🕐07.11.13 - 09:54 Uhr

INVESTEC: CENTAMIN : GOOD HEADLINE NUMBERS, BUT STILL AWAITING THE CASH - BUY



Centamin (Price: 48.3p | Target: 54.0p | Rec: Buy) CEY had already reported very good 3Q production of 84,757oz (Investec 85koz).

The weaker YoY results reported yesterday were therefore indicative of the 21% fall in the realised gold price YoY, not poor performance.

EBITDA of $43.1m was down 36% YoY, while EPS of 2.72cps was down 51% YoY, including an $11.9m writedown of the Nyota investment.

Most importantly, the Stage 4 expansion, doubling the plant to 10mtpa, remains on track for completion in 4Q, with steady state expected to be reached in the 2H14E. * Following the encouraging 3Q performance, particularly from underground, we have lifted our FY13E production from 329koz to 340koz and FY14E from 368koz to 391koz, lifting our forecast EPS by 10% and 12% respectively. * A confounding aspect of CEY’s 3Q financials, like so many gold companies, is that the attractive headline numbers do not translate into free cashflow, with the $215m in operating cashflow for the nine months to Sep’13 offset by the $242m of investing activities.

The stage 4 expansion project consumed only $90m of this, with the remainder including $62m for the expanded fleet, $38m for open pit and underground development, $18m of other sustaining capex and $16m of exploration.

The company indicates that combined underground development and sustaining capex should stabilise around $60m/pa (or $133/oz at a 450koz/pa rate), which we incorporate in our assumptions.

This company should generate very good free cash flows in future years: under our assumed $1,400/oz gold price we estimate over $262m during FY14-16E, net of the government share, or $216m at the current gold price of $1,316/oz. * Our target price, which is based on an equal blend of NPV and three-year earnings multiples, has lifted from 50p to 54p, reflecting the lift in forward production rates and earnings.

Maintain Buy.
To access the full note please click here Analyst: Hunter Hillcoat
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