Centamin (CEY) 128.3p

Gain to date: 31.3%

We flagged the appeal of Egyptian gold miner Centamin (CEY) a little over two months ago based on two key factors: operational improvements and exposure to strong gold prices.

WHAT’S HAPPENED SINCE WE SAID TO BUY?

The recent move higher in gold prices has been extremely helpful as geopolitical tensions in the Middle East escalate and inflationary pressures continue to prove stubborn. There are predictions in the market gold could move from its current level of $2,350 per ounce to as much as $4,000.

Centamin is better placed to benefit from any move higher in the precious metal after a three-year investment programme which helped to bring down operating costs.

Results for 2023, released on 21 March, saw the company reaffirm its Sukari mine was positioned towards consistently delivering 500,000 ounces of gold per year with further scope for cost savings and growth identified. Key industry metric AISC (all-in sustaining costs) fell 14% to $1,205 per ounce.

The company reported positive free cash flow of $49 million after a free cash outflow of $18 million in 2022. Centamin revealed cash and liquid assets at the end of December of $153 million.

Berenberg analyst Richard Hatch commented: ‘This was a stable set of numbers but we think it is important to again focus on operational improvements. Management flagged ongoing productivity gains, which have contributed to falling costs, as has a transition to owner-mining from underground-contractor mining.’

WHAT SHOULD INVESTORS DO NOW?

The economic and geopolitical backdrop makes a case for having some exposure to gold in a portfolio and Centamin offers the prospect of additional upside, albeit with risk attached, as it delivers on a solid-looking strategy so this is an idea to stick with.

Updates on the company’s prospective Ivory Coast Doropo development and its EDX exploration project as well as further upgrades at Sukari offer further catalysts in the coming months. 

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