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Centamin Shares Are Down 17% This Year, Can They Reverse Course and Rally Higher?

Updated: 4 Mar 2021

Shares of gold mining company Centamin PLC (LON: CEY) are down 17% this year, fueled by the drop in gold prices as investor risk appetite remained elevated, boosting riskier assets at the expense of safe-haven assets such as gold.

The company’s share price has been falling since last year as production at its Sukari gold mine in Egypt fell due to technical hitches that limited access to some of the sites with massive gold deposits.

Centamin is on track to fix the issues that slowed down mining activities, but the drop in gold prices has hampered the appreciation of its shares this year. Today, the company received two Caterpillar 6040 BH hydraulic shovels at its Sukari mine that should help boost gold production.

The two shovels are part of the company’s plans to lower the total cost of producing an ounce of gold to below $900 by 2024, which is likely to improve the mine's profitability over time and raise the company’s earnings.

Centamin’s shares are likely to surge if the price of gold reverses course and heads higher in future, which would automatically raise its earnings. The company plans to install a 36 MW solar power plant and add three more truck trays as part of its fiscal 2021-2023 plans.

The strategic moves being implemented by the gold miner combined with the recent downtrend make Centamin shares appear fairly valued, and the likelihood that gold prices could head higher soon makes the stock very attractive.

Regardless, the stock is not immune to further declines fueled by a drop in gold prices, increasing the timeframe for the shares’ recovery.

Centamin share price.

Tradingview chart of Centamin share price 04-03-2021

Centamin shares are down 17% in 2021; can they reverse course and rally again?

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