Centamin raises gold production targets for Egyptian mine

THE Egyptian-focused gold miner Centamin has raised its production target for this year after the group’s results for the first six months of 2016 beat analysts’ expectations.

Shares in Centamin rose 2.2p to 173.8p after it said it would now mine between 520,000 and 540,000 ounces of gold this year from its Sukari mine in Egypt, up from a forecast of 470,000 ounces. Higher production should also lower the company’s unit costs compared with previous guidance.

Along with other gold miners, the company has been one of the biggest beneficiaries of the Brexit vote; its share price has climbed 61pc since the referendum, as investors pile into safe havens.

Over the course of the year, the stock has risen 174pc, making it the secondbest performing company on the FTSE 250. Over the same period, the price of gold has soared by 27pc, after hitting a six-year low in December.

For the six months to June 30, Centamin’s pre-tax profits jumped 142pc to $114m (£87.6m) as the higher gold price powered a 26pc rise in revenues to $328m. The company also benefited from cost savings, currency exchange gains, and lower fuel costs. Centamin, which is debt free, hiked its interim dividend by 50pc to two US cents a share, although chief executive Andrew Pardey did not rule out a special dividend at some point in the future.

“Our interim dividend is within the range we guided. But we are not a bank. We have no intention of holding on to excess cash,” Mr Pardey said.

Dan Shaw, analyst at Morgan Stanley, suggested Centamin could end the year with $420m of free cash, $120m ahead of its own target, stoking hopes of further shareholder payouts. He added that the update was “overall a strong set of results”, with earnings beating consensus forecasts.

Centamin has begun exploring the hilly northern edge of its Sukari complex, spending $11.5m from its cash reserves to dig a tunnel from which it will be able to drill for gold samples.

“We see nine months of development work,” said Mr Pardey. “Drilling will be undertaken after four or five months – but at the moment it is solely exploration,” he added, saying Centamin could not put an estimate yet on how big the gold reserve may be underground.

The company is also prospecting for gold in Burkina Faso and Ivory Coast.