New York bank Jefferies said Centamin's "baseline for production" over the next two years didn't factor in operational upside from potential higher grades, mine and plant optimisation efforts in progress, or cost benefits of a solar-power project.
The company's latest US4c interim dividend (US$46.2 million payout) brought cumulative dividends paid to shareholders to about US$500 million.
"Six months into our 10th year of commercial production, Centamin continues to make good progress delivering on its corporate strategy," said CEO Andrew Pardey.
"The company is a high-margin gold producer, delivering reliable stakeholder returns through strong free cash flow generation."
Centamin produced $35.7 million of free cash from 224,129oz of gold sales at US$1,305/oz gold and $292.4 million of revenue, after profit sharing with the Egyptian government and royalty payments totalling $48.1 million, for the first six months of this year.
"H1 results highlighted the commitment to shareholder returns and an improved view on the medium-term with publication of the baseline outlook for 2020/2021, allowing for upside from operational optimisations, Cleopatra stoping and targeted cost reductions," Jefferies said.
"M&A appears to be a lower priority as CEY advances green and brownfield projects.
"With a commitment to returning excess cash, we believe there is upside risk to forecast 5% dividend yields in 2019/20. In our upgrade note earlier this week, we noted the financial capacity to pay up to a 10% yield in FY20 if the YE20 cash balance was to be worked down to $250 million [with $100 million cash balance maintain and $150 million spent on project development].
"The cost side doesn't bake in a targeted 12% cost reduction plan over the medium-term nor longer-term solar power. CEY continues to advance a feasibility study for the development of a 40MW solar farm at the Sukari mine as a partial power solution, significantly reducing CO2 emissions and also cutting costs."
An investor call today heard Centamin saw potential for solar power to cut its processing costs by up to 30%.
"With processing costs being 50% of mine production costs in 1H19, the potential 15% reduction of mine production costs would a material, medium-term tailwind," Jefferies said.