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Here’s Why Centamin (CEY) Shares Edged Lower Despite Upbeat 2021 Report

Simon Mugo trader
Updated 5 Apr 2022

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Key points:

  • Centamin’s share price edged lower after releasing its 2021 annual report.
  • There were no financial surprises in the report, but some highlights stood out.
  • Investors were largely unfazed by the report despite some crucial highlights.

The Centamin PLC (LON: CEY) share price edged lower after the gold mining company released its annual report for 2021. However, there were very few surprises in the report, given that the miner had released its full-year results on 16 March 2022.

Also read: Five Best Gold and Gold Mining Stocks To Buy Now.

However, a key highlight of the annual report was that Centamin’s Sukari mine would produce its five millionth ounce this year, with the company projecting that the mine could remain operational for the next 12 years.

Centamin highlighted Sukari’s long term potential to appease investors who may have been worried about the mine’s dwindling production. The mine has been in operation for almost 12 years, starting in 2009.

Investors will be pleased to know that the Sukari mine has estimated reserves of 15.4 million ounces, so Centamin expects the mine to remain active for the decade based on its current annual production target of 500,000 gold ounces.

In the past, investors were worried about the harsh operating conditions for mining companies in Egypt. Still, the Egyptian government has recently implemented new laws to revamp the sector and attract more firms to invest in the mining sector.

Centamin will benefit from the move, but the entry of other companies into Egypt’s mining sector also ups the competition for resources, including water for mining operations and labour. However, the mining infrastructure is likely to be expanded to accommodate the new entrants.

The miner recently completed two phases of its life of mine assessment, which led to a 200% increase in the underground gold reserves estimate and an overall 23% increase in gold reserves.

Centamin has also implemented a cost-saving plan that has saved the firm $71 million by December 2021.

Another crucial highlight of the report was that Centamin had diversified its operations from the Sukari mine in Egypt to other jurisdictions, including Côte d’Ivoire and Burkina Faso. The miner has two operations in Côte d’Ivoire, the Doropo project with inferred resources of 5.2 million ounces of gold and the ABC Project with inferred resources of  2.2 million ounces. However, due to internal hurdle rates and license tenure, the company plans to exit its Burkina Faso project.

Centamin has also bid for the additional ground near its existing Sukari mine, which could provide extra mill feed or become a standalone mine. The bid was placed under the Egyptian government’s new mining code launched in 2020.

The miner’s prospects are pretty bullish given its improving operations and the rising gold price due to the current global geopolitical uncertainties.

*This is not investment advice. Always do your due diligence before making investment decisions.

Centamin share price.

Centamin share price 05-04-2022
Source: IG

Centamin shares edged 1.28% lower to trade at 91.70p, falling from Monday’s closing price of 92.89p.

Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading