Solid gold production sees Centamin earnings rise

Centamin saw gold production of 124,641 ounces in its second quarter of the year, it said on Thursday, which was a 14% increase on the first quarter and 11% lower than Q2 2016.

The FTSE 250 firm said its cash cost of production and all-in sustaining costs (AISC) remained “well controlled” in its interim results to 30 June, resulting in a unit cash cost of production of $609 per ounce and unit AISC of $829 per ounce sold.

Its full-year 2017 guidance was maintained at 540,000 ounces, with a $580 per ounce cash cost of production and $790 per ounce AISC.

“Whilst the first half of 2017 was focussed largely on the cut back of the east wall in the open pit, with correspondingly low ore grades, it has been very pleasing to see the business generate over $135m in cash flow from operations over the period,” said chief executive Andrew Pardey.

“After capital and exploration expenditure of approximately $44.6m and profit share payments to our partner, EMRA, of $41.2m, we are delighted to be able to increase the interim dividend payment by 25% to 2.5 cents, comfortably exceeding the minimum target set out in our dividend policy.”

Looking at the financials, the board declared an interim dividend per share of 2.5 cents, a 25% increase on the 2016 interim payment and in line with Centamin's stated policy of returning free cash flow to shareholders.

EBITDA at $66m was up 24% from the first quarter, due to an increase in both sales volumes and average realised gold price, while the board described “strong cash flow generation” with free cash flow generation of $50.8m in the year-to-date.

Cash at bank, bullion on hand, gold sales receivable and available-for-sale financial assets as at 30 June stood at $333.6m.

Centamin said the Egyptian state had benefitted directly from profit share payments to EMRA of $41.2m during the first half, in line with guidance for 2017, in addition to $8.7m in royalty payments.

Quarterly basic earnings per share, after profit share, were 1.10 cents, a decrease on the first quarter due to non-cash and non-recurring items as well as higher profit share payments.

“Importantly, the underground mining rates and grades and record productivity levels from both the open pit and processing plant achieved during the first half demonstrate the potential for future production increases from existing operations,” Pardey explained.

“Longer term, positive results from drilling at Cleopatra continue to offer encouragement for a possible significant increase in underground production rates.”

Operationally, Centamin reported record quarterly throughput of 3.06 million tonnes from its Sukari process plant, an increase of 5% on the first quarter and of 4% year-on-year.

Its Amun / Ptah underground operations delivered 293 kt at a grade of 8.79g/t to the ROM pad with mill feed from underground of 276 kt at 7.74g/t during the period.

It also posted record open-pit material movement of 17,493 million tonnes, with mining of the east wall cutback completed during the quarter as planned, allowing open-pit mining to move to higher grade sectors.

Continued positive results were reportedly received from underground exploration drilling at Sukari at both Amun / Ptah and Cleopatra.

Centamin said development of the Cleopatra exploration decline, located in the north-east of Sukari Hill, advanced 407 metres, and it claimed to have “encouraging” initial results from diamond drilling over 5,231 metres.

“With the open pit now into higher grade sectors and operations across the mine performing well, we look forward to a strong second half of the year and maintain our full year guidance of 540,000 ounces at an all-in sustaining cost of US$790 per ounce sold,” Andrew Pardey added.