Gold producer Centamin (CEY) has started to give the Egyptian government a share of its profits from the Sukari mine earlier than expected.
The miner previously indicated it would start payments in the first half of 2017. That’s been brought forward to October this year as a result of strong production, lower costs and a higher gold price.
HOW THE DEAL WORKS
It will pay 40% of free cash flow to the government, rising to 50% after two years. This is in lieu of all taxes excluding a 3% royalty at the revenue line.
We flagged this event was on the horizon in a recent article on Centamin in Shares.
Centamin was previously exempt from the profit share deal while it recovered the costs of building Sukari. However, the company went ahead and paid $28.75m from its profit to the government as a gesture of goodwill.
It now says the agreement is officially in force with the aforementioned $28.75m effectively being allocated to profit share for the three month period ending 30 September 2016.
A further $6.67m has been paid to the government since the start of October.
BETTER THAN EXPECTED RESULTS
The news coincides with the publication of third quarter results which beat expectations. Centamin had already released production figures on 5 October; today’s announcement focuses on the financial numbers.
Earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $122m, ahead of Numis’ forecast for $109m.
All-in sustaining cost of running the mine was $644 per ounce of gold produced.
The company finished the period with no debt and $388m cash. That leaves it in a strong position to develop a new mine in West Africa, should exploration be good enough to warrant such a development.
EXPLORATION PUSH
Centamin has published very positive drill results on its prospects in Burkina Faso and Côte d'Ivoire.
‘Exploration in Burkina Faso continued to test the potential for lateral and depth extensions of the more advanced targets, with priority on the Wadaradoo and Napalapera prospect areas,’ says the company.
‘In Côte d'Ivoire, drilling over targets defined by geochemical and geophysical surveys continued to support the potential over a number of prospects for laterally extensive mineralisation.
‘Further drilling will be carried out during the fourth quarter, aimed at initial resource estimation and with a focus on the shallow high-grade mineralised areas.’
