A cut in annual production guidance from miner Centamin (CEY) triggers a 10.7% slide in the share price to 97p.

The miner has slashed its production guidance from between 505,000 ounces (oz) and 515,000 oz to approximately 480,000 oz in the year to 31 December.

Investors should note this is one of several downgrades in 2018 as Centamin originally hoped for 580,000oz of gold production back in January.

WHAT IS BEHIND THE REVISED GUIDANCE?

Key factors behind the disappointing performance are lower grades, higher production costs and operational improvements taking longer to implement than anticipated.

In the quarter to 30 September, Centamin suffered a 25% drop in gold production at 117,720 oz, down from 156,533 oz over the same period last year.

Broker Berenberg believes the results are not all bad as open mining volumes beat a forecast 17.3m tonnes (Mt) at 19.9Mt, while open pit grades improved 25% quarter-on-quarter.

The analyst says the company is confident improvements will come into effect this quarter and in the first quarter of 2019.

Berenberg notes Centamin will continue to generate strong free cash flow and return cash to shareholders assuming 2018's operational problems prove to be a blip.

CENTAMIN ‘OVERSOLD’

Numis thinks the shares are currently oversold, but the miner needs to convince investors it can deliver better grades from underground mining operations.

Shares in Centamin have dropped 39% in the year to date.

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Issue Date: 05 Oct 2018