Centamin declares dividend bonanza as earnings soar and costs fall

Egyptian gold miner Centamin declared a bumper dividend as it posted results for the year to 31 December on Wednesday, with EBITDA up 145% to $373m due to higher gold prices, increased production and lower costs.

The FTSE 250 company’s revenue was also up, to $158.3m from $130.2m in 2015, as production reached 551,036 ounces, a 26% increase on 2015 and above the revised guidance range.

Basic earnings per share were 18.61 cents, up 313% on the prior year.

Profit sharing with the Egyptian Mineral Resources Authority commenced during the third quarter, with earnings per share before profit share of 23.05 US cents, up 411% on the prior year.

Centamin said it remains debt-free and unhedged with cash, bullion on hand, gold sales receivable and available-for-sale financial assets of $428m at 31 December, up 85%.

Its board proposed a final dividend of 13.5 cents per share, making for a total 2016 dividend payout of 15.5 US cents per share.

The cash cost of production was $513 per ounce, down from $713 per ounce in 2015 and below the revised guidance range, driven by higher production and reductions in mine production costs, mainly due to lower fuel prices.

All-in sustaining costs were $694 per ounce, down from $885 per ounce in 2015 and below the revised guidance range, due to the same factors affecting the cash cost of production.

The board reported a record processing throughput of 11.6Mt, an increase of 9% on 2015 and above its base case forecast rate of 11Mtpa, with record open pit total material movement of waste plus ore at 62.2Mt, an increase of 8% on 2015.

Underground ore mined fell to 1.02Mt - a 12% reduction - at an improved grade of 9.04g/t - up 40% on 2015 - leading to a sustained annualised rate above the board’s base case forecast of 1Mt per annum at a grade of at least 6g/t.

It gave 2017 guidance of 540,000 ounces of gold at $580 per ounce cash cost of production and $790 AISC.

The board also confirmed a new discovery from exploration in Côte d'Ivoire, with a maiden resource of 0.3Moz at 1.6g/t indicated and 1.0Moz at 1.3g/t inferred covering five prospects within a 5km radius area and remaining open at depth and along strike.

Evaluation of results from Burkina Faso was also ongoing, which will guide further drilling planned for 2017.

“During 2016 Centamin's flagship Sukari Gold Mine continued to deliver substantial free cash flows, driven by a seventh successive year of production growth and through reductions in operating costs,” commented chairman Josef El-Raghy.

“This performance has allowed Centamin to maintain its strategic focus on generating shareholder returns and value-accretive growth.”

El-Raghy said a significant milestone was achieved during the year, as the capital investment in the Sukari operation by Centamin's wholly-owned subsidiary Pharaoh Gold Mines was recovered from cash flows to the extent that profit share commenced with the Egyptian Government during the third quarter.

“Centamin ended the year with $428m in cash, bullion on hand, gold sales receivables and available-for-sale financial assets, an increase of $197m during the year."

Broker Canaccord hailed the dividend "bonanza". It noted that alongside its production report in early January, Centamin announced a revised dividend policy, saying it expected the 2016 payment to exceed the maximum provided by the policy at that time, which was 15-30% of net cash flow after sustaining capex and government profit share.

As a result of its operating and financial performance the policy was changed, with an aim to paying out at least 30% of net cash flow after sustaining capex and government profit share.

"After the recent revision of the dividend policy, we had been looking for a final dividend of 4.0c and a full-year payment of 6.5c. Instead, the company reported a final of 13.5c, to make 15.5c for the year."

Shore Capital said the numbers were excellent and called the dividend "tasty".