Centamin reviews expansion options as results exceed forecast

Egypt-focused gold miner Centamin (LON:CEY) (TSX:CEE) said on Monday it is looking at expansion opportunities as soaring bullion prices and the country’s decision to open up its riches to foreign capital unlocks opportunities.

Gold prices have hit nine-year-highs of about $1,800 an ounce in recent weeks, boosting miners’ bottom-lines and spurring merger and acquisition activity.

Chief executive Martin Horgan said current gold prices have made “things interesting” for the company’s ability to forge transactions. He acknowledged, however, that striking a deal could prove challenging, given that all gold miners are benefiting from the metal’s price strength.

Hogan also highlighted Egypt’s new drive to attract foreign miners. Until February this year, Centamin was the only international company with a mining license in the country. But on Feb. 13, Canada’s Aton Resources (TSX-V: AAN) secured a mining permit — the first one granted in 15 years.

A month later, Cairo began auctioning 56,000 square kilometres of exploration concessions in the Eastern Desert.

It recently extended the auction’s original July deadline to September 15 due to delays caused by the coronavirus pandemic and to extend the opportunity to more potential bidders.

Centamin’s boss said the company would participate in the ongoing auction.

“We have significant infrastructure in Egypt and leveraging that off would be a good thing,” Horgan said, adding that the company was waiting for details on the process before preparing any bids.

Unlike Egypt’s natural gas sector, its mineral wealth remains largely under-explored and undeveloped.

The lack of activity was due, in part, to the nation’s past system of royalties and profit-sharing agreements. They made it difficult and unprofitable for miners to explore for and exploit minerals. 

Sukari shines

Centamin reported that its flagship Sukari asset, the only operating gold mine in Egypt, produced 130,994 ounces of gold in the March-June period, above the 115,000 ounces anticipated in April.

The company attributed the better-than-expected output figures to higher mill feed grades. Deferring plant maintenance shutdowns to the third quarter, a coronavirus-related precautionary measure, also helped, Centamin said.

Net cash generated in the period totalled $144 million, a 151% improvement year-on-year. As of June 30, cash and liquid assets were $367 million,  after the first interim dividend distribution of $69 million, paid on May 15.

While the gold miner said the current pandemic has not significantly affected its business, it decided to lower guidance for the year to reflect minor delays in the supply chain.

Centamin now expects to mine between 510,000 and 525,000 ounces of gold this year, slightly down from a previous range of 510,000 to 540,000 ounces.

Egypt’s Ministry of Petroleum and Mineral Resources revealed last month the discovery of a gold deposit with estimated resources of 1 million ounces.

While the government did not provide details on the methodology used to determine the deposit’s size, it noted it expected at least $1 billion in investments related to the development of the deposit over the next 10 years.