Centamin Egypt rises after gold rush

By Graeme Dickson
Updated: 12:24 EDT, 10 November 2010

The FTSE index rose 126 points or 2.2 per cent to 5875 after a number of important commodities reached a 52 week high, particularly copper and gold, helping the miners advance even further.

Commodities in turn were helped by the $600 billion (£372 billion) stimulus package provided by the US Federal Reserve, thereby weakening the dollar, which almost invariably has an inverse relationship with commodity prices.

The highly influential Non-Farm Payroll figures last Friday came in much better than expected with 151,000 new jobs created in October.

Caution has to be thrown into the mix with the forthcoming G20 meeting in South Korea. However one investment bank has stuck its neck out, in the form of Deutsche Bank and said that it expects European equities to advance by a further 16 per cent next year, as the continent benefits from a global recovery.

In the meantime, now that 5800-5825 has been broken it looks like we are now on track for 6000-6100 for the end of the year. Support should initially come in at 5800 and through here down to 5600.

Big mover of the week: how you can profit

The best performing stock of the week coming from a FTSE 350 constituent came from Centamin Egypt (CEY), up 19.67 per cent to 197p since last Wednesday after a strong advance in the gold price to an all-time high of $1,422.00.

The company recently issued a quarterly statement saying that it had sold 31,228 ounces of gold at an average price of $1,239 per ounce against an average cash cost of $638 per ounce.

Centamin Egypt forecasts 160,000-170,000 ounces of gold to be mined during 2010. The company said it has huge reserves of 9.1 million ounces and on the balance sheet it has $32 million in cash (£19.8 million) and no debt.

The company is expected to ramp up production over the next three years, giving rise to a forecast 2013 price to earnings of just 7.13.

It has no hedge on the gold price, which currently looks great given the new all-time high on the commodity. Based on information to hand this company looks too cheap and I don't foresee Centamin Egypt staying below 200p for much longer.

Keep an eye on...

Flying high?: Early this year the company seemed to be up against it - but things are looking up

Budget short-haul flight operator Easyjet (EZJ) on 16 November when it is scheduled to issue its preliminary report.

Earlier in the year the company was up against it with the grounding of all flights after the Icelandic volcano debacle. On top of that the company was facing legal wranglings with its founder Stelios Haji-Ioannou.

However now that the volcano issue is seemingly a thing of the past, the company appears to have appeased Haji-Ioannou by agreeing terms with him and that the Easyjet name can remain with the company.

Easyjet has a tidy balance sheet with just 23 per cent net gearing, while its forecast 2012 price to earnings ratio of 8.8 is attractive. 500p will act as strong resistance, but if it manages to break through this level then expect to see 600-630p in the not-too-distant future.

Highlights from the FTSE 350 universe last week:

• On Thursday software engineer Invensys (ISYS) rallied just over four per cent to 300.3p on more takeover rumours.

• Man Group (EMG) the hedge fund manager rallied 14.6 per cent to 290.8p after it reported its first quarter of positive institutional inflows in more than two years.

• Rolls-Royce (RR.) slumped five per cent to 621.5p after airline Qantas grounded all of its A380 fleet after one of the engines designed by Rolls-Royce and used on the super jumbo plane, exploded in mid-air and fell off one of its planes.

• On Friday oil and gas pipe designer and manufacturer Wellstream (WSM) had a late spike to 770p on talks of a counter bid to rival General Electric's offer.

• Rentokil (RTO) dropped 5.78 per cent to 94.5p after its courier arm City Link, continued to act as a drag on the rest of the business, with a deterioration of trading performance.

• On Monday fund manager Gartmore (GRT) plummeted 15 per cent to 107p after its star fund manager Roger Guy announced his resignation.

• Afren (AFR) the African focussed oil explorer slipped 5.5 per cent to 123.7p after five crew members on one of its jack rigs, were taken hostage by Nigerian militants.

• Building/environment consultancy RPS Group (RPS) jumped 4.9 per cent to 236p on further buy-out rumours.

• InterContinental Hotels Group (IHG) fell 5.16 per cent to 1140p after it failed to revise its full year guidance in its third quarter report.

• Russian gold miner Petropavlovsk (POG) gained 8.3 per cent to 1027p after gold hit an all-time high.

• Telephone directories business Yell Group (YELL) sank 20.5 per cent to 12.37p after it posted a fall in its interim profits while it announced a new chief executive in the form of Michael Pocock.