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Centamin (LSE:CEY) share price is trading down just under 2.0% from yesterday’s close at 53.30. At mid-afternoon CEY is at 52.25, following release of the company’s first quarter 2014 production results. I suggest that it takes a great deal of patient understanding when reading a report like Centamin’s.
Gold’s Not Glittering Like It Used To
It’s been a tough year for gold. That’s enough to initiate a groan from investors just on the basis that a quarterly report from a gold miner has been issued, without ever reading it. Anyone with even a casual acquaintance with world news knows Egypt, where Centamin’s Sukari mine is located, has been in unpredictable political turmoil almost continually since the beginning of the so-called “Arab Spring.” Combine those two factors and it’s difficult to read a report expecting to see any good news, perhaps, even to see good news when it’s right before your eyes.
Seeing the Rose Despite the Thorns
Despite what the report says, headlines today shout sentiments about Centamin ranging from good to bad. Some even emphasize that Sukari gold production is down. I think that is patently unfair and prejudicial reporting. I’m not arguing the comment. It is, in fact, true. While production was, indeed, down compared to both Q1 and Q4 2013 (74,241 oz vs. 87,016 in Q1 2013 and 94,546 in Q4), the yield, especially versus Q1 2013, was comparable.
Although total material movement was down slightly year on year (9,749 kt vs. 10,550), it was up by 107 kt from Q4 2013.
A Rose by Any Other Name . . .
The company’s objective is to increase throughput, which, in turn, should increase gold production. The report said that, “The Stage 4 commissioning process will progressively lift overall plant throughput and hence gold production levels through the remainder of the year.” Almost ironically, neither the issue of the gold market nor the unrest in Egypt appeared to bring any weight to bear on Centamin’s Sukari operations.
“The primary challenge faced during the quarter was from poor mining fleet availability within the high grade stoping areas of the underground mine. Whilst the operation delivered a record 206 kt of ore, up 18% on Q4 2013, this limited ability to remotely mine the high-grade stopes reduced the average mined grade to below planned levels and thus restricted the contribution to overall production. These problems with equipment availability were rectified late in the quarter.”
Centamin Chairman Josef El-Raghy highlighted the success of operations compared to the company’s strategic milestones. “Consistently high levels of productivity have again been achieved with the process plant at Sukari. Although underground performance has impacted Q1 we are pleased to confirm commissioning of Stage 4 is proceeding as planned, with Sukari achieving a major milestone towards the end of Q1 as first ore was fed through the new circuit. We expect plant throughput to increase through the rest of the year as commissioning continues. Our forecast 2014 production and the continued ramp up towards Sukari’s long-term target of 450,000-500,000 ounces per annum remain on track.”
It should also be pointed out that, once again, against the odds, Centamin’s share price has remained remarkably steady during the last 12 months. On 09 April 2013, shares were trading at 47.00. The share price has dropped below 40.00 only once since 23 August and it has been steadily trending upward ever since.
Call it what you will. I call it success.
