Centamin was pitched to the Stockopedia Investment Club (SIC) on 16th February 2021.

Gold miners have recently suffered as a result of retreating gold prices, which remain around 15% below their July 2020 highs at the time of writing. Despite this recent retracement, gold prices are still up over 30% over the last 2 years, amid heightened global volatility.

As a mid-cap gold producer operating a Tier 1 gold mine, Centamin is well positioned to benefit from the stronger gold price environment. However, issues at the company’s flagship Sukari mine in Egypt have weighed on sentiment and the share price, with the shares losing over half their value since their peak in early August last year.

Despite the falling share price momentum, Centamin scores strongly across valuation and quality metrics, making the stock a speculative contrarian pick. With Centamin’s profitability highly levered to the gold price, does the company offer the SIC good exposure to a possible safe haven in these uncertain times?

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Summary

Bull Points - Offers great value on almost all metrics, high dividend yield and generous capital returns policy, catalysts for license bidding and upgraded mine estimates for the group's assets, exceptional balance sheet.

Bear Points - Mine issues at its only revenue generating operations, 50% profit sharing with agreement with Egyptian Mineral Resource Authority, limited near term production growth.


Profile

Centamin (LON:CEY) is a FTSE 250 listed gold miner, which also trades on the Toronto Stock Exchange. At the current share price of 103.6p, the market capitalisation is worth £1.2 billion. Liquidity isn’t much an issue, with an Exchange Market Size of 10k.

The current StockRank for the company stands at 84, with exceptionally high Quality and Value Ranks of 99 and 93 respectively. The value is highlighted by a forward P/E of 10.2 and dividend yield of over 6%.

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The opportunity type is a classic contrarian play, where the deterioration in the share price has not transpired to affect the value and quality characteristics of the company. Indeed, Centamin currently qualifies for 8 Guru Screens across a variety of Value, Quality and Income investing themes.


Business & Model

What is the company history & what does it do?

Centamin was established in 1970 and originally floated on the ASX. In 1999,…

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