cannacord today
Centamin Egypt Ltd | Nicholas Chalmers, 44.20.7050.6636
CEY : AIM : £1.31 | £1,335.0M | Buy , Target £1.76
• Sukari fully up and running -- BUY, 176p target price
Event
Centamin today announced that it has commenced gold exports from its Sukari mine in
Egypt following the achievement of optimal design throughput at the operation during
December. The 4Mt pa processing facility is now performing in line with design
specifications.
Impact
Positive but expected – the company has delivered on its previous guidance that full design
capacity would be achieved by the start of 2010. The operation is now commercial and we
expect to see revenue and costs accounted through the P&L going forward (Q3 results for
the three months ending March 31 should be out in April). We believe Sukari remains on
track to meet our calendar 2010 production forecast of 200koz of gold (at cash costs of
under US$400/oz) and expect Centamin to undertake an expansion of the operation to
+500koz pa by 2012.
Action
We reiterate our BUY recommendation and 176p target price.
Valuation
Our 176p target is based on 1.1 times our 5% peak gold NAV. The stock is currently
trading at 0.95 times its spot gold NAV – we think there is potential for this P/NAV multiple
to expand to 1.1 times (around the average for junior/emerging producers in North
America over the past year) as the company proves itself as an established producer in
2010. We note there could be potential upside to our NAV estimate should resources
continue to grow and justify an expansion substantially beyond the 500koz per annum
assumed in our model, and also note the ongoing potential for the company to attract
corporate attention.
Next Catalyst
• 2010 production and cost guidance (Q1/10).
• Further guidance on production expansion plans (Q1/10).
• Inclusion in FTSE 250 Index (March 2010).
• Announcement of maiden quarterly operating profit (April 2010).