Centamin rallies as Morgan Stanley initiates at 'overweight'

“Sukari provides a solid foundation from which to grow the business with a 7% free cash flow yield in 2017e.This can be invested either at Sukari, or outside of Egypt, or alternatively returned to shareholders if no viable project is identified. Valuation does not reflect this optionality in our view.”

However, the bank pointed out that absolute upside is still largely dependent on the outlook for gold prices.

MS said Centamin deserves to trade at a premium to peers Acacia and Hochschild.

At Acacia, the operation outlook is more uncertain, it said, with 2016 guidance downgraded at the start of the year due to issues at the flagship mine. At Hochschild, the most important mine, Inmaculada, has not even been operating for a full yesar yet, meaning risk is elevated.

Morgan Stanley said that having mined open pit ore since 2010 and underground development ore since 2011, the operating risk at Centamin's Sukari is now below that of its peers.

“This lower operating risk, alongside balance sheet optionality and undemanding valuation make Centamin our top pick in the European listed gold space.”

As far as the outlook for gold is concerned, MS said it remains balanced, with bull factors of market anxiety and uncertainty over China's growth outlook and bear factors of low inflation and positive US economic growth, offsetting each other.

At 0923 BST, Centamin shares were up 3.5% to 111.70p.