Centamin shares plunge to lowest since April after production cut

Centamin (CEY.L) fell out of favour with investors on Wednesday after it announced its production would be lower than forecasted next year.

Shares in the FTSE 250 miner nosedived 20% as it revealed gold production in 2021 is expected to be between 400,000 and 430,000 ounces as an unstable section of its Sukari mine open pit in Egypt had to be avoided.

This was significantly lower than the 500,000 ounces analysts expected, sending its share price tumbling to its lowest since April.

Panmure Gordon analyst Kieron Hodgson said “the material cut to full-year 2021 is likely to be taken negatively by the market.”

The Egypt-focused gold miner, which is listed on the Toronto Stock Exchange as well in London, saw sales decline 9% to 118,617 in the third quarter, however, this was offset by a 12% increase in average prices.

Revenue for the three months to September was $230m (£176m), 43% higher than a year ago.

The company’s Sukari gold mine, which is located just outside of Cairo, is the only operating gold mine in Egypt.

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Martin Gorgan, chief executive, said in an update to the market: “The third quarter marked another solid performance, bringing 2020 year to date free cash flow generated to $137m, with a strong balance sheet of $345m in net cash and liquid assets.

“We have already commenced an increased waste stripping programme to improve optionality in the [Sukari] open pit, the benefits of which are expected to start to flow through in 2022.”

Gorgan, co-founder of Toro Gold, which was acquired by Resolute Mining (RSG.L) last year, took the helm at Centamin during the coronavirus pandemic in April.

Earlier this year, Canadian rival Endeavour (EDV.TO) abandoned a $1.9bn hostile bid for the miner, citing a lack of information while Centamin declared its proposal was too low.

Since then gold prices have hit a record high as investors flocked to the safe-haven asset amid the market turmoil caused by the health crisis.

Russ Mould of AJ Bell Investment said: “You would have thought that sitting on a gold mine would be a path to instant riches, especially when the precious metal’s price is trading near its all-time high, so shareholders can be forgiven for being frustrated by the latest profit warning from Centamin.

“With gold still trading above $1,900 an ounce, Centamin still has every chance to make healthy profit margins, especially as the FTSE 250 firm’s balance sheet is net cash so there are no net interest bills to pay, but the outcome could have been so much better.”

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