GREAT IDEAS
12 | SHARES | 01 August 2019
Snap up its shares as operational setbacks become history
FTSE 250 gold miner
Centamin is starting
to shine again
F
or those who are nervous
about where the world
is heading, one way to
ƉŽƚĞŶƟĂůůLJƚĂŬĞĐŽŵĨŽƌƚ;ĂŶĚ
ƉƌŽĮƚͿĐŽƵůĚďĞƚŚƌŽƵŐŚĂŵŝŶŝŶŐ
company digging for gold by the
Red Sea.
ŌĞƌĐƵƫŶŐŝƚƐƉƌŽĚƵĐƟŽŶ
ŐƵŝĚĂŶĐĞƚŚƌĞĞƟŵĞƐůĂƐƚLJĞĂƌ
ĚƵĞƚŽŽƉĞƌĂƟŽŶĂůŝƐƐƵĞƐĂŶĚ
ƐƵīĞƌŝŶŐĨƌŽŵĂƐƐŽĐŝĂƚĞĚƐŚĂƌĞ
price weakness, FTSE 250 miner
ĞŶƚĂŵŝŶ; zͿ ŝƐƐƚĂƌƟŶŐƚŽǁŝŶ
back the market’s favour, helped
by a stronger gold price.
dŚĞŵŝŶĞƌŝƐƚĂƌŐĞƟŶŐκεϬ͕ϬϬϬ
to 520,000 ounces of gold
ƉƌŽĚƵĐƟŽŶƚŚŝƐLJĞĂƌ͕ĂŚĞĂĚŽĨƚŚĞ
κΘκ͕ϯϮϮŽƵŶĐĞƐŝƚƐŽůĚůĂƐƚLJĞĂƌ͘
'ŽůĚƚĞŶĚƐƚŽĚŽǁĞůů
when there is an economic
downturn, and its price per
ŽƵŶĐĞŚĂƐŚŝƚƐŝdžLJĞĂƌŚŝŐŚƐƐŽ
ĨĂƌŝŶϮϬϭεĚƵĞƚŽĂŵƵůƟƚƵĚĞ
of global problems, including
ƚŚĞh^ͬŚŝŶĂƚƌĂĚĞǁĂƌ͕ƌĞdžŝƚ
uncertainty and bubbling
tensions in the Middle East.
Centamin says its all-in
sustaining costs will be around
ΨΘεϬƚŽΨερϬƉĞƌŽƵŶĐĞ͘tŝƚŚ
gold having hovered above
Ψϭ͕κϬϬĂŶŽƵŶĐĞƚŚŝƐLJĞĂƌ͕ƚŚĞ
company stands to make a
ĚĞĐĞŶƚƉƌŽĮƚ͘
/ŶĂĚĚŝƟŽŶ͕ƚŚĞĐŽŵƉĂŶLJ
has around $300m in cash on
its balance sheet as well as
no debt – unlike a lot of other80100120140
CENTAMIN2018 2019miners – so that gives it some
ƉƌŽƚĞĐƟŽŶƐŚŽƵůĚŝƚĐŽŵĞŝŶƚŽ
any unforeseen problems, which
can never be ruled out with
mining companies.
Centamin last month reported
an improvement in its business
ĨŽůůŽǁŝŶŐŶƵŵĞƌŽƵƐŽƉĞƌĂƟŽŶĂů
problems in the past year at
its Sukari mine. It previously
ƐƵīĞƌĞĚůŽǁĞƌŐƌĂĚĞƐŽĨŐŽůĚ
ƚŚĂŶĞdžƉĞĐƚĞĚĨƌŽŵƚŚĞŽƉĞŶƉŝƚ
ƐĞĐƟŽŶŽĨŝƚƐŵŝŶĞĂŶĚĚŝƐƌƵƉƟŽŶ
to the process it uses to get the
gold out of the ground.
ƵƚƚŚĞĮƌŵŚĂƐŵŽǀĞĚƚŽ
reassure investors that it has
a ‘new team in place’ ready to
return Sukari ‘back to its full
ƉŽƚĞŶƟĂů͕͛ŚĂǀŝŶŐ͚ŝĚĞŶƟĮĞĚ͕
evaluated and implemented’
ƐŽůƵƟŽŶƐƚŽƚŚĞĂĨŽƌĞŵĞŶƟŽŶĞĚ
problems.
‘Centamin’s share price, while
ŽīŝƚƐůŽǁƐĂƐŐŽůĚƉƌŝĐĞƐŚĂǀĞ
rallied, in our opinion does
ŶŽƚƌĞŇĞĐƚĂŶLJŽƉĞƌĂƟŽŶĂůimprovements and is pricing in
ƐŝŐŶŝĮĐĂŶƚůLJůŽǁĞƌƚŚĂŶƐƉŽƚ
and long-term forecast
gold prices,’ say analysts at
ŝŶǀĞƐƚŵĞŶƚďĂŶŬ:ĞīĞƌŝĞƐ͘
͚tŝƚŚŝŵƉƌŽǀŝŶŐĨƌĞĞĐĂƐŚ
ŇŽǁŝŶϮϬϮϬ;ϳйLJŝĞůĚͿ͕ĚƌŝǀĞŶ
by metal price forecasts and
ŵŽĚĞƐƚĂƐƐƵŵĞĚŽƉĞƌĂƟŽŶĂů
improvements, we forecast the
ĚŝǀŝĚĞŶĚLJŝĞůĚƌĞƚƵƌŶŝŶŐƚŽρй͕Ă
notable standout versus global
gold peers.’
The analysts believe
improvements in Sukari’s open
pit near term, along with stronger
ĨƌĞĞĐĂƐŚŇŽǁŐĞŶĞƌĂƟŽŶĂŶĚ
shareholder returns will drive the
ĞƋƵŝƚLJƌĞͲƌĂƟŶŐ͘CENTAMIN È BUY
(CEY) 129.6p
Stop loss: 85pMarket value: £1.5bn