Centamin (CEY) 149p

Gain to date: 52.5%

Market cap: £1.72 billion

Back in February we tipped Jersey-domiciled gold miner Centamin (CEY) both as a growth story and as a way to play the rising price of the precious metal, which at the time was trading just above $2,000 per ounce.

As well as exposure to the gold price, the FTSE 250 firm offered operational gains from its three-year investment programme which had set the company up for ‘a pretty good 2024’ according to chief executive Martin Horgan, with production costs in the ‘lower half of the industry curve’.

WHAT HAS HAPPENED SINCE WE SAID BUY?

In March, the firm posted a double-digit increase in full-year 2023 profit as it delivered on its production guidance once again with revenue also up double digits driven by higher prices and higher output from its main Sukhari mine in Egypt.

The company’s all-in cost of production was $1,205 per ounce, down from roughly $1,400 the previous year, while its average selling price was $1,948 per ounce against $1,794 previously.

Meanwhile, the gold price has continued to climb and now sits above $2,500 per ounce as central banks around the world embark on a cycle of lowering interest rates.

Low and falling interest rates make gold more attractive, relatively speaking, as its lack of yield matters less to investors than it does when rates are high or rising.

This appeal clearly isn’t lost on South African firm AngloGold Ashanti (ANG:JSE), which has made a cash and share offer valuing Centamin at £1.9 billion or 163p per share, a 37% premium to its previous market value.

AngloGold argues Centamin makes ‘a compelling strategic fit’ and describes Sukhari as a ‘world-class asset with a long life, compelling cost profile and attractive development potential.’

WHAT SHOULD INVESTORS DO NOW?

As it stands, Centamin shares are trading at a discount to the offer price to reflect the fact it is mostly stock-based and therefore vulnerable to changes in the AngloGold price.

The offer itself represents a fairly low premium to fair value according to analysts at Cannacord Genuity, but as the Centamin board has recommended the deal the only way investors will get a higher price for their shares is if a third party starts a bidding war.

For our part we would call it a day, cash in on the rally and move on to pastures new. 

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