US Edition Centamin Egypt
98p +2.65
Questor says BUY
The company returned to full production after the delivery of blasting products was restarted in July. This meant Centamin produced 50,539 ounces in July – a 67pc increase on the equivalent periods last year.
However, the share price remains in the doldrums because of the political situation in Egypt. Because the company has just one asset in the country, the trouble associated with the Arab Spring sent the risk premium soaring. Things have not improved this week with the controversial death of a number Coptic Christians when troops broke up a protest.
Centamin confirmed that it remained on track to its current year production target of 200,000 to 210,000 ounces. This target range was cut from 250,000 to 290,000 ounces in August as authorities restricted the delivery of blasting products.
The cost of producing each ounce of gold is expected to be in the region of $550.
The shares were first recommended on January 5, 2009 at 42½p, so they are still up 131pc since the initial tip, compared with a FTSE 100 up 17pc. They have, however, been tipped as high as 159¾p in the pre-conflict period.
The shares are trading on a December 2011 multiple of 8.7 falling to 6.2 next year – a large discount to other sector players.
Of the 17 analysts covering the shares and monitored by Bloomberg on price targets, the average is 175¼p.
The shares remain a risky, speculative buy because of the world-class quality of the Sukari mine. Investors must also be aware this is a single-asset company operating in a country with high political risk.