Shares Underperform on Sukari Mine Concern

Summary

• Centamin PLC's shares, one of the largest LSE listed gold producers, have been underperforming past one month
• The share prices of the company have fallen sharply after it announced that it would be producing half as much gold from its Sukari mine in Egypt during the Q4 2020 as estimated earlier.
• The reshuffling in the mining schedule is expected to lead to higher unit costs and lower cash flow.

Gold mining company Centamin PLC (LON:CEY) has lost almost 40 per cent of its share value in just over a month after it announced that it will now be producing around half as much gold from its Sukari mine in Egypt during the last quarter of 2020. On 16 September, the share price was GBX 218.70 since then it is on a continuous decline. The unexpected and dramatic underperformance of the company has drained all the gains it accumulated since the beginning of the year.

The share price of the company had effectively flattened at a time when gold soared to US$1,900 from less than US$1,500 per ounce. The decision would lead to a reshuffling in the mining schedule and eventually to higher unit costs and lower cash flow.

About Centamin PLC

Incorporated in the island of Jersey, Centamin PLC is a mineral exploration, development and mining company, engaged in the business of exploration and production of precious metals. The company has spread its operations in Australia, Jersey, Egypt, Burkina Faso and Cote d'Ivoire and conducts the limited activity in its own right.

The ordinary shares of the company are dual-listed on the London Stock Exchange (LSE:CEY) and the Toronto Stock Exchange (TSX:CEE).

Financial Updates

On 21 October 2020, Centamin PLC released its Q3 2020 results for the period ending 30 September 2020. CEO Martin Horgan said that the Q3 2020 performance of the company was marked by solid $230 million (£176.8 million) of revenue for the quarter, which was 43 per cent higher as against the previous year numbers.

The company posted a drop in the gold production and sales for Q3 2020 as compared to Q2. The FTSE 250 miner had a 2 per cent fall in production to 128,240 gold ounces and 9 per cent decline in sales to 118,617 ounces. However, this was offset by a 12 per cent surge in average prices to $1,933 per ounce sold.

In Q3 Centamin reported gold production of 128,240 ounces from the Sukari Gold Mine, up from 98,045 ounces year-on-year, recording 384,324 ounces of production for the three quarters for the year.

Cash costs were reported at $682 per ounce produced and all-in sustaining costs were $961 per ounce sold, driven by the scheduled increase in capital expenditure. The free cash flow generated till 30 September was $137 million, maintaining a strong balance sheet of $345 million in net cash and liquid assets after payment of the second interim dividend of $69 million on 11 September.

The company has strengthened its leadership team with new appointments, particularly in the areas of geology, projects, and environmental and social, adding further depth to its management capacity and operational capability.

(Source: Company’s Result, RNS)

Also Read: Centamin Plc reports surge in H1 FY20 free cash flow due to the rise in the gold price and production

Road Ahead

The Gold mining company has slashing its projection after halting mining operations at its Sukari project in Egypt to carry out upkeep work after detecting change in waste material. The production guidance for Q4 2020 is estimated in a range of 60,000-70,000 ounce, and AISC of US$1,450-1,650 per ounce sold, including capital expenditure of US$30-40 million. Also, the production for 2021 is likely to decline to 400,000-430,000 tons with AISC costs of between $1,200 and $1,275 per ounce sold.

However, the company is putting all efforts and has started an increased waste stripping programme to increase the number of production areas available within the open pit, which would result in improvement in operational optionality. The company has also indicated that the remediation work at the Sukari open pit would be completed in H1 2021.

Stock Performance

CEY stocks were trading at GBX 137.60 on 22 October 2020, at 12:13 PM, up by 4.80 per cent from its previous close of GBX 131.30. It was having a market capitalisation of £1,517.77 million. The company recorded a positive return on the price of 3.63 per cent on a YTD (Year to Date) basis.

Must Read: Quick Glance on Two Precious Metal Mining Stocks – Centamin PLC & Hochschild Mining PLC

Let’s have a look at some of LSE-listed miners’ stock performance:

Anglo Asian Mining PLC (LON:AAZ)

The stocks of the company were trading at GBX 118.50 on 22 October 2020, at 12:18 PM, down by 3.27 per cent from its previous close of GBX 122.50. It was having a market capitalisation of £140.13 million. The company recorded a negative return on the price of 18.33 per cent on a YTD (Year to Date) basis.

Polymetal International PLC (LON:POLY)

The stocks of the company were trading at GBX 1,795.00 on 22 October 2020, at 12:21 PM, up by 1.73 per cent from its previous close of GBX 1,766.00. It was having a market capitalisation of £8,332.31 million. The company recorded a positive return on the price of 48.22 per cent on a YTD (Year to Date) basis.

Highland Gold Mining (LON:HGM)

The stocks of the company last traded at GBX 299.60 on 22 October 2020. It was having a market capitalisation of £1,090.96 million. The company recorded a positive return on the price of 52.03 per cent on a YTD (Year to Date) basis.

Shanta Gold LTD (LON:SHG)

The stocks of the company were trading at GBX 17.88 on 22 October 2020, at 12:30 PM, down by 0.69 per cent from its previous close of GBX 18.00. It was having a market capitalisation of £152.74 million. The company recorded a positive return on the price of 86.53 per cent on a YTD (Year to Date) basis.