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Could gold miner Centamin strike it lucky in 2020? (CEY)

14 Jan 2020 | by: James Moore

UK gold miner Centamin (LSE:CEY) is primed for a strong start to the year after reporting a boom in production ahead of Q4 earnings. 

Last week, the £1.45 billion miner, which is due to release its Q4 2019 earnings on 30 January, said production at its flagship Sukari gold mine in southern Egypt for period had leapt more than 50% to 148,387 ounces. Chief executive Ross Jerrard said the result “represents one of the strongest quarterly results from Sukari and is a significant achievement for our operational team”. The higher production numbers were driven by improved feed grade and metallurgical recoveries, Jerrard noted, pointing to the recent “transition in leadership [being] reflected in our improved operating performance.” 

Jerrard has been at the helm of Centamin since previous chief executive Andrew Pardey announced his retirement in October 2019. In the same market note, Centamin said that its total 2019 gold production had inched 2% higher to 480,529 ounces, while production guidance for 2020 remained unchanged at between 510,000 and 540,000 ounces.

Analysts have suggested that Centamin needs to diversify its asset base in order to attract wider institutional interest. Sukari, which began production in 2009, is its principal asset. It has other exploratory interests in Burkina Faso and notably in the Doropo Project in the northeast of the Ivory Coast, but these are both still at the investigation stage and are non-producing at time of writing.

James Bell at RBC Capital Markets noted on the back of the positive Q4 production results that the market remains cautious of the Centamin valuation: “As we have written multiple times, the feedback we hear from global investors is that single asset gold producers are potentially not viable long-term investments and hence may struggle to gain premium ratings.”

Bell’s comments would suggest, however, that there are opportunities to go long for the smaller retail investor. If Centamin can keep hold of its listed status and attract more liquidity, City analysts are likely to re-rate the stock higher. 

The gold miner also saw its share price soar towards the end of 2019 after a potential suitor emerged in the form of Canada’s Endeavour Mining Group. In December, Centamin rebuffed the unsolicited £1.5bn buyout proposal from Endeavour, but the terms of a potential deal are still being hashed out behind the scenes. 

Endeavour has until 5pm GMT on Tuesday 14 January to make a firm official offer for Centamin.

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