21st Mar 2016 13:32
LONDON (Alliance News) - Centamin PLC on Monday hiked its 2015 dividend despite reporting a dip in profit, and said production is expected to rise this year following the significant expansion at its Sukari gold mine in Egypt.
The gold miner said its pretax profit in 2015 fell to USD58.4 million from the USD81.6 million reported a year earlier, despite revenue rising to USD508.4 million from USD472.6 million.
Revenue rose as a 17% increase in gold sales offset an 8.0% fall in gold prices, but operating margins were squeezed as a result. Alongside tighter margins, a USD6.3 million write-off against Centamin's Ethiopian exploration assets hit profit.
As a result, earnings before interest, tax, depreciation and amortisation dipped to USD152.2 million from USD165.5 million.
Centamin will pay a final dividend of 1.97 cents per share, giving a total dividend of 2.94 cents per share for the full year, a small rise from the maiden dividend paid in 2014 of 2.86 cents.
The miner has a policy to pay out between 15% to 30% of its net free cashflow each year, and the dividend for 2015 will cost a total of USD33.7 million, which is at the top end of its policy range.
Cash generated from operations in 2015 rose substantially to USD185.5 million from only USD116.4 million the year before.
Centamin remains debt free and reported a large rise in its cash and cash equivalent balance at the end of the year to USD230.7 million from USD162.8 million at the end of 2014, which it said "highlights the potential of the business to continue self-funding its next stages of growth from cash flows whilst maintaining a commitment to dividend payments."
Production grew for the sixth consecutive year in 2015, rising 16% to 439,072 ounces of gold with an all-in sustaining cost of USD885 per ounce of gold produced, below guidance of USD950 per ounce.
Production was within Centamin's revised guidance range of 430,000 to 440,000 ounces of gold, hiked from its original guidance of 420,000 ounces.
Centamin expects production to increase for the seventh consecutive year in 2016, guiding to 470,000 ounces of gold at an all-in cost of USD900 per ounce.
Production at Sukari was already running in line with the higher 2016 guidance by the fourth quarter of 2015, when it produced 117,644 ounces. That implies an annualised rate of production of around 470,576 ounces, comfortably within the target rate of 450,000 to 500,000 ounces.
Costs were also substantially lower in the fourth quarter of the year compared to the 2015 average, with an all-in sustaining cost of USD815 per ounce.
Further growth is expected in 2017 with an annual production rate of approximately 500,000 ounces, with an all-in cost continuing to trend downwards below USD900 per ounce, it said.
"Whilst this guidance implies further material production growth at Sukari, the key focus for the operation during the year is on realising the potential for additional productivity and cost efficiencies," the miner said, referring to its Egyptian mine.
With Sukari already producing at a rate sufficient to meet the company's full year guidance, Centamin said it has not earmarked any capital expenditure in 2016 for expansion or project development work at Sukari, but exploration at the operation will continue.
Centamin did not spend any funds on expanding Sukari in 2015, but did spend USD36.5 million in "sustaining" capital expenditure, mainly on developing the underground element of the mine.
Exploration at Sukari continues to prioritise extensions of the high-grade underground resource and reserve and Centamin hopes to deliver a resource and reserve update sometime this year.
That would follow on from the update in 2015, which showed Sukari's total mineral reserve estimate had risen 7.0% to 8.8 million ounces of gold compared to estimates published in September 2013.
That could help Centamin extend Sukari's existing 20-year-plus mine life.
Centamin also has other exploration assets it will continue to progress and has given itself a budget of USD25.0 million for those activities in 2016, which is lower than the USD34.4 million spent in 2015.
The majority of that budget for 2016 will be spent in Burkino Faso, with the rest going to its other exploration assets in the Ivory Coast and to Sukari.
"Our exploration programmes in West Africa continue to build momentum. In Burkina Faso, at the Wadaradoo, Napalapera and Torkera prospects, drilling has indicated the presence of structurally controlled high-grade mineralised zones in addition to extensive lower-grade mineralisation," Centamin said.
"In Cote d'Ivoire, first-pass drilling over targets defined by geochemical and geophysical surveys has outlined mineralised zones over a number of prospects. We continue to test the potential for lateral and depth extensions at these more advanced prospects, whilst also progressing the numerous other prospects within our significant land packages," the company added.
Centamin has exploration assets in Ethiopia, but that write-off booked in 2015 was made after the company decided to pull out of the country.
Importantly, the miner said that budget could be revised depending on market conditions and its results throughout the year.
"Whilst disciplined and sustainable growth on our existing projects remains a key focus, we continue to evaluate opportunities to grow through the acquisition of projects which offer the potential for the Company to deliver on its strategic objectives," said Centamin.
Centamin shares were down 0.7% to 91.90 pence per share on Monday afternoon.
By Joshua Warner; [email protected]; @JoshAlliance
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