9th Jan 2017 12:08
LONDON (Alliance News) - Egyptian gold miner Centamin PLC on Monday said it beat its production guidance for 2016 and suggested cash generation has been particularly strong as it tweaked its dividend policy so shareholders can receive a higher payout.
Centamin shares were trading 0.6% higher on Monday morning at 139.00 pence per share.
The miner more than doubled its interim dividend at the end of the first half of 2016 to 2.00 cents per share from 0.97 cent and said on Monday that, due to the company's strong cash position and the level of cashflow generated from the Sukari mine, its full-year dividend will exceed the maximum provided by the current policy.
As a result, the miner's board has approved an update to the policy to allow shareholders to receive a higher payout for 2016.
"When determining the amount to be paid the board will take into consideration the underlying profitability of the company and significant known or expected funding commitments. Specifically, the board will aim to approve an annual dividend of at least 30% of the company's net cash flow after sustaining capital costs and following the payment of profit share due to the government of Egypt," Centamin said on Monday.
Previously, Centamin had a policy to pay out between 15% to 30% of net free cashflow each year to shareholders in the form of dividends. In 2015, Centamin paid an interim dividend of 0.97 cent and a final dividend of 1.97 cents, making the total payout for the year 2.97 cents per share.
At the end of the third quarter of 2016, Centamin had said full-year production would be at the upper end of its full year guidance of 520,000 to 540,000 ounces of gold, as it looked to deliver a material step up from the 439,072 ounces produced in 2015.
Although it stuck to its target, production was already running ahead of the guidance range at the end of September. On Monday, Centamin revealed production in the final quarter of the year had fallen from the third, but confirmed that it had still managed to beat its full-year guidance range for 2016 comfortably.
Production in the last three months of 2016 totalled 136,787 ounces of gold, dropping 8% from the 148,674 ounces produced in the previous quarter after less ore was taken from the underground operation at Sukari, but production was still 16% higher than one year earlier.
Centamin produced a total of 551,036 ounces of gold in all of 2016, 2% above the top end of its guidance range and 6% higher than the bottom, and rising 25% from what was produced in 2015.
Analysts have previously flagged that Centamin tends to low-ball production estimates to cater for any potential underperformance, but the gold miner did upgrade its target at the midway point of 2016 after delivering strong production growth in the first half, raising its goal from the original 470,000 ounce target - 17% below the full-year production figure reported on Monday.
"Free cash flow generation from Sukari has further strengthened Centamin's financial position during 2016, a trend we expect to continue," said Chief Executive Andrew Pardy. "Ongoing optimisation of the processing and mining operations continues to offer scope for further increases in productivity."
The gold miner did not provide any update on its cost performance in the final quarter of 2016, but said in October that it expected full-year cash costs in 2016 to be at the lower end of its range of USD530 to USD560 per ounce, while the all-in sustaining cash (AISC) cost would be between USD720 to USD750 per ounce.
Gold miners have enjoyed a solid year for gold prices in 2016. The first day of trading in 2016 marked the lowest price of the precious metal throughout the year at USD1,062 per ounce, rising to a 2016 high of USD1,375 per ounce in July. The final three months of the year, however, saw prices fall, but the spot price of USD1,179 per ounce on Monday was still comfortably above where it stood at the start of 2016.
Centamin said at the end of October that its margins had improved markedly, boosted by a combination of higher gold prices and the company's focus on sustained productivity and cost improvements during the second half of the year.
Despite the increasing level of output from the Sukari mine, Centamin has refrained from promising a huge rise in production in 2017, guiding that a total of 540,000 ounces will be extracted from the mine, implying Centamin expects a 2% year-on-year drop.
The target is based on the plant at Sukari achieving a throughput rate of 11.8 million tonnes of ore and 1 million tonnes of ore being taken from the underground operation at a grade of at least 7.26 grammes of gold per tonne.
Centamin warned that the open pit is scheduled to develop a low-grade east wall cutback in the first quarter of 2017, meaning production will be lower than that experienced in the final quarter of 2016. However, the drop during the early parts of the new year look likely to be offset by the ongoing drive to improve productivity and efficiencies throughout the year.
The AISC for 2017 is guided at USD790 per ounce, low enough to continue enjoying large margins but 5.3% higher than the bottom of the 2016 guidance range and 9.7% higher than the top.
"We remain committed to our disciplined approach to capital allocation, as well as the potential for exploration to deliver significant shareholder value over the long-term. Results from our programmes in Burkina Faso and the Ivory Coast continue to build momentum and warrant further investment, and we again exit the year with a robust financial and operating base on which to continue delivering our growth strategy," said Pardy.
By Joshua Warner; [email protected]; @JoshAlliance
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