Currently viewing Global edition

Centamin fortunes to reverse in 2021

Shares in gold miner Centamin could be on the rebound after a tumultuous 2020, analysts believe.
Centamin fortunes to reverse in 2021 Centamin fortunes to reverse in 2021 Centamin fortunes to reverse in 2021 Centamin fortunes to reverse in 2021 Centamin fortunes to reverse in 2021

Centamin's Sukari gold mine in the Nubian Desert in Egypt

Analysts at US investment bank Jefferies have upgraded London and Toronto-listed Centamin's 2021 earnings forecast by 10% to US$390.3 million on the back of its planned reset of Sukari in Egypt to a 500,000 ounce per annum gold mine. 
Centamin shares offer exposure to "a world-class gold asset, sector-leading dividends and opportunity for operational led re-rating", Jefferies said in a research note, giving the stock a buy recommendation with a target price of 170p. 
The miner has had a tumultuous 2020 with shares plummeting almost 50% after it flagged stability issues on the west wall at Sukari in September, forcing it to lower guidance by 15% to 450,000oz. 
The analysts hailed CEO Martin Horgan's multi-year revival plan for Sukari mine, announced this month, which, he hopes, will return it to a 500,000ozpa producer by 2024, by slashing costs and raising capex. 
"We believe the aim is to create a more stable and predictable Sukari mine, sacrificing some absolute for more profitable ounces," they said.
Centamin's capex - which look set to average $200 million per year from 2021-2023 - should slim back down to $90-100 million per annum by 2025, Jefferies predicts. 
Centamin's future dividend prospects also look set for a reboot - and its dividend yield could jump to 7% in 2022 - up from 5.6% in 2021, thanks to a lift in production and cost improvements. 
"With a clean balance sheet [no debt, $345 million cash and liquid assets at September 2020] Centamin is able to retain very strong shareholder returns as the commitment to pay at least $105 million in dividend in 2021 puts it on a 5.6% yield," Jefferies' analysts said. 
Investment bank UBS is in agreement, restoring the status of Sukari as a "tier one" mine, and predicting it will "deliver significantly better financial results in the future", in a note earlier this month.  
Future brownfield exploration at Sukari and possible high-grade discoveries at its assets in West Africa were other avenues of growth and asset diversification, the bank said. 
Centamin shares slumped 45% from a August high of 231.1p to 126.9p on Monday, valuing the company at £1.3 billion.