I’m sorry for not having posted lately but I’ve been exceptionally busy even though I’ve continued to trade.   To summarise I’ve lost a lot of money on my Avocet holdings,  made money on Amara, lost a lot on Gulfsands (which luckily I’ve managed to offload on its recent tick-up to 68p) and made a lot on long trades on both Xcite Energy and Quindell which I’ve timed out very well. I’m thinking of posting a statement of my account here if I figure out how to upload the data efficiently.

I still believe in Centamin as a long term play.  In my view they are relatively immune to gold price perturbations compared to the vast majority of producers that I monitor – thanks to their low all-in costs.

At current price of gold and extrapolating forward to their full 50:50 split with the state by c. 2019, I still estimate their earnings per share at 12p+ (ie making their forward P/E c.5x!), so on a fundamental basis they remain considerably undervalued.

Dividend payments are due to be paid from this financial year onwards.

Their large capital expenditures on the 10mtpa expansion are complete – so free cash flow will rise and remain positive going forward.

They have considerable resources and reserves – so life of mine for Sukari is considerable – even at c.600kozpa.

Ev/OPCF for 2013 was just 4.3x – indicating both the low valuation and extremely poor sentiment across the sector at large.

2013 operating profit margin was 49%, whilst most of the global large producers were struggling around the marginal cost of production.

Costs/tonne milled at $46/t have stayed remarkably constant over the last 4 years with their overall average costs/t being $48/t (including UG operations!).

Unlike most of their peers they have a positive Cash/equity of +9% compared to high levels of net debt amongst most of the big producers.

I calculate all-in costs for 2013 were $710/oz (based on their cash flow statement) and $721/oz (based on their P&L figures) – so a pretty good correlation between the two methods.

So, on a personal level, I am pretty confident to both hold and add shares of CEY.


June 30, 2014 by Harry
Category: blog