15th May 2014 08:23
LONDON (Alliance News) - Centamin PLC Thursday said its pretax profit dropped by 70% in its first quarter as a slump in production and lower gold prices hit its revenues, while its cost of sales increased as on-going disputes with the Egyptian government over fuel costs continue.
Despite its recent difficulties, the FTSE 250 miner reaffirmed its production forecast for the full year ahead.
Centamin said its pretax profit fell 71% to USD20.6 million for the three months ended March 31 from USD71.9 million the previous year as revenues dropped 26% to USD102.7 million from USD138.2 million.
The company said its revenues fell as production dropped and the average realised sales price for its gold fell to USD1,298 per ounce from USD1,604 the previous year, after the market gold price fell in 2013.
Centamin also said its cost of sales increased 29% to USD76.3 million from USD59.1 million as the company continues to struggle with fuel costs as part of an ongoing dispute with the Egyptian government.
In January 2012, the company stopped receiving diesel fuel oil for its Sukari mine at subsidised prices, after pressure from Egyptian General Petroleum Corp, according to Centamin, and received a demand from its supplier Chevron Corp for the repayment of fuel subsidies from late 2009 to January 2012, some USD60 million in total.
The company lodged an appeal against Egyptian General Petroleum in 2012 over the situation, but to date no final decision has been made on the matter and so the company continues to have to provide for the prepayment costs as exceptional items.
It also said its unit cash costs were above its 2014 full-year guidance of USD700 per ounce, due to a temporary reduction in the underground average grades recovered resulting from issues with its mining fleet availability which were resolved within the quarter.
It April, the company announced that gold production from its Sukari Gold Mine in Egypt declined in the first quarter of 2014 from the previous quarter, hit by a temporary reduction in underground average grade.
Centamin reported total gold production for the quarter to end-March of 74,241 ounces, down 14% compared to the previous year and down 19% from the fourth quarter of 2013.
The company said that its primary challenge during the quarter had been poor mining equipment availability within the high-grade stoping areas of the underground mine, which limited its ability to mine the high-grade stopes, where extraction takes place. However, Centamin said that the issues with equipment availability had been resolved late in the quarter.
Centamin is currently commissioning its stage-four expansion plan for the site, which it hopes to improve the overall throughput and gold production levels at the plant throughout the rest of the year.
However on Thursday, Centamin reiterated its production guidance for 2014 at 420,000 ounces of gold.
"Although underground performance has impacted Q1 we are pleased to confirm commissioning of Stage 4 is proceeding as planned, with Sukari achieving a major milestone towards the end of Q1 as first ore was fed through the new circuit," Chairman Josef El-Raghy said in a statement.
"We expect plant throughput, and hence quarterly production rates, to increase through the rest of the year as commissioning continues. Our forecast 2014 production and the continued ramp up towards Sukari's long-term target of 450,000-500,000 ounces per annum remain on track," he added.
In March the company said pretax profit fell in 2013 due to a large exceptional cost, but that increased revenues and production meant pretax profit before such items increased during the period.
It said pretax profit fell 7.4% to USD184.0 million in 2013 from USD198.6 million in 2012. Not including exceptional items, the company would have posted a pretax profit increase of 1.4% to USD235.0 million from USD231.7 million in 2012.
Centamin shares were down 1.6% to 62.95 pence, putting it among the top FTSE 250 fallers during early trading on Thursday.
By Tom McIvor; [email protected]; @TomMcIvor1
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